The Korea Exchange (KRX) plans to launch a new auction-based block trading service, A-Blox, for trading securities from the Kopsi and Kosdaq indices after receiving approval from its domestic regulator the Financial Services Commission.
A-Blox, which is scheduled to go live on 29 November, will be a non-displayed liquidity pool that will match orders from counterparties on a continuous auction basis, prioritised by time of order entry. Trades will be settled at the end of the day at the relevant volume-weighted average price.
The new service is designed to complement K-Blox, the exchange's existing block trading service that allows members to cross internal orders, execute negotiated trades or search for counterparties by exposing trade intentions, i.e. issue, price and quantity.
A-Blox orders must be a minimum of 200 million Korean won for Kosdaq stocks, and 500 million Korean won of Kopsi securities. Post-trade information will be disclosed after market close.
According to KRX, a growth in the demand for trading large lots in Korea and the ongoing growth in dark pools in other parts of the world were the main drivers behind the development of A-Blox.
“We've had numerous consultations with market participants and experts to meet customers' needs when designing the new auction based block trading,” said Chang-ho Lee, president of Kopsi Market Division. “This service will not only enhance the trading convenience of our customers but it will also help to alleviate unintended market impacts and costs by large volume trades in the regular auction pool.”
In April 2008, agency brokerage Instinet launched a matching system for Korean equities that matches orders before the domestic market opens and executes trades at the day's primary market VWAP benchmark.
Buy-side only crossing network Liquidnet and trading technology provider ITG's POSIT are also among the trading venues providing block trading services for Korean stocks.