Stock Quotation Price Units to Decrease from Next Year..."Stocks Priced in 100,000 Won Range, 500 Won → 100 Won"

[Image source=Yonhap News]

[Asia Economy Reporter Myunghwan Lee] Starting January next year, the tick size for certain price ranges in the domestic stock market will be reduced to lower transaction costs for investors.

The Korea Exchange announced on the 1st that it will improve the tick sizes in the securities and derivatives markets to reduce trading costs for market participants.

The tick size, which is the minimum price fluctuation unit, serves as the lower limit of the bid-ask spread, the difference between the best ask and bid prices. Therefore, a tick size set too high institutionally restricts the reduction of the bid-ask spread, ultimately increasing investors' trading costs. The large tick size also prevents quoting prices below the current tick size, which can hinder the market's price discovery function.

Although the domestic stock market has relatively low trading fees, the tick size has not been improved for a long time since October 2010, resulting in implicitly higher trading costs compared to major overseas markets. Accordingly, the Exchange plans to reduce the tick sizes in the securities and derivatives markets to an appropriate level to decrease trading costs and improve the price discovery function.

As a result, the tick sizes for some price ranges with high tick size ratios will be reduced. Specifically, the tick size for stocks priced between 1,000 KRW and less than 2,000 KRW will be reduced from 5 KRW to 1 KRW. For stocks priced between 10,000 KRW and less than 200,000 KRW, the tick size will be reduced to 10 KRW, and for stocks priced between 100,000 KRW and less than 200,000 KRW, it will be reduced to 100 KRW.

Additionally, the tick sizes for high-priced stocks above 100,000 KRW, which differed by market, will be unified. The tick size for stock futures will also be reduced to match that of the stock market.

The detailed rules for implementing the tick size improvements will be enforced in conjunction with the launch of the Exchange's next-generation system in January next year, after collecting opinions from market participants.

This content was produced with the assistance of AI translation services.