Korean Stock Exchange

The Korea Stock Exchange (KRX) is the only securities exchange based in South Korea. With a market cap worth over $2.46 trillion and a trading volume of 81 billion shares, day trading on the KRX is an attractive choice for investors. This review will look into its history, how the KRX works, trading schedules, investing rules and more. We also look at how to start KRX trading, including listing the best brokers for Korea Stock Exchange trading below.

What Is The Korea Exchange (KRX)?

History

The Korea Exchange was established in 1956 and initially operated independently. In 2005, the KRX we know today was formed when the Korean Stock Exchange, the Korean Securities Dealers Automated Quotations (KOSDAQ) and the Korean Futures Exchange joined forces. The merger occurred as an outcome of the Korea Stock & Futures Exchange Act, which aimed to reduce costs and improve investor efficiency in response to rapidly changing financial markets. The result was the creation of three divisions: the Stock Market Division, the KOSDAQ Market Division and the Derivatives Market Division.

The company is headquartered in Seoul and Busan, South Korea but the Korean Exchange Bank has numerous trade centre branches around the world.

Korea stock exchange logo

How Does The KRX Work?

In 2021, the Korea Stock Exchange listed 2,448 companies, totalling a market cap of USD 2.6 trillion. In April 2021, the KRX trading volume reached over 86 billion shares, with a trading value of over 620 billion KRW (USD 540 million) in the same month. There are several large-cap, mid-cap and small-cap indices that hold are a variety of companies arranged by market capitalisation and other factors.

Under each market division, investors have a wide choice of tradable instruments:

KOSPI Market Division

  • Stocks
  • Bonds
  • Exchange-Traded Funds (ETFs)
  • Exchange-Linked Warrants (ELWs)
  • Real Estate Investment Trusts (REITs)

KOSDAQ Market Division

  • Stocks

Derivatives Market Division

  • Single Stock Futures
  • Indices
  • Equities
  • Bonds
  • Forex
  • Commodities

KRX Trading Indices

The Korean Stock Exchange has a total of 372 indices as of April 2021, covering equities, derivatives/commodities, fixed income, and more. The following are the standout KRX trading indices:

Korea Composite Stock Price Index (KOSPI)

KOSPI was initially introduced in 1983 and is calculated based on market capitalisation. It is the stock market index that is representative of South Korea in the same way as the S&P 500 represents the United States. Consisting of the most common stocks listed on KOSPI, it is also considered Korea’s key economic indicator that gauges the overall health of the KOSPI market. The KOSPI and its subsidiaries are the most popular global indices for KRX trading.

KOSPI 200

The KOSPI 200 index, otherwise known as the Korean blue-chip index, was established in 1994. It served as an underlying index for futures and options. The 200 companies listed are market and industry leaders from the Stock Market Division, which features decent liquidity. With 70% market value of the KOSPI, this index moves alongside it. More importantly, KOSPI 200 is listed on the futures and options markets and is one of the most highly traded indices in the world.

KOSDAQ 150

The KOSDAQ 150 index was introduced in 2015 and represents the technology sector in Korea. It is currently used as the underlying index for futures and ETFs. The constituents listed are calculated based on market capitalization, sector representativeness, and liquidity. When KRX trading on the KOSDAQ 150, investors are speculating on the rise and fall of top global names such as Samsung, Kia and LG Electronics.

KRX 300

The KRX 300 index was created to maximise the market cap coverage of both KOSPI and KOSDAQ. Therefore, it represents a combination of 300 sector leaders in both of these markets. The shares listed on the KRX 300 are chosen for their market capitalization, liquidity, and sector representation standards. It was created in 2018.

KRX Trading

Korea Stock Exchange Program Trading Rules

If you wish to trade on the Korea Stock Exchange, there are a few basic KRX trading rules to consider. Korea-based investors must open a trading account through a licensed securities company that has obtained a KRX membership. KRX trading orders can only be placed through these members. On the other hand, foreigners need to obtain an Investors Registration Certificate from the Financial Supervisory Service. The FSS is Korea’s integrated supervisory authority. Afterwards, foreigners need to open an account with a local custodian bank that provides custody, money transfer and security settlement services.

Korea Stock Exchange Listing Requirements

Admission

So what does it take for a company to be listed on the KRX? The South Korea Stock Exchange has set out strict criteria that companies must meet to float on the exchange. The KRX trading rule system is divided into quantitative and qualitative criteria, which differs from the KOSPI to the KOSDAQ to the KONEX market. Some formal listing review requirements are as follows:

Quantitative Criteria To Be Listed On KOSPI:

  • Paid-in capital must equal or be over KRW30 billion
  • The company must have been in operation for three or more years
  • The expected number of shares to be listed must be one million or more
  • Recent sales from the company must amount to KRW100 billion or more, with previous three-year sales averaging KRW70 billion

Qualitative Criteria:

  • Transparency of Business Operations – This includes corporate governance, internal control systems and fiscal transparency
  • Continuity of the Company – This refers to the stability of operations, finance and other business issues i.e. the existence of conflict and litigation
  • Protection of Investors – This includes disclosure transparency, protection of minority shareholders and stock market integrity

KRX Exchange Trading Hours

Trading sessions on the KRX work similarly to other major stock markets around the world. Whether you’re trading stocks, futures markets, derivatives or trading on the KOSPI, they can all be executed within the times below. The regular trading schedule including extended trading hours are as follows:

Trading days: Monday to Friday (GMT +9:00):

  • 8:00am – 9:00am KST: Pre-Hours
  • 9:00am – 3:30pm KST: Trading Session
  • 3:40pm – 6:00pm KST: Post-Hours

The South Korea Exchange trading hours are a total of 6 hours and 30 minutes per day, whereas other markets can be open from anywhere between 5 to 7 hours a day. Shorter trading sessions can mean increased liquidity, less volatility, tighter spreads and more efficient markets.

According to the South Korea Stock Exchange 2021 trading calendar, there are some trading holidays to consider. The Korean Exchange is closed for 10 days, with one partial trading day in 2021. The trading holidays work in a similar way to the Korea Stock Exchange 2020 trading calendar. Trading holidays include New Year’s Day, Korean New Year, Independence Day, Chuseok Festivity and Children’s Day.

Biggest Players

You can find the largest businesses that dominate the KRX on the KOSPI indices. Typically, Korea is famous for its technology and automotive companies, many of which are well-known around the world. For example, Samsung currently leads with a market cap of over $470 billion. Other familiar brands include Hyundai ($44.82 billion), Kia ($30 billion) and LG Electronics ($27.44 billion). As you can see, these companies have outstanding valuations that are worth considering when day trading shares on the KRX. These equities are likely to be the most frequently traded with high trading volumes suitable for intraday traders.

Why Trade The Korea Stock Exchange?

As one of the top exchanges around the world, there are many reasons why investors are flocking to the KRX. The following are just some of the benefits of trading on the Korea Stock Exchange:

  • Liquidity: The KRX offers high trading volumes with a healthy market cap, which makes it one of the most liquid stock exchanges in Asia. Thousands of companies from various industries feature on the KRX indices too. The introduction of a market maker system has also further increased liquidity.
  • Diverse Trading Vehicles: The available traded instruments offered by the KRX provide more opportunities for a diverse portfolio. You can have your choice of over 300 indices, bonds, futures, ETFs and more. This also results in more opportunities to generate profits.
  • Transparency: KRX has enhanced its credibility internationally by signing a Memorandum of Understanding (MOU) to cooperate with the Depository Trust & Clearing Corporation (DTCC) on a trade repository for information sharing. This means improved market data across several jurisdictions.
  • Trading Hours: The Korea Exchange offers extended trading hours before and after the trading session. Additionally, its shorter trading times mean higher liquidity, tighter spreads, lower volatility and more efficient trading. Furthermore, it allows for more time to consolidate any market news or data ahead of regular trading hours.
  • Growth: South Korea has rapidly grown to be a strong and stable economy. It is expected to grow at a rate of 2.3% to 3.6% from 2021 to 2026. It also has a stable annual per capita income of more than $30,000.

How To Start Day Trading The KRX

Choose A Broker

As part of the KRX program trading rules, you are required to open an account with a licensed provider to start trading on the exchange. Additionally, brokers provide a gateway to the market while facilitating your trades. Here are some key factors to look for when trying to find the best brokers for Korea Stock Exchange trading:

  • Trading Fees: It is vital to be fully aware of any fees or charges to maintain profitability. As a day trader who places a high volume of trades throughout the day, commissions can add up and take away from profits. Therefore, you want to choose a provider with low commissions and tight spreads to make KRX trading worthwhile.
  • Trading Platforms: The broker’s trading platform is where you’ll likely spend most of your hours when KRX trading. Check that the platform offers the right tools, charts and graphs for technical analysis. If you want the option of on-the-go trading, you should opt for a platform with a mobile app.
  • Customer Service: When your trades are on the line and you encounter any issues, you’ll need the broker’s customer support team to respond promptly. Make sure that there are multiple ways to contact them and in the methods that suit you. Additionally, most customer support teams have 24/7 opening hours, in several languages.

Instrument

Brokers offering stocks on the KRX are few and far between. Interactive Brokers is an outlier, offering access directly to the exchange and allowing traders to purchase stocks like Kia, Samsung and LG Electronics. However, for the majority of retail traders, the best way to trade the KRX is through an ETF. ETFs are funds that contain a mixture of instruments, often stocks, that aim to track a market or industry’s performance. The most liquid and widely offered ETF is the iShares MSCI South Korea ETF (EWY), which gives traders exposure to the South Korean economy. 

Strategy

Before you start day trading on the Korea Stock exchange, it is paramount that you have an effective strategy. More often than not, unnecessary losses are due to poorly managed decisions. Nowadays, there are a plethora of stock charts, graphs, historical prices and market data that you can utilise for effective technical analysis. While some providers may charge fees for market data, there are still many resources that are free of charge. By utilising the right tools, it can help you visualise a pattern, which will facilitate in making more accurate price predictions.

KRX Trading Tips

News

Keeping up with the latest market news and market data is key. You need to be able to anticipate market moves and stay ahead of any factors that can trigger significant price shifts. There are several resources you can utilise, from live news reporting to updates or even forecasts. Some popular financial news sources include Bloomberg, FT and Yahoo Finance. News websites can also provide KRX trading calendars with any significant trading holidays.

Timing

As mentioned, KRX trading hours can offer opportunities for increased liquidity and more efficient trading. While you can trade during extended trading hours, it does not necessarily result in more profit potential. Pre-market hours will have less volume and may have different trading rules. It also means limited liquidity with increased volatility and larger spreads. On the other hand, earnings trade reporting and key market news are generally announced post-trading sessions. This can result in major price swings during the after-hours market.

Automation

Once you’ve perfected your strategy, it is time to consider automated trading. Automating your trades with a robot that follow predetermined criteria can open up more opportunities for increased profits beyond what you could ever perform manually. Trading algorithms can also help you save time so that you can focus on research or other matters. However, any bot that will trade on your behalf should be heavily backtested. Run the automation on a demo account before letting loose on your live funds.

Trading Journal

Keeping a journal is a great way to monitor your  KRX trading performance and what can be improved over time. We recommend noting it down on a spreadsheet or any other specialist software. Some examples of useful information to keep track of include:

  • Price
  • Entry & exit position
  • Purchase & sale date
  • Position size
  • Reason for making the trade

With the frequency of trades placed during the intraday, it can be hard to know what is working and what isn’t. Therefore, visualising data on your KRX trading will make identifying a successful strategy much easier.

Final Word On KRX Trading

Day trading on the Korea Stock Exchange offers multiple opportunities to profit from indices like the KOSPI, KOSDAQ or KRX. With a large market cap and high daily trading volume, it’s no surprise that many are choosing to day trade on the Korean Stock Exchange. However, to gain an edge in a competitive market, it is crucial to be prepared with an effective strategy that utilises news and market data. Additionally, take note of our top Korea Stock Exchange brokers to ensure you are getting regulated, high-quality trading conditions.

FAQs

What Tradable Instruments Are Available On The Korea Exchange?

There are many markets day traders can get involved with on the KRX. Separated into the KOSPI, KOSDAQ and Derivatives Market Division, traders can get involved with: stocks, bonds, ETFs, ELWs, REITs, Indices, Futures, Equities, Forex, Bonds and Commodities.

Has The KRX Ever Activated A Trading Halt?

Yes. The Korea Stock Exchange triggered a trading halt on the KOSPI and KOSDAQ market after it dived more than 8 per cent. This is where KRX trading hours stopped on 12 March 2020. The activated circuit breaker suspended operations for around 20 minutes, which blocked trades on the KRX. The drastic fall was attributed to panic selling that was sparked by growing concerns over the global coronavirus fallout. Before that, the circuit breaker had only been activated the day after the 9/11 terror attacks in 2001.

Does The Korea Stock Exchange Have Extended Market Trading Hours?

Yes. The Korea Exchange has extended trading hours from Monday to Friday. The pre-trading session occurs between 8:00 to 9:00 am KST, while the post-trading session is from 3:30 pm to 6:00 pm. The post-market session is also known as the single price auction. Extended trading hours are trading times that occur before and after an official trading session. Pre-market and after-hours trading will generally have less volume, which means limited liquidity, increased volatility and larger spreads. Additionally, the Korea Exchange is not open on Saturday or Sunday.

Does The KRX Have A Trade Repository?

Yes. The Depository Trust & Clearing Corporation (DTCC) and the Korea Exchange signed a Memorandum of Understanding (MOU) to cooperate on a Trade Repository (TR) solution in Korea. The trade repository allowed for better transparency of derivative markets, increased cooperation across jurisdictions and reduce risks of financial instability.

Are There Any Trading Fees Associated With The Korea Stock Exchange?

Market charges when KRX trading depends on the broker you choose. Your provider may impose commission fees, deposit minimums and deposit and withdrawal fees. It’s important to be aware of all trading fees when investing in the KRX, as they may eat into your profits over time.

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