NEXTRADE (NXT), Korea's first alternative trading system (ATS), has settled into the market, surpassing a 15% share by transaction volume eight months after its launch. Against this backdrop, experts are calling for easing the current market-share cap to advance a multiple-market structure.
The Korean Securities Association held a special symposium on the launch of the alternative trading system and the introduction of a multiple-market structure on Feb. 27 at the Korea Financial Investment Center in Yeouido, Yeongdeungpo-gu, Seoul. About 70 figures from the financial investment industry, including Association President Jeon Jin-gyu and Korea Financial Investment Association President Seo Yu-seok, attended the event.
On the day, Securities Association President Jeon Jin-gyu said, "With the launch of NEXTRADE (NXT), our capital market has begun in earnest to shift to a multiple-market system, moving beyond a single-exchange centered structure that had been maintained for nearly 70 years," adding, "Through this, we achieved institutional progress that broadens market participants' choices and enhances capital market efficiency and investor welfare."
Korea Financial Investment Association President Seo Yu-seok said in congratulatory remarks, "Even in its early stage, the performance of (NEXTRADE (NXT)) accounting for about 15% of the market's total transaction volume is the result of minimizing the trial and error experienced by overseas markets, and going forward there needs to be development into a multi-layered competitive structure, including market transparency, execution speed, and quality data-based services."
At the event, there was an opinion that the 15% market-share cap on alternative trading systems should be revisited. Under the current Financial Investment Services and Capital Markets Act, as of the last day of each month, an alternative trading system's average daily transaction volume over the previous six months is not allowed to exceed 15% of the Korea Exchange (KRX) volume.
NEXTRADE (NXT) CEO Kim Hak-su said, "With the launch of NEXTRADE (NXT), a competitive structure in the transaction market has been established, allowing us to deliver the resulting benefits to investors," while noting, "It is also necessary to reexamine ATS-related systems, including the market-share cap, and to expand eligible instruments to global ATS levels, such as exchange-traded funds (ETF), fractional investing, and security token offerings (STO)."
Kim Dae-jin, a professor at the School of Business at Sungkyunkwan University who delivered the keynote presentation, cited the increase in market liquidity and the strengthening of price discovery since the launch of NEXTRADE (NXT) as grounds for easing the 15% cap.
Kim explained, "When the transaction volume is 100, the market does not split 50–50 between the Korea Exchange (KRX) and NEXTRADE (NXT); rather, each side becomes 80, giving the market an overall depth of 160."
He added, "Although the growth of NEXTRADE (NXT) may temporarily reduce the Korea Exchange (KRX)'s market share, that does not mean the KRX's overall liquidity declines."
Kim also said, "In low-liquidity stocks, NEXTRADE (NXT) makes a high contribution to price management," emphasizing, "The 15% market-share cap can reduce investors' transaction opportunities and worsen the investment environment."
In the panel discussion, participants argued that the market-share cap should be reexamined and that the regulatory gap between NEXTRADE (NXT) and the Korea Exchange (KRX) should be narrowed.
Yon Seon-jung, a professor at Dongguk University, said, "NEXTRADE (NXT) effectively borrows market surveillance and clearing and settlement infrastructure from the Korea Exchange (KRX), so the expense calculation process should be made more transparent and the competitive expense burden should be eased."
In response, Financial Services Commission (FSC) Deputy Director An Young-bi said, "As NEXTRADE (NXT) has become a core transaction platform alongside the Korea Exchange (KRX), we need to consider the path forward together," adding, "We will continue consultations to improve the limit regulations and to develop various smart order routers (SOR)."