Where orders are filled
Korean stocks are mostly filled on one venue, the Korea Exchange (plus some alternative exchange trading). The US is different. The same Apple share trades simultaneously on more than a dozen exchanges, dozens of alternative trading systems, and inside brokers and market makers.
| Venue | What it is |
|---|---|
| Exchanges | The New York Stock Exchange (NYSE), Nasdaq and others. Regardless of the “listing exchange”, most stocks trade on several exchanges at once |
| Alternative trading systems (ATS) | Electronic trading systems that are not exchanges. Those that don’t display quotes are often called dark pools |
| Internal fills by market makers and brokers | Many retail orders never reach an exchange; a market maker takes the other side directly |
As a result, close to half of US stock volume is filled off-exchange (it varies over time). The volume on a chart is the sum of fills at all these venues.
Where US stocks are filled (rough shares, varies over time)
- Exchanges 55%
- Off-exchange (ATS, market makers) 45%
The best quote (NBBO) and order routing
The best bid and ask nationwide across all exchanges’ quotes is called the NBBO (National Best Bid and Offer). By rule, an order may not be filled at a worse price when a better displayed quote exists elsewhere. So wherever it is filled, most orders fill at prices within the NBBO.
The path of a US stock order placed in Korea
- Your orderKorean broker’s app
- Korean brokerCurrency exchange, order forwarding
- US brokerChooses the venue
- Exchange, market maker or ATSFilled within the NBBO
Opening and closing auctions
The open and close of the US regular session are also set as single prices. The listing exchange collects orders at the open (opening cross/auction) and the close (closing cross/auction) and fills them at one price. The closing auction in particular attracts rebalancing by index funds and ETFs and institutional orders benchmarked to the close, so a large part of the day’s volume fills at the moment of the close.
- Buy and sell imbalance information published near the close can swing the price sharply just before the close.
- Whether an order placed in a Korean broker’s app a few minutes before the close joins the closing auction or fills in continuous trading depends on the order type.
Trading hours and holidays (Korea time)
| Session | US Eastern | Korea (during US daylight saving) | Korea (otherwise) |
|---|---|---|---|
| Pre-market | 04:00 – 09:30 | 17:00 – 22:30 | 18:00 – 23:30 |
| Regular session | 09:30 – 16:00 | 22:30 – 05:00 | 23:30 – 06:00 |
| After-hours | 16:00 – 20:00 | 05:00 – 09:00 | 06:00 – 10:00 |
The extended hours offered differ by Korean broker, and “daytime trading” of US stocks during Korean daytime is filled through US alternative trading systems. Trading in this window is very thin and spreads are wide; in August 2024, amid a sudden market move, daytime trading orders were cancelled en masse. Check whether and when it is offered with each broker at the time.
T+1 settlement
Since May 2024 US stocks settle the trading day after the trade (T+1; Korea is T+2). The most visible change is that the dividend record date and the ex-dividend date became the same day. To get a dividend you must buy by the trading day before the ex-dividend date. Through a Korean broker there is a separate currency exchange and domestic settlement schedule, so the day you can withdraw sale proceeds in won may be later.
LULD and market-wide circuit breakers
US stocks have no daily upper or lower price limits. Instead, the LULD (Limit Up-Limit Down) mechanism prevents sudden moves over short periods.
- Bands are set above and below the average price of the last five minutes. Large caps (S&P 500, Russell 1000, etc., above $3) generally get ±5%, other stocks ±10%, and so on.
- The bands double in width right after the open and just before the close.
- If the price stays at the edge of a band for 15 seconds, trading in that stock pauses for five minutes and restarts with an auction.
If the whole market plunges, circuit breakers kick in. If the S&P 500 falls 7% (level 1) or 13% (level 2) below the previous close, trading halts for 15 minutes (with exceptions just before the close); at 20% (level 3) trading ends for the day. The thresholds differ from Korea’s (8%, 15%, 20%).
LULD: trading pauses when the price hits the band edge (large caps ±5%)
Single-stock trading halts
- News pending halt: trading is briefly paused ahead of an important announcement, at the company’s request or the exchange’s judgment. It resumes after the announcement.
- Regulatory halt: if disclosure is inadequate or trading looks suspicious, the SEC can suspend trading for up to 10 trading days.
- Failing listing standards: a stock that stays below $1 for a long time gets a warning from the exchange, and if not fixed it is delisted and pushed to the over-the-counter (OTC) market. Companies often do a reverse split, combining shares, to avoid this.
Short selling and short squeezes
The US is a market where short selling is routinely allowed. The principle that you must borrow shares before selling is the same, but the borrowing cost (stock loan fee) is set by the market for each stock: under 1% a year for easy-to-borrow stocks, and tens of percent a year for hard-to-borrow ones.
- Short interest: compiled from broker reports and published twice a month by the Financial Industry Regulatory Authority (FINRA) and the exchanges. It is usually viewed as a percentage of the float.
- Days to cover: short interest ÷ average daily volume. It means how many days it would take to buy back all the short positions. The larger the number, the bigger the shock when buybacks pile up.
- Short squeeze: when a heavily shorted stock starts rising, buybacks to limit losses follow one after another and the rise gets steeper. The 2021 surge in so-called meme stocks is a classic example.
How the options market moves stocks
Single-stock options trade very actively in the US. Market makers who sell options buy and sell the underlying stock to offset their risk (delta hedging), and this trading affects the share price.
- If call buying piles up heavily on one side, the option sellers may have to buy shares, which can strengthen a rise (the gamma effect).
- Some analyses suggest that near expiration, prices seem to be pulled toward heavily traded strike prices.
- With the boom in very short-dated options, the influence of options flow on intraday index moves is often discussed.
These effects are hard to measure precisely and vary in size over time. But they help explain why stocks sometimes move sharply around earnings or expirations regardless of fundamentals (chapters 11 and 12).