STOCKS | South Korea Exchange to Assess High-Frequency Trading Impact

South Korea's exchange, KRX, is soliciting bids for a research project to analyze the impact of sharply rising high-frequency trading on the market and explore regulatory directions. According to Jin10, the bid application deadline is July 27, and the study is scheduled to be completed in the second half of this year. High-frequency trading uses computer algorithms to place orders at extremely high speed. Unlike conventional program trading, which automatically executes large orders under specific conditions, high-frequency trading requires no human intervention and uses very short time gaps of less than one second for frequent order placement. Foreign institutional investors account for the largest share of this trading model, which is mainly used to capture instant price differences for arbitrage. The report said high-frequency trading is hard to profit from when securities transaction tax rates are high, but its profit potential rises as tax rates fall. Concerns that a surge in high-frequency trading could disrupt the market have persisted since the securities transaction tax rate was cut in 2019. KRX plans to use the study to analyze market effects and build a regulatory framework. South Korea has already introduced risk-control measures, including a registration system for high-speed algorithmic traders in 2023 and a circuit breaker mechanism for bulk order cancellations.