The market share of the alternative trading system NEXTRADE (NXT) fell sharply. The designation of SK hynix as an investment alert issue, along with the Korea Exchange (KRX)'s fee cut, is seen as the cause.
According to the Korea Exchange (KRX) on the 21st, from the 15th to around the 19th, NEXTRADE (NXT)'s average daily transaction value was 5.6719 trillion won, a steep drop of 28.3% from the previous week. Compared with a slight increase in the total transaction value of the domestic stock market, NEXTRADE (NXT)'s decline is unusual.
The biggest reason for the decline in transactions is that SK hynix, the No. 2 by market capitalization, was designated as an investment alert issue on the 11th. Under relevant rules, once designated as an investment alert issue, trading through an alternative trading system is banned.
As a result, NEXTRADE (NXT)'s average daily transaction value, which had stayed in the 8 trillion won range, began to slide immediately after trading in SK hynix was blocked. In addition to SK hynix, major large-cap stocks such as Doosan Enerbility, Hyundai Rotem, SK Square, and Hanwha Aerospace are also included on the list in large numbers, exacerbating the hit.
On top of this, the Korea Exchange (KRX) moving to a head-on contest by cutting trading fees had a major impact. The Korea Exchange (KRX) changed the single trading fee rate, previously 0.0023%, to a tiered schedule from the 15th through Feb. 13 next year, cutting it by 20% to 40%.
Until now, NEXTRADE (NXT) has leveraged lower fees than the Korea Exchange (KRX) to secure orders through the smart order routing (SOR) system. Under the current system, if an investor places a stock trading order without specifying an exchange, the SOR system has the securities firm compare price, fees, expense, order size, and the likelihood of execution, and automatically route the order to the exchange most favorable to the customer.
However, after the Korea Exchange (KRX)'s fee cut weakened NEXTRADE (NXT)'s price competitiveness, the share of main market transactions overlapping with regular hours decreased, while the shares of pre- and after-hours markets rose relatively.
Still, NEXTRADE (NXT) appears inclined to watch the situation rather than respond hastily. The Korea Exchange (KRX)'s fee cut is in effect for only two months, and the investment alert designations for large-cap stocks are likely to be lifted soon.
Meanwhile, the Korea Exchange (KRX) has reportedly begun reviewing system improvements to prevent a side effect in which top market-cap stocks are designated as investment alert issues and see trading restricted. Options being discussed include using excess returns relative to the stock index, rather than simple returns, as the designation criterion.