SK hynix suffered a dramatic 30% price drop in pre-market trading for the second time in roughly a week, raising fresh questions about the stability of South Korea's alternative stock exchange, Nextrade. According to data from the recently launched bourse, which handles trades before and after regular market hours, 11 shares of SK hynix were executed at 1,168,000 won each at 8:00 AM local time, hitting the daily limit-down threshold. The stock recovered to end the 50-minute pre-market session roughly 2% lower.

During the regular trading session on the Korea Exchange, the country's primary stock market, the chipmaker's shares fell as much as 9.8% on Thursday, tracking a broader industry downturn following overnight weakness on Wall Street. This volatile swing on Nextrade closely mirrors an identical event from the previous Tuesday, when SK hynix also crashed 30% in pre-market trading before paring its losses. That incident led to the liquidation of nearly $60 million in long positions on SK hynix derivative contracts traded on a crypto exchange within just two minutes.

Why is this happening?
Nextrade, which launched last year, has rapidly expanded its market share in South Korea by offering longer trading hours and lower fees. However, unusual events like the SK hynix flash crash have intensified scrutiny of the alternative exchange, with concerns that such trades could undermine proper price discovery. Unlike most stock exchanges that use multiple pricing sources, Nextrade states it relies on a single source, a practice it says is common among global alternative trading systems.

What is Nextrade saying?
In response to media inquiries, Nextrade explained, "Unlike the main exchange, where price discovery functions like determining the opening and closing prices are critical, an alternative stock exchange focuses more on trade execution." It added, "Therefore, like leading global alternative trading systems, Nextrade operates its market by opening the continuous trading session." According to a spokesperson for the exchange, Nextrade plans to introduce a Static Volatility Interruption (SVI) mechanism starting September 14, which should prevent such incidents from recurring. The mechanism will be triggered by bids or offers at least 10% above or below the previous closing price, initiating a two-minute call auction to select a price that maximizes trade execution.