Nextrade eyes 10 percent market share in three years
The South Korean stock market will welcome a new bourse operator for the first time in nearly 70 years, as alternative trading system Nextrade is set to make its debut on March 4.
The launch of Nextrade is poised to stir up the market by putting an end to the monopoly power that the country’s sole operator Korea Exchange has enjoyed for decades, providing extended-hours trading sessions before and after regular market hours.
“We are going over the final details of operation testing with 29 brokerage houses that have expressed their intention to join the new platform on the opening day,” Kim Young-don, head of management and strategy at Nextrade, said at a press briefing held Friday.
Nextrade is to be launched by a consortium of 34 securities and tech firms based here. After the consortium was established in November 2022, it earned final regulatory approval to operate an eponymous alternative trading system on Wednesday.
Once the new exchange goes into operation, investors would be able to trade stocks 12 hours a day, longer than the current 9 a.m. to 3:30 p.m. for Korea Exchange. Premarket hours will run from 8 to 8:50 a.m., with regular market hours from 9 a.m. to 3:20 p.m. and aftermarket hours from 3:40 to 8 p.m. In the long term, it plans to extend the hours to up to 24 hours.
Around 10 shares will be available for trading on the first day. The number of stocks available for trading will be increased weekly to over 800 shares across the next four weeks. Exchange-traded funds and exchange-traded notes will also be available.
Investors can choose between Nextrade and Korea Exchange to execute their orders. If they do not make the choice, brokerage houses will decide for them, based on the duty of best execution, meaning they will evaluate which bourse operator can better serve customers in terms of price or stability.
For the time being, 15 brokerage houses have shown a willingness to trade with Nextrade during main market hours. Others are to provide transactions through Nextrade only during the premarket and aftermarket hours.
In the aftermarket trading hours, if major incidents that can affect investment decisions happen, the related shares will be closed for trading.
"The shutdown is a makeshift policy to cope with the lack of safety measures in the aftermarket hours. More detailed solutions would have to be worked out in the future," Nextrade's Kim said.
Being a new player in the market, Nextrade will emulate the Korea Exchange on many of its management details, including trading curb measures such as the circuit breaker and sidecar, as well as accommodation policy for investor protection. The 30 percent upper and bottom circuit limits of the Korea Exchange will be applied to Nextrade as well.
“An ATS (alternative trading system) is needed as the local stock market transaction volume which stood at around 5 trillion won ($3.45 billion) in 2013 jumped to 15 trillion won,” Kim said. “The vision is to up the market share of Nextrade to 10 percent in three years.”
By Im Eun-byel (silverstar@heraldcorp.com)
