SK Hynix plummeted 30% before the market twice in a week, and Korean alternative exchange Nextrade is frequently questioned about “ghost trading”

The Zhitong Finance App noticed that chip giant SK Hynix experienced a brief sharp drop in stock prices for the second time in about a week, raising new questions about the volatility of Korea's alternative stock exchange transactions.

According to data from Nextrade, a new exchange launched last year, at 8 a.m. local time, 11 SK Hynix shares traded at 1.168,000 won per share, hitting the 30% daily decline limit. The exchange also handles transactions before and after regular trading hours. The stock was down about 2% at the end of the 50-minute pre-market trading session.

During the normal trading session of the Korea Exchange (the country's main exchange) on Thursday morning, the chipmaker's stock price once fell 9.8% as US stocks declined and followed the general weakness of the entire industry.

This rollercoaster on Nextrade is very similar to the stock's performance last Tuesday, when it also plummeted 30% in pre-market trading and then narrowed its decline. The incident resulted in SK Hynix derivatives contract holders trading on the cryptocurrency exchange closing nearly $60 million long positions within two minutes.

Given its longer transaction times and cheaper fees, Nextrade rapidly expanded its market share in Korea after its launch last year. However, unusual events such as the SK Hynix flash crash have intensified scrutiny of this alternative exchange as people are concerned that such deals will disrupt reasonable price discovery mechanisms.

Unlike most stock exchanges that use multiple pricing sources, Nextrade said it only uses a single source, and says most alternative exchanges around the world have also adopted this practice.

In response to media questions, Nextrade said, “Unlike main board exchanges, the latter's price discovery function (such as determining opening and closing prices) is critical, while alternative stock exchanges focus more on trade execution.” “As a result, like the world's leading alternative trading systems, Nextrade uses continuous trading sessions to open and operate its market,” it added in the statement.

According to a spokesperson for the exchange, Nextrade plans to introduce a static fluctuation interruption mechanism (SVI) starting September 14, which should prevent such events from happening again. He added that if there is a bid that is at least 10% higher or lower than the previous closing price, the mechanism will be triggered to open a two-minute collective bid to select the price that will facilitate the most execution of the transaction.