South Korea is set to enter a new era of capital market competition as Nextrade, the country’s first alternative trading system (ATS), begins operations (Image courtesy of Yonhap)
SEOUL, Feb. 6 (Korea Bizwire) — South Korea is set to enter a new era of capital market competition as Nextrade, the country’s first alternative trading system (ATS), begins operations on April 4.
The Financial Services Commission announced at its second regular meeting on February 5 that it would grant final approval for Nextrade’s multilateral trading facility business license.
The launch of Nextrade will extend stock trading hours to 12 hours per day, from 8 a.m. to 8 p.m., significantly expanding trading opportunities for investors. During regular trading hours, Nextrade will operate alongside the Korea Exchange (KRX), while exclusively operating pre-market (8:00-8:50 a.m.) and after-market (3:30-8:00 p.m.) sessions.
Opening and closing prices, as well as stock indices, will continue to be determined by the KRX’s regular trading session (9:00 a.m.-3:30 p.m.). Trades executed during Nextrade’s pre-market and after-market sessions will be reflected in the opening price auction.
The new platform will introduce innovative order types, including “midpoint orders” that automatically adjust to the middle price between the best bid and ask, and “stop-limit orders” that trigger limit orders when a specified price is reached. These additions complement existing market orders and four types of limit orders. The KRX plans to offer similar order types in response.
Nextrade aims to reduce trading costs by lowering transaction fees by 20-30% compared to current KRX rates. Financial authorities will implement comprehensive market oversight as both exchanges operate simultaneously.
Brokerages will be required to follow “best execution” guidelines when routing orders between the KRX and Nextrade. Short selling will be restricted to regular trading hours and prohibited during pre- and after-market sessions due to lower liquidity and increased price volatility risks.
Price limits and market stability measures will mirror KRX standards, with daily price movements capped at ±30% from the previous day’s KRX closing price. Circuit breakers and trading halts will be synchronized between the two venues. Settlement will follow the same T+2 cycle as the KRX.
Thirty-three securities firms have committed to participating in Nextrade. Fifteen firms will join all trading sessions at launch, while 14 will initially participate only in pre- and after-market trading before expanding to full participation by September. Four additional firms plan to begin full participation in September.
Nextrade will initially list approximately 800 highly liquid stocks currently trading on the KRX, with the final selection to be announced at a joint briefing on February 12. Beginning in late June, the trading roster will be reviewed and updated quarterly.
Financial authorities plan to expand the system to include Exchange Traded Notes (ETNs) and Exchange Traded Funds (ETFs) in line with the ATS initiative’s objectives.
M. H. Lee (mhlee@koreabizwire.com)
