US alternative stock trading platform Blue Ocean has been unable to resume its trading service in South Korea for months with no clear explanation. The main reason could be its lack of transparency in dealing with last August's server outage, according to the CEO of a former partner company that is currently engaged in a lawsuit with the platform's operator.

Fundamental Interactions, a developer of enterprise market center technology platforms, previously provided its systems to power the Blue Ocean Alternative Trading System, including when a massive server outage occurred last year on Aug. 5. Investors in Korea saw orders worth 630 billion won ($437 million) canceled as a result.##

Blue Ocean Technologies explained that its matching engine failed to handle the surge in trade volume triggered by a global stock market sell-off over fears of a US recession. Fundamental Interactions CEO and co-founder Shawn Sloves argues, however, that Blue Ocean's “repeated negligence” in not upgrading its infrastructure led to the “preventable system failure.”

“Fundamental Interactions repeatedly recommended capacity upgrades to Blue Ocean in response to the sharp increase in transaction volume, but Blue Ocean ignored these requests,” Sloves said in an email interview with The Korea Herald.

Following the system failure, Blue Ocean ATS migrated to a new technology platform, MEMX, explaining the move had already been planned. It also promised that another failure would not happen with the new system.

Fundamental Interactions claimed that Blue Ocean Technologies misrepresented the situation, affecting the tech firm's market reputation by suggesting its software was at fault. The company filed a lawsuit against Blue Ocean Technologies in September in the New York Supreme Court, which is currently reviewing the case.

Sloves further suggested, "The allegations against Blue Ocean Technologies could significantly impact South Korean authorities' decision to allow brokerage firms to resume trading with Blue Ocean Technologies."

"Its public statements misrepresented the true cause of the outages, eroding market confidence and regulatory trust."

##Since the system crash in August, local brokerage firms have halted trading through Blue Ocean ATS. The standstill has left Korean investors unable to respond to market changes outside of regular US market hours because all of the 19 brokerage houses here provided trading of US shares during Korea's daylight hours from 10 a.m. to 5:30 p.m. through Blue Ocean Technologies since it first built ties with Samsung Securities in 2022.

With Korea as its biggest market prior to the outage, accounting for 65 percent of its trading volume, Blue Ocean Technologies is keen to resume service with local brokers.##

Its top executives, including CEO Brian Hyndman, visited Seoul earlier this month to meet with counterparts at local brokerage firms and the Korea Financial Investment Association, which represents the firms and has been seeking the regulatory nod. Blue Ocean Technologies even set up a Seoul office to better communicate with the local market.

Yet the service remains stalled for no clear reason. While officials from local brokerage houses said the country's top regulator, the Financial Supervisory Service, has to approve any resumption, Sloves said the real problem is Blue Ocean Technologies' unwillingness to take responsibility for the outage.

"Given the importance of market stability and compliance, South Korean regulators may hesitate or delay approval until Blue Ocean Technologies demonstrates substantial improvements in infrastructure, risk management and transparency,” Sloves said.

Meanwhile, Blue Ocean Technologies responded that the lawsuit by Fundamental Interactions is “frivolous and without merit.”

“We are actively engaged with our legal counsel and working on a motion to dismiss these charges,” said Silvia Davi, the firm’s spokesperson.

By Im Eun-byel (silverstar@heraldcorp.com)