Korea Exchange Monopoly Broken - NextTrade Launches < Video < Article

[Min Jae Lee, Anchor] A significant change has come to the domestic stock trading market. The single exchange system, which has been in place for nearly 70 years, has collapsed, and the alternative exchange NextTrade has been launched. Let's find out how securities firms and investors are reacting, and what impact it will have on the market.

[Young Tae Seo, Reporter] NextTrade has successfully completed its first day of trading. In the after-market session following the regular trading hours, the trading value exceeded 11 billion won, with individual investors accounting for 90% of the trades.

There were initial concerns that it would primarily be a market for institutional investors' arbitrage trading, but we could confirm high interest from individual investors. Despite only 10 stocks being available for trading, the volume through NextTrade accounted for a significant portion.

For example, the trading volume of KOSDAQ-listed YG Entertainment on NextTrade reached 46.76% of the volume on the Korea Exchange (KRX), while KOSPI-listed Kolon Industries recorded 26.64%.

According to current regulations, if the daily average trading volume of an alternative exchange exceeds 15% of the total market volume, or 30% for a single stock, trading must be suspended. However, NextTrade surpassed these thresholds for some stocks on its first day of operation.

[Anchor] As competition between exchanges intensifies, the investment environment is likely to change. How are securities firms preparing?

[Reporter] Securities firms are responding quickly. They have revamped their mobile trading systems (MTS) and reduced trading fees to attract investors in line with NextTrade's launch.

They have also enhanced information provision features for each exchange and allowed customers to choose between KRX and NextTrade (NXT) when placing orders. Trading hours have been significantly extended from 9:00 AM to 3:30 PM to 8:00 AM to 8:00 PM. As a result, securities firms are adjusting their work schedules, with some introducing staggered work hours for employees to manage workload.

[Anchor] The securities industry is paying close attention to NextTrade's launch. Representatives of major securities firms attended the opening ceremony to celebrate the beginning of the multi-exchange era, expecting improved investor benefits and market vitalization.

[Reporter] Representatives of major domestic securities firms attended NextTrade's opening ceremony, emphasizing the positive changes that the multi-exchange system will bring. NextTrade is an alternative trading system (ATS) established primarily by the Korea Financial Investment Association and securities firms, signifying a shift from the KRX monopoly to a competitive system.

Seon-ho Heo, Vice Chairman of Mirae Asset Securities, said, "We expect positive results as we can provide customers with lower trading costs," adding, "The extended trading hours, which strengthen connectivity with global markets, are also a significant advantage."

[Anchor] I'm curious about the reactions of other major securities firms. What expectations do they have as we transition to a multi-exchange system?

[Reporter] Securities firm representatives emphasized that as investors' options expand, the trading environment will improve further.

Sung-hwan Kim, President of Korea Investment & Securities, said, "It's rare for a country to have only one exchange globally," adding, "We will be able to provide better services to investors through competition." He also mentioned, "Changes such as best execution obligations and reduced trading fees are expected to have a positive impact on investors."

Ju-sung Eom, CEO of Kiwoom Securities, said, "Consumer benefits will increase, and trading volume is expected to grow," while Byung-woon Yoon, CEO of NH Investment & Securities, emphasized, "Lower fees will be an advantage, and it will successfully establish itself in the market."

Jung-hak Seo, CEO of IBK Investment & Securities, stated, "It will be advantageous for investors as fees become cheaper," and added, "NextTrade could be an opportunity to turn around the stagnant market atmosphere." Ik-geun Oh, CEO of Daishin Securities, also mentioned, "We have thoroughly prepared for NextTrade's launch."

[Anchor] I'm also curious about investors' reactions. What kind of evaluations are coming out?

[Reporter] Investors' reactions are mixed. While there are positive assessments, some point out that merely extending trading hours may not be effective, given the current unfavorable market conditions.

One investor said, "As soon as I logged into the MTS, I saw a notice about the changed trading environment," adding, "I learned for the first time that there are investor rights protection measures after seeing the explanation about best execution obligations."

However, opinions on online communities included, "Isn't this just like a restaurant that's not doing well adding more menu items?" and "Resolving issues with split listings and short selling is more urgent."

Some investors welcome NextTrade's introduction as a positive change, while others view the addition of another exchange as less significant amid the current domestic stock market downturn.

[Anchor] What changes will NextTrade bring to the Korean stock market in the future?

[Reporter] NextTrade is operating its pre-market for the first time today. Real-time orders are executed from 8:00 AM, before the start of KRX's regular trading hours. This differs somewhat from the existing single price auction, so investors need to be cautious.

While KRX determines a single opening price by collectively receiving quotes before the regular market, orders are executed in real-time as soon as the market opens in NextTrade's pre-market.

If an investor places an order at the upper or lower limit price, KRX collectively sets the price for execution, but in NextTrade, the submitted quote is maintained and executed immediately if there's a matching order.

A NextTrade official explained, "Investors should be aware that the pre-market trading system differs from KRX," adding, "Since it's a continuous auction method, there's a high possibility that the submitted quote will actually be executed."

[Anchor] With the addition of a new exchange, there must be benefits for investors as well. What changes are expected?

[Reporter] With NextTrade's launch, competition for trading fees among securities firms is likely to intensify. As the competition for lower trading fees heats up, investors' cost burden is expected to decrease.

Additionally, with the transition to a multi-exchange system, changes are expected in order execution speed and market surveillance systems. NextTrade has stated that it will provide stable trade execution and investment environment.

Hak-soo Kim, CEO of NextTrade, said, "We will contribute to the development of the capital market by providing agile and more innovative services in line with market demands."

Eun-bo Jeong, Chairman of the Korea Exchange, emphasized, "Healthy competition between exchanges will provide more opportunities for investors," adding, "As an integrated market manager, we will thoroughly prepare for the settlement of the multi-exchange system."

(Young Tae Seo, Financial Department, Yonhap Infomax)

※This content is from the "Reporting Files" corner of Yonhap News TV's "Economy ON" program aired on March 5 (Wednesday) at 4 PM. (Featuring: Young Tae Seo, Yonhap Infomax reporter, hosted by Min Jae Lee)

ytseo@yna.co.kr

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Young Tae Seo ytseo@yna.co.kr