KRX Adds Real-Time Price Banding

Korea has one of the region's largest derivatives markets.

The Korea Exchange (KRX) has announced new safety measures for its derivatives market, introducing real-time price banding to prevent mass fluctuations.

The KRX is able to reject orders that fall outside of the bands, set at between one and five percent of the previous price. These mechanisms operate somewhat different to so-called circuit breakers, which halt trading in an instrument for a set period of time to prevent crashes and busted trades. It is, however, also adding a kill-switch capability, which will allow the exchange to cancel all orders from an algorithmic trading account if requested.

While the KRX says that the new mechanism will add significant load to the trading platform in place at the exchange, it does not expect it to affect order speed.

The new price bands apply to Kospi 200 futures, Kospi 200 options, singl- stock futures (except e-mart futures), US dollar futures, European euro futures, Japanese yen futures, three-year KTB futures and ten-year KTB futures. It will not apply to night or negotiated block trading, recently announced by the KRX.

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