Ever since the decision two years ago to delay the closing time of the nation’s securities market by 30 minutes, market authorities and labor activists have been in a heated debate, with unions saying the extended trading hours place an undue burden on employees without conferring significant benefits in terms of transaction volume.
The issue is to take center stage at this week’s National Assembly audit, with Korea Exchange Chairman Jung Ji-won having been called as witness to discuss the matter at a session slated for Thursday.
Eyes are on Jung to see whether he will deviate from his remarks during a July press conference, when he said backtracking on the new trading hours -- in place since August 2016 -- would be “premature.” Jung will be questioned by lawmakers, including ruling Democratic Party Rep. Kim Byung-wook. Kim was formerly the leader of a labor union associated with the Korea Securities Dealers Association, which later merged with the Korea Financial Investment Association.
KRX Chairman Jung Ji-won (KRX)
The parliamentary audit comes at a time when labor unions and the KRX, the sole market operator in South Korea, are locking horns over the new trading hours.
Labor unions, including the Korean Finance and Service Workers’ Union, argue that the longer trading hours translate into an excessive volume of tasks, nibble away at work efficiency and jeopardize the health of brokerage house employees at all levels: brokers, dealers and clerks.
On the other hand, the market operator defends the extended trading hours, saying they are necessary and that technological advances will soon make it possible to alleviate employees’ workload through a new set of measures to be introduced by the end of October.
Since August 2016, securities markets here operate from 9 a.m. to 3:30 p.m. on weekdays, without a lunch break but excluding holidays. Prior to that, the closing time was 3 p.m.
At the time, the KRX cited a need to improve liquidity and achieve a breakthrough to overcome the stagnant performance of domestic stocks, saying it expected the volume of transactions to increase 3-8 percent as a result of the change.
The KRX also wanted its trading hours to overlap by an additional 30 minutes with those of China’s Shanghai and Shenzhen stock markets, taking into consideration the one-hour time difference. It said the move would help some securities here, such as exchange-traded funds that follow Chinese market indices, “better reflect information about Chinese markets.” The Chinese markets operate from 9:30 a.m. to 3 p.m. with a 90-minute lunch break.
Korea Finance and Service Workers' Union holds a sit-in in front of KRX Seoul office on Sept. 13. (Son Ji-hyoung/The Korea Herald)
Trade unions, on the other hand, say the KRX has kept only a few of its pledges and that work conditions for rank-and-file employees have deteriorated.
The Korean Finance and Service Workers’ Union is planning a protest march on Wednesday near the KRX Seoul office in Yeouido. This follows a series of sit-ins across the nation in September.
“We are supposed to work from 8 a.m. to 5 p.m., but implicitly we come to work before 7:30 a.m. and are released from work past 6 p.m.,” Kim Jun-wan, head of the labor union division at NH Investment & Securities and one of the speakers at the podium, told some 1,000 protesters at a Sept. 13 rally in front of the KRX Seoul office.
“The KRX continues to cling to its reasoning, that it’s only been two years since the introduction of the new trading hours, and it consistently comes up with politically based excuses to refuse to back away from the policy.”
The KRX so far has remained adamant on its stance, saying its reasons for extending the trading hours remain valid and that calls to go back are “out of place.”
“No matter how the labor union takes issue with it, we still see a need for the extended trading hours,” Ahn Il-chan, a KRX official in charge of stock trading policy, told The Korea Herald.
He added that upcoming changes at the KRX would reduce the employees’ workload. Starting later this month, the KRX will provide finalized information about the closing prices of securities and derivatives no later than 5 p.m. Currently, the closing prices of securities and derivatives are provided by 5:30 p.m. and 6:10 p.m., respectively. The KRX is also in talks with financial authorities to shorten pre-market trading time, currently 8 a.m. to 9 a.m.
But doubt prevails among workers at securities firms, particularly since the 52-hour maximum workweek policy took effect this year.
The new workweek policy will go into effect at securities companies in July next year, but employees at securities firms doubt they will be able to carry out their duties in the allotted time.
“The new workweek policy will involve tougher regulation, leading to additional costs for securities firms,” Kim Ho-yol, vice president of the Korean Finance and Service Workers’ Union, said at a press conference in September. “The social costs of the extended trading hours are permanent.”
According to a survey conducted by the labor union on Monday, 71.8 percent of 2,588 respondents had been subjected to an increase in overtime work, while 70.7 percent said they were not paid for working overtime.
“The work routine of brokerage firm employees involves extra tasks,” said Koo Gi-dong, a business administration professor at Shingu University, during a panel discussion at the National Assembly in September.
According to Koo’s presentation, the day of a trader or dealer starts a few hours before the market opens, because of morning meetings and pre-market trading that start at 7:30 a.m. The lack of a lunch break discourages employees from taking time to focus on the meal. After 3:30 p.m. employees take part in after-hours trading sessions, settle transactions and handle customer services.
The critics also say there are discrepancies in interpretation regarding the degree to which the liquidity of equity markets has increased, as compared with expectations, since August 2016.
According to data compiled by the Financial Services Commission, the stock transaction volume on Kospi and Kosdaq for the combined 23 months since August 2016 rose 13 percent compared with the 23 months until July 2016. By market, the transaction volume on Kospi fell 10.4 percent, while that on Kosdaq jumped 29.1 percent.
Also on Kospi, the value of traded stocks over the cited period climbed 13.9 percent, while that on Kosdaq surged 29.1 percent. The combined value soared 20 percent.
But the figure did not reflect the increase in the number of listed stocks that outpaced the rise of transaction volume in both markets, which could be an indication of decreased market liquidity.
A bull statue in front of the Busan International Finance Center (KRX)
Aside from the different interpretations and expectations for the market, experts raise concerns that cutting the trading hours back would significantly undermine investor confidence.
“Frequent changes in market policy will take a toll on investor demand in Korean markets,” said Kim Young-do, a capital market division research fellow at the Korea Institute of Finance. “Farsightedness and consistency in policy direction are crucial in financial markets here.”
“A rise in trading volume for a couple of years is insufficient to explain the effects of the extension of trading hours,” said Lim Dong-chun, director of the finance and fair trade team at the National Assembly Research Service. “Frequent changes in trading hours would harm investor confidence in the Korean stock market.”
By Son Ji-hyoung