Temporary Ban on Upper and Lower Limit Orders in Pre-Market Following Market Distortion Incidents Like 'One SK Hynix Share Plunging to Lower Limit'

As abnormal orders caused SK Hynix's opening price to plummet to the lower limit twice in a short period, Nextrade (NXT) has taken the strong measure of temporarily banning upper and lower limit orders in the pre-market.

In a press release issued on August 7, Nextrade announced that it will temporarily ban upper and lower limit orders in its pre-market (8:00 AM to 8:50 AM) starting from the 12th.

This restriction will remain in place until the additional introduction of the Static Volatility Interruption (VI) system, which is scheduled for September 14 of this year.

Until then, placing upper or lower limit orders in the pre-market will be completely prohibited, Nextrade explained.

Following the introduction of the Static VI, if an order is received at a price that fluctuates by 10% or more compared to the previous day's base price, it will not be executed immediately. Instead, trading will resume after calculating an equilibrium price through single-price auction.

This measure comes after SK Hynix started trading at the lower limit twice within about a week in the recent pre-market.

On August 6, right after the pre-market opened, SK Hynix traded at 1,168,000 won, down 29.98% from the previous regular session's closing price.

Although the trading volume was only 11 shares, the initial price was determined as such because, unlike the regular market, initial price determination in the pre-market follows a continuous trading method rather than a single-price auction.

Although the drop narrowed to the 3% range after a dynamic VI was immediately triggered and a 2-minute single-price auction took place, considerable confusion was caused among investors who were already nervous due to global semiconductor market adjustments.

Prior to this, on July 28, just a single share of SK Hynix was executed at the lower limit of 1,272,000 won right after the pre-market opening, causing around 80 billion won in damages in the cryptocurrency derivatives market.

Although the spot price recovered immediately, the abnormal transaction price, which was 29.99% lower than the previous day, was reflected in the oracle (underlying asset price provider) for Trade.xyz's SK Hynix perpetual futures (TradFi), spreading the shock far and wide.

Due to this, TradFi prices fell by 17.9%, and long positions worth approximately 57.4 million dollars (approx. 81.5 billion won) were reportedly liquidated.

Because Nextrade's pre-market suffers from relatively low liquidity, initial price determination is conducted through a continuous trading method rather than a single-price auction, unlike the traditional regular market.

Consequently, concerns have been raised that it could be vulnerable to fat-finger errors (order mistakes caused by human error) or opening price manipulation.

In response, Nextrade has restricted market orders—which could increase volatility in the pre- and post-markets—permitting only limit orders, while cooperating with member firms to prepare for the introduction of the Static VI.

Nextrade stated that it will closely monitor for any abnormal signs regarding sharp price fluctuations through upper and lower limit orders.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.