Chapter 2. Korean trading rules

KOSPI, KOSDAQ and KONEX

The Korea Exchange (KRX) runs three stock markets with different characters. The KOSPI (main board) is for large companies with a track record,KOSDAQ centers on technology and growth companies, and KONEX is for early-stage small and venture companies. Listing requirements, transaction tax rates and investor protections differ slightly by market.

A company can also move its listing from KOSDAQ to KOSPI. Moving to KOSPI opens the possibility of joining large indexes such as the KOSPI 200, which can change supply and demand.

The trading day timetable

If you only know “stocks trade from 9 to 3:30”, orders that fill before and after the session are hard to understand. A KRX day is divided like this.

Disclosures released after the close (such as preliminary results) show up first in the after-hours single-price session. A big after-hours move does not guarantee the next day’s open will follow, but it often hints at the direction of the next day’s gap.

The alternative exchange (Nextrade)

With the opening of Nextrade (NXT), Korea’s first alternative exchange, in March 2025, some stocks can be traded outside the KRX. Nextrade runs an early-morning pre-market and an after-market into the evening, so there is more time to trade after work (eligible stocks and hours need confirming).

• Because the same stock trades on two markets, brokers have a best execution duty to route your order to the better market. You can check where your order filled in your trade history.
• The two timetables mesh — for example, trading on the alternative exchange pauses during the KRX call auctions.
• Outside the regular session trading is thin, so spreads are wide and prices jump easily. Limit orders are safer (chapter 3).

Continuous trading and single-price auctions

There are two main ways of matching. Continuous trading matches each order with the opposite side the moment it arrives. Asingle-price auction collects orders for a while and then fills them all at the one price that matches the largest quantity.

Continuous trading follows price priority, then time priority: an order to buy higher (or sell lower) fills first, and at the same price the earlier order fills first. Single-price auctions are used not only for the open and close but also when a VI is triggered, right after trading resumes and for stocks under investment warnings.

Price limits and volatility interruptions (VI)

Korean stocks can move at most ±30% from the previous close in a day. At the upper limit, only buy orders pile up at that price and nobody sells, so trading can almost stop.

A volatility interruption (VI) works within a smaller range. If a price moves a lot in a short time, that stock alone switches to a single-price auction for about two minutes to cool down.

Circuit breakers and sidecars

These are used when the whole market, not a single stock, plunges.

• Circuit breaker: triggered in stages when the KOSPI or KOSDAQ stays 8%, 15% or 20% below the previous day for one minute. Stages 1 and 2 halt all stock trading for 20 minutes; stage 3 ends trading for the day. Each stage can trigger only once a day.
• Sidecar: if futures prices swing sharply (such as ±5% in KOSPI 200 futures), only program trading orders are paused for five minutes. It keeps mechanical trading across futures and cash markets from shaking the cash market.

The US has similar mechanisms with different thresholds (chapter 9).

Market warnings, administrative issues and trading halts

The exchange attaches staged warnings to stocks moving abnormally. The higher the stage, the tighter the limits — margin purchases are blocked, buyers must put up 100% cash, and so on.

An administrative issue is a stock with problems keeping its listing because of its finances or disclosure violations. Capital impairment, insufficient revenue or audit opinion problems (chapter 5) can be reasons, and if they are not resolved, delisting can follow. When accounting problems or embezzlement come to light, the exchange runs a listing eligibility review, and trading can be halted for a long time.

Base prices, ex-rights and adjusted prices

The ±30% limit and percentage change are calculated from the base price. Normally that is the previous close, but when an event changes the share count, the exchange resets the base price to a theoretical price — on the ex-rights date of a bonus issue or rights offering, the ex-dividend date, or the day trading resumes after a split or reverse split.

Charting software shows adjusted prices that rewrite past prices to reflect such events. An unadjusted chart shows a fake crash on the ex-rights date, distorting moving averages, RSI and every other indicator. Be especially careful when you download old data to analyze it yourself.

Short-selling rules and position disclosure

Short selling means borrowing shares, selling them first, and buying them back later to return. In Korea, naked short selling (selling without borrowing) is banned; you can sell only after borrowing. Short selling was fully banned from November 2023 and was allowed again at the end of March 2025, after a system to detect illegal short selling was put in place.

• Uptick rule: in principle, short sales cannot be quoted below the last traded price, to avoid adding fuel to a fall.
• Position disclosure: when short positions in a stock exceed a set share of shares issued, who sold how much is disclosed.
• Stock lending balance: the balance of borrowed shares, used to gauge potential short selling — though not all borrowing becomes short selling.
• Overheated short-selling stocks: if the short-selling share jumps and the price plunges, short selling can be banned the next trading day.