Buying Samsung on the commute home: What to know as KRX extends trading to 8 p.m.

Korea Exchange (KRX) will launch an after-market session on Sept. 14, opening the door to real-time stock trading during evening commute hours. With the alternative trading venue Nextrade (NXT) already offering extended hours, KRX's entry into the space is expected to accelerate the push toward a round-the-clock trading framework. However, investors are advised to exercise caution, as lower trading volumes in the after-market can make order execution difficult and price swings more pronounced than during regular sessions.

According to the financial investment industry Wednesday, KRX recently finalized amendments to its KOSPI and Kosdaq operating rules. Under the changes, the existing off-hours single-price auction — currently held between 4 p.m. and 6 p.m. — will be abolished and replaced by an after-market session running from 4 p.m. to 8 p.m.

The most significant change investors will notice is how trades are matched. The old off-hours session batched orders every 10 minutes for a single-price match. The after-market will instead use continuous real-time matching, the same method used during regular trading hours.

The daily price limit will also widen. The previous off-hours session capped moves at plus or minus 10 percent of the day's closing price, but the after-market will apply a plus or minus 30 percent band based on the previous day's closing price — the same ceiling and floor as the regular session.

Order types will be restricted, however. Only limit orders, best-limit orders and most-favorable limit orders will be accepted in the after-market; market orders and conditional limit orders will not be permitted. Investors may attach immediate-or-cancel (IOC) and fill-or-kill (FOK) conditions to their orders.

Investors should also note that KRX and NXT handle unfilled orders differently. On KRX, any order left unfilled when the regular session closes is automatically canceled; traders wishing to participate in the after-market must check their order history and resubmit. NXT, by contrast, carries unfilled orders through from the pre-market into the regular session and on into the after-market.

ETFs and exchange-traded notes (ETNs) will be excluded from KRX's after-market. Industry sources point to the burden this would place on liquidity providers (LPs), who are required to post asking prices and manage the gap between market prices and net asset values — a task that becomes significantly more demanding in staffing and systems if extended into evening hours. The exclusion also reflects a more cautious stance following a surge in market volatility since the recent introduction of single-stock leveraged products.

Also excluded from after-market trading are stocks that went untraded during the regular session that day, stocks on the administrative issues list, shares flagged under investment warning or investment risk designations, abnormally surging stocks, and ultra-low-liquidity issues.

Short selling will be permitted. The uptick rule — which prohibits submitting an asking price at or below the immediately preceding price — and its exceptions will apply in the same manner as during the regular session. Where no preceding price exists, the regular session's closing price will serve as the reference.

NXT will also step up its market safeguards from Sept. 14, setting the stage for direct competition with KRX. NXT currently operates a pre-market from 8 a.m. to 8:50 a.m. and an after-market from 3:40 p.m. to 8 p.m. in addition to the regular session.

NXT plans to implement rule amendments introducing a static volatility interruption (VI) mechanism and requiring that trading switch to a single-price auction format whenever either a dynamic or static VI is triggered.

Until now, NXT had only a dynamic VI, which activates when a specific asking price causes a sharp price swing. The absence of a static VI had allowed anomalies in which a small number of orders could push the pre-market's opening price to the daily upper or lower limit. NXT also said it would pursue a plan to determine the pre-market's initial price through a single-price auction.

Brokerages are anticipating a boost in customers ahead of KRX's after-market launch. Once the session is fully up and running, demand is expected to grow from investors reacting to corporate disclosures released after the regular close, as well as from workers and others who find it difficult to trade during regular hours. Brokerages also see a natural spillover effect, with domestic evening trading flowing into overnight trading of overseas stocks.

The extended hours do, however, bring added risk. "The after-market is shallower than the regular session, so even the same order can move prices significantly, and trades may not execute at the desired price right away," a brokerage industry official said. "Investors need to check their order prices carefully."