South Korea Extends ETF Trading Hours from September; Tax Burden on Liquidity Providers Raises Concerns

According to Korea Exchange, South Korea will expand ETF trading hours starting September, allowing transactions during aftermarket hours (4 PM to 8 PM) in addition to the current 3:30 PM closing. The alternative exchange Nextrade plans to introduce both pre-market (8 AM to 8:50 AM) and aftermarket ETF trading by November. However, securities firms warn that the trading expansion will increase tax burden on liquidity providers (LPs), who facilitate ETF transactions. LPs face education tax on trading profits while losses from hedging trades are not offset, pressuring them to widen bid-ask spreads. The Financial Investment Association advocates introducing loss-and-gain netting to reduce compliance costs and maintain market liquidity as ETF market cap exceeds 500 trillion Korean won.
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