As the New York Stock Exchange (NYSE) prepares to enter the weekly transaction market, the strategies of the domestic securities industry have become complicated. Currently, the service for U.S. stock weekly transactions in Korea has been suspended for 8 months due to an order cancellation incident at the U.S. alternative trading system (ATS) Blue Ocean last August. For the domestic securities sector reviewing the resumption of services, signing a contract with the large institution NYSE could prevent another order cancellation incident like last year.
The issue is that the New York Stock Exchange has just begun preparations for related business, indicating that more time is needed before a service contract can be finalized. Domestic securities firms are torn between choosing stability, even if delayed, and hastily resuming services.
According to sources in the financial investment sector on the 5th, the Korea Financial Investment Association recently discussed the weekly transaction service for U.S. stocks with the New York Stock Exchange. Subsequently, the association is gathering opinions from 19 securities firms that previously provided the U.S. stock weekly transaction service.
The U.S. stock weekly transaction service compiles transaction orders from domestic investors that are received during daytime hours in Korea and enables trades. Since U.S. regular trading hours are from 10:30 p.m. to 5 a.m. Korea time, it has become popular among investors who find it difficult to trade stocks in real-time during these hours.
However, on the day in August last year when the global stock market plummeted, the U.S. ATS Blue Ocean, which had a collaboration contract with domestic securities firms, unilaterally canceled Korean orders as it struggled to handle the surge in transaction volume. This incident led to the cancellation of transaction amounts totaling 630 billion won across approximately 90,000 accounts held by 19 domestic securities firms that had contracts with Blue Ocean, and the restoration of accounts was delayed, resulting in losses for many investors. Since that incident, the weekly transaction service for U.S. stocks has not resumed in Korea.
Domestic securities firms are preparing to resume the weekly transaction service for U.S. stocks. Despite having experienced an unexpected incident last year, many investors still want this service. However, during the 8-month pause, options available to domestic securities firms have increased, extending the concerns among operators.
The U.S. stock weekly transaction is structured so that domestic securities firms sign contracts with U.S. local exchanges to provide the service to investors. Until the order cancellation incident occurred last year, Blue Ocean was the only company authorized for weekly transactions by the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA).
Recently, U.S. trading platform companies such as "24 Exchange" and the U.S. fintech firm Apex have started preparing to provide weekly transaction services for U.S. stocks. Additionally, the regular exchange, the New York Stock Exchange, is also getting ready to enter this market. The NYSE received approval from the SEC in February of this year to extend trading hours to 22 hours.
For domestic securities firms, this is a situation where they are contemplating between stability and speed. In terms of the service's stability, no other operator can match the large regular exchange, the New York Stock Exchange. The problem is that while the NYSE has only received approval to extend trading hours from the SEC, there are many preparation steps that still need to be addressed. To provide the Securities Information Processing (SIP) service, which integrates and provides exchange information to the market, the NYSE also needs approval from the SIP Committee.
A representative from the Korea Financial Investment Association noted that "there are currently doubts about the reliability that ATSs wanting to provide the weekly transaction service for U.S. stocks can guarantee." The representative added, "If we collaborate with the New York Stock Exchange, there should not be any issues regarding transaction stability," but emphasized the dilemma of whether to start the weekly transaction service for U.S. stocks through ATS, accepting instability, or to wait until the regular exchange, the New York Stock Exchange, comes in.