As South Korea prepares to extend trading hours and shorten settlement periods, global investors are calling for simultaneous improvements across the entire market infrastructure, including exchanges, brokerages, custodians, clearinghouses, and foreign exchange markets. They emphasize the importance of establishing an operational framework that global investors can effectively utilize, rather than merely implementing new regulations.
On September 29, during the 'Korea Premium Week 2026' session on capital market infrastructure modernization held at The Grand Lotte in Jung-gu, Seoul, discussions continued regarding the extension of trading hours and the introduction of a one-business-day (T+1) settlement cycle.
Representatives from GIC, a global institutional investor, noted that extending trading hours could create a new pool of liquidity and expand the overlap of trading hours among Asian, European, and U.S. markets, which would aid in price discovery and real-time risk management.
Gwen Chua, Head of Asia Equity Trading at GIC, stated, "Extending trading hours can create a new pool of liquidity, and as the trading hours of Asia, Europe, and the U.S. overlap, it will enable price discovery and real-time risk management." However, she cautioned that the increased trading hours could lead to liquidity being dispersed across multiple time zones, necessitating the participation of domestic and international market makers.
Regarding the introduction of T+1, the importance of preparation was highlighted. It was noted that, similar to the U.S. transition to T+1, market participants—including exchanges, regulatory bodies, custodians, brokerages, and investors—must meticulously review and test their operational processes before actual implementation.
She emphasized, "T+1 presents significant operational challenges for global institutional investors due to the compressed settlement cycle. Exchanges, regulatory bodies, custodians, brokers, and investors must collaborate and conduct thorough testing before implementation." She also pointed out the need for a response system to address potential system failures or operational errors during the settlement process.
The Korea Exchange has begun preparations for the T+1 implementation. Park Sang-wook, Head of the Clearing and Settlement Division at the exchange, remarked, "The introduction of T+1 is no longer a subject of debate," noting that the exchange, the Korea Securities Depository, the Bank of Korea, and the Financial Services Commission have been reviewing its feasibility. Currently, they are examining potential issues that may arise during actual trading processes through a working group involving industry stakeholders and global investors.
Park emphasized, "The completion of T+1 cannot be achieved by infrastructure institutions alone; the readiness of custodial banks and global players is crucial." He expressed expectations for improved capital utilization efficiency, reduced credit and securities settlement risks, and lower transaction costs as a result of T+1 implementation.
The Hong Kong Stock Exchange, which is pushing for T+1 implementation in the fourth quarter, has called for an initial overhaul of the settlement structure for sell-side transactions. Yu Tae-seok, Executive Director of the Hong Kong Stock Exchange, stated, "In sell transactions, the most important factors are when stocks and money are received and how long it takes to receive the money," suggesting a detailed examination of the settlement structure in the selling process.
Timothy Cuddyh, Chief Risk Officer of the Depository Trust & Clearing Corporation (DTCC) and Chair of the Global CCP, assessed that extending trading hours and implementing T+1 could amplify existing risks rather than create new ones. He emphasized that the infrastructure for exchange-traded funds (ETFs) and foreign exchange must evolve alongside changes in the stock market. He cautioned, "The entire ecosystem is only as strong as its weakest link," urging exchanges and clearinghouses to establish adequate control measures.
Global investors are also demanding a clear timeline for implementation. Chua noted that each brokerage and custodian requires different amounts of time to prepare their systems, personnel, and operational processes, highlighting the need for a clear roadmap to allow market participants to prepare in advance. She stated, "All partners must prepare their systems, personnel, and processes, and the time required varies. A specific implementation schedule must be presented to allow market participants to prepare."
Joshua Groholotski, Head of Brokerage Operations for Interactive Brokers (IBKR) in the Asia-Pacific region, also mentioned the need for regulatory improvements to enhance access for foreign investors to the domestic market alongside the extension of trading hours. He specifically pointed to tax improvements related to domestic ETF and exchange-traded note (ETN) investments and the short-selling liquidity provider (SLP) system as future challenges.
Meanwhile, discussions highlighted that changes in corporate governance and shareholder behavior are prerequisites for realizing the Korea Premium. Kim Hak-kyun, Head of the Research Center at Shin Young Securities, stated during a panel discussion on 'Vision and Challenges for the Era of Korea Premium' that it is still difficult to observe meaningful changes in governance among major South Korean corporations.
Kim emphasized, "Changing the law does not change the behavior of the capital market," urging that institutional investors and active funds must take proactive actions as shareholders, rather than merely relying on institutional changes.
* This article has been translated by AI.
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