Photo = Korea Exchange

 

 

[Alpha Biz= Paul Lee] A system glitch that occurred in the KOSPI market on Tuesday (18th) was found to be related to the recently introduced "mid-price quote" system, implemented alongside the launch of the alternative trading platform "NextTrade."


According to the Korea Exchange (KRX), the system failure was caused by an issue in calculating trade execution quantities under the self-trade prevention condition for Dongyang Steel Pipe. The omission of mid-price quote quantities led to delays in trade execution.


The self-trade prevention condition is a mechanism that prevents the matching of orders with the same trading ID. If buy and sell orders from the same ID are placed at the same price, one side of the order is invalidated.


During trading of Dongyang Steel Pipe, the self-trade prevention condition resulted in a situation where only mid-price quotes and regular quotes existed. Due to the characteristics of mid-price quotes, which involve "price truncation" (rounding down to specific units), a discrepancy arose between the expected and actual executed stock quantities.


A mid-price quote is automatically adjusted to the midpoint of the highest bid and lowest ask prices. However, for stocks with a price unit of 1 KRW (i.e., stocks priced below 2,000 KRW per share), the mid-price quote is 0.5 KRW. This value was rounded down to 0 KRW, potentially causing a quantity error.


The system detected this error, leading to a temporary halt of all KOSPI trading, including transactions involving Dongyang Steel Pipe.


As a result, trading on the KOSPI market was suspended for seven minutes, from 11:37 AM to 11:44 AM on the same day.

 

 

 

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