November 21, 2024

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The financial district of Yeouido in western Seoul (123rf)

Local securities firms that offer daytime trading of US stocks for South Korean investors are to tentatively suspend the service, following the order cancellation fiasco that happened earlier this month.

A total of 19 brokerage houses, affected by the canceAllation of orders by the US overnight trading platform operator Blue Ocean Technologies, are to temporarily suspend the service from Friday, according to the Korea Financial Investment Association.

“Representing local securities firms, the association has sent a statement to Blue Ocean Technologies on Wednesday and called for a thorough investigation into the reasons behind the system failure and measures to prevent relapse,” the association announced.

The alternative trading system operator provides after-hours trading, allowing local investors to trade US shares in their daytime. On the afternoon of Aug. 5 Korean time, Blue Ocean Technologies shut down its matching engine, citing an unexpected surge in trade volume.

The halt resulted in the cancellation of orders worth 630 billion won ($464 million) across 90,000 accounts here, according to the country’s top watchdog Financial Supervisory Service. All gains and losses from the canceled orders were nullified.

Two days after the shutdown, Blue Ocean ATS resumed trading for only 29 exchange-traded funds.

Though the securities firms were set to offer full trading of US shares from Friday, the association stepped in, citing investor protection.

“To protect investors, the daytime trading will not be resumed until the system stability has been confirmed. After sufficient verification procedure on the system, we will decide whether to resume the service or not,” the association said.

Korean investors have continuously experienced turbulence with trading engaged by Blue Ocean Technologies. The operator had unexpectedly shut down its trading in April, citing excessively high trade volumes, and transaction errors were reported back in August 2023.

With Blue Ocean ATS being the only overnight trading platform of the US shares, all local brokerage houses that offer daytime trading for investors provide the service through the platform.

By Im Eun-byel (silverstar@heraldcorp.com)