This article was published on Aug. 20, 2025, at 6:41 a.m. on ChosunBiz MoneyMove site.
The alternative exchange NextTrade has surpassed a 30% market share in stock transactions just five months after its launch, and it is now drawing attention as it sets its sights on trading exchange-traded funds (ETFs). From the standpoint of the Korea Exchange, which has monopolized ETF trades, NextTrade's attempt to freeload is unwelcome.
According to the financial investment industry on the 20th, NextTrade plans to promote ETF transactions as one of its key tasks in 2026. Since its launch at the end of March, NextTrade has been facilitating transactions for 794 stock items, but ETFs are currently excluded from the trading targets.
The regulatory framework is in place. A revised enforcement decree allowing the alternative exchange to facilitate ETF transactions passed through a cabinet meeting in May. NextTrade is currently going through the authorization process required by the financial authorities to trade ETFs.
If ETF trading becomes possible at NextTrade, it could quickly erode the market share of the Korea Exchange, similar to stock trading. This is because ETFs can be traded for up to 12 hours a day through pre-market (8 a.m. to 8:50 a.m.) and after-market (3:40 p.m. to 8 p.m.) sessions.
In the case of stock trading, NextTrade has already halted trading for some items considering the '15% rule.' According to the capital market law enforcement decree, the six-month average transaction volume of the alternative exchange must not exceed 15% of the Korea Exchange's transaction volume for the same period, and they have almost reached that limit, prompting a proactive response.
The atmosphere at the Korea Exchange is tense. A representative of the Korea Exchange said, "It is only natural to feel uncomfortable as a competitor emerges."
Internally, there is a negative reaction at the Korea Exchange regarding NextTrade freeloading not only on stocks but also on ETFs. As NextTrade is an alternative exchange rather than a regular exchange under capital market law, it does not perform market creation and management tasks such as listing and market surveillance. Instead, it utilizes the infrastructure of the Korea Exchange and pays for those expenses.
However, compared to the manpower and expense that the Korea Exchange incurs to manage ETF listing reviews and discrepancies with underlying indices, the money NextTrade pays to the Korea Exchange is relatively small. Although ETF trading fees are not yet in the discussion stage, it is expected that NextTrade will apply a relatively lower rate than the Korea Exchange, similar to stock trading fees.
Another representative of the Korea Exchange said, "In our country, the listing fee for ETFs is lower compared to foreign countries, maintaining it through trading fees; however, I'm worried that NextTrade can lower only the trading fees while not performing functions like listing reviews."
However, there are also significant challenges before brokerages for ETF transactions are processed at NextTrade. The immediate task is to persuade asset management companies and liquidity providers (LPs).
LPs play a role in preventing the gap between the ETF trading price and net worth by submitting bids according to the estimated net asset value (iNAV) of the ETF. The problem is that if ETFs are traded at both the Korea Exchange and NextTrade, bids must be submitted separately at each.
Especially if the trading hours for ETFs extend to pre-market and after-market sessions, the burden increases. This necessitates more manpower and budget allocation.
A representative from the asset management industry said, "For ETFs, bid management is necessary, but a new systematic development is needed. From the asset management perspective, maintaining operations at both the Korea Exchange and NextTrade only increases expense without sufficient incentive."