Blue Ocean suspension affects 18 securities, including popular SOXL and KORU, after trading volumes hit US regulatory thresholds
South Korean retail investors are trading some popular US leveraged securities without access to real-time quotes during daytime hours, after Blue Ocean ATS suspended trading in 18 securities to comply with US Securities and Exchange Commission rules.
The suspension took effect with Monday’s 8 p.m. ET session, Blue Ocean ATS said.
Most of the affected securities are leveraged or inverse products, including the Direxion Daily Semiconductor Bull 3X Shares, known as SOXL, and the Direxion Daily MSCI South Korea Bull 3X Shares, or KORU. Both are popular among Korean investors.
“Blue Ocean ATS hits the Fair Access threshold for many stocks over the course of a month. While this often involves low-volume securities, this month we have seen higher volume in leveraged products,” a Blue Ocean Technologies spokesperson said.
Under the SEC’s Fair Access Rule, an alternative trading system becomes subject to additional requirements when it accounts for at least 5 percent of trading volume in a security during four of the preceding six months.
While Blue Ocean did not specify what drove the higher volumes, increased trading in leveraged ETFs among Korean retail investors may have contributed.
According to the Korea Securities Depository, the value of US stocks traded by Korean investors rose 34 percent to $65.6 billion in June from $48.9 billion in January.
KORU, which seeks to deliver three times the daily performance of the MSCI Korea 25/50 Index, ranked eighth among US securities purchased by Korean investors in June, with net purchases of $145.7 million.
Korean brokerages rely heavily on Blue Ocean to offer daytime trading in US stocks, meaning the suspension leaves investors facing what market participants call “blind” trading.
Samsung Securities, Toss Securities and other brokerages said trading in the affected securities remains available through alternative trading systems such as MOON and Bruce. Those venues, however, do not provide market quotes through Korean brokerage platforms, meaning investors must place limit orders without seeing real-time prices.
“Although quotes are unavailable, investors can still execute trades based on the last available price, with returns displayed on brokerage platforms,” an official at a local brokerage said. “Trading demand appears to remain strong despite the lack of market data.”
Local brokerages are reviewing backup options in case other platforms take similar steps, amid continued strong demand from Korean investors for US stocks.
The suspension could nevertheless further dampen Korean investors’ appetite for US leveraged products following recent restrictions imposed by local authorities, including minimum-deposit and order-volume requirements.
“We review the volume over the course of the month to determine a date to resume trading,” the Blue Ocean spokesperson said, adding that the operator has not set a reopening date.
By Im Eun-byel (silverstar@heraldcorp.com)
