As the Korea Exchange (KRX) night derivatives market opens on the 9th, projections have emerged that dividends received by major stakeholders in the exchange, such as large securities companies, may increase.
Kim Yong-gu, a researcher at Yuanta Securities Korea, noted this in a report titled "Implications of the KRX Night Derivatives Market Opening and Investment Strategies." The KRX night derivatives market is directly operated by the Korea Exchange, rather than through existing overseas exchanges (Eurex). Trading hours extend from 6 p.m. to 6 a.m. the following day, totaling 12 hours.
The trading products in the KRX night derivatives market include seven stock-related items such as KOSPI 200 futures, mini KOSPI 200 futures, KOSDAQ 150 futures, KOSPI 200 options, mini KOSPI 200 options, KOSPI 200 weekly options (Monday and Thursday), and KOSDAQ 150 options, along with three FICC-related products such as U.S. dollar futures, 3-year government bonds, and 10-year government bonds, totaling ten.
Researcher Kim predicted that the opening of the KRX night derivatives market would improve transaction convenience and increase liquidity in the stock market. The trading hours for derivatives will expand to 19 hours, an increase of one hour from before, and transaction fees are expected to decrease to one-third of the existing Eurex linkage model.
Kim explained that the strategic value of KOSPI 200 derivatives could also increase. This is because it overlaps with European stock markets (4 p.m. to 12:30 a.m. KST) and U.S. stock markets (10:30 p.m. to 5 a.m.), allowing traders to respond to nighttime issues through KOSPI 200 derivatives trading.
From 2010 to March 2020, when night trading was linked to the Chicago Mercantile Exchange (CME), the correlation between KOSPI 200 night futures and the Standard & Poor's (S&P) 500 index was 0.69, and the correlation with the Morgan Stanley Capital International (MSCI) emerging and developed markets relative index was 0.8, indicating strong relationships.
Kim stated, "As the strategic usefulness of night derivatives increases, the connectivity of the domestic cash futures market with global stock markets during daytime hours the following day is also likely to double," adding that "the significance of the market could also increase proportionally." He further explained, "This is why we look for the key to the revival of the Korean stock market, which has fallen to the fourth position in the MSCI emerging market rankings, in the activation of the night derivatives market."
If the KRX night derivatives market becomes active like during the CME-linked trading period when it boasted the world's top trading volumes, the dividends received by major stakeholders in the exchange, such as large securities companies, could also increase. Researcher Kim remarked, "In addition to market and shareholder-friendly governance and financial policy changes that invigorate the stock market, there’s an additional reason to buy securities stocks tied to Lee Jae-myung put options."