As the exchange-traded fund (ETF) market grows rapidly, the yardstick for judging securities firms' brokerage (commission trading) competition is changing. Until now, only the average daily stock transaction value was a barometer of industry conditions, but ETF transaction value has now become an essential indicator. Analysts say the growth of the ETF market is shaking not only securities firms' revenue structures but also competition in the brokerage market.
According to the Korea Exchange (KRX) on the 30th, individual investors this year had, through the previous day, a net purchase of 87.94 trillion won in domestic listed shares (KOSPI+KOSDAQ) and 61.9 trillion won in ETFs. The net purchase size of ETFs has grown to about 70% of individual stocks.
The ETF market's presence is also expanding quickly. Although ETFs account for only about 7% of the domestic market's total capitalization, their share of transaction value has already exceeded 30%. As of the 26th, ETF net assets under management stood at 502 trillion won, surpassing KOSDAQ's market capitalization (479 trillion won) for the first time, and this year's average daily ETF transaction value reached 23 trillion won, growing to about half of the domestic stock market's transaction value (about 50 trillion won).
Securities firms have begun to reflect this shift in their earnings outlooks. KB Securities recently changed the transaction value criterion for assessing brokerage conditions in its securities sector report from "stocks" to "stocks+ETFs." Kang Seung-geon, an analyst at KB Securities, said, "As ETF transaction value has risen steeply of late, average daily stock transaction value alone no longer sufficiently explains brokerage conditions."
The expansion of ETF transactions is also affecting the competitive landscape among securities firms. Unlike ordinary stocks, ETFs see a higher share of foreign transactions and of liquidity providers (LPs) and creation/redemption (AP) transactions, leading to a different pattern from the traditional brokerage market, analysts say.
Based solely on stock transactions, second-quarter order-intake market shares this year were Kiwoom Securities (16.8%), Mirae Asset Securities (10.3%), Korea Investment & Securities Co. (9.2%), Samsung Securities (7.6%), and NH Investment & Securities (7.4%). But when ETFs are included, the gaps shift to Kiwoom Securities (15.4%), followed by Korea Investment & Securities Co. (12.1%), Mirae Asset Securities (10.4%), and NH Investment & Securities (8.7%).
That is because, in ETF transaction order-intake market share, Korea Investment & Securities Co. (21.7%) and NH Investment & Securities (12.9%) ranked relatively higher than Kiwoom Securities (10.7%), Mirae Asset Securities (10.6%), and Samsung Securities (5.3%).
This shift is being led by the expansion of foreign ETF transactions. ETFs have a higher share of foreigners and institutions than ordinary stocks, and ultra-short-term trading is active via direct market access (DMA), which places orders directly to the exchange through dedicated lines. DMA executes faster than regular orders and is fee-competitive, making it a preferred channel for foreign investors.
Analyst Kang said, "Foreign ETF transactions have increased sharply recently, and the rise in transactions through DMA channels—which involve frequent short-term trades—may have influenced changes in order-intake market share." The industry notes that as demand for ETF investment surges, centered on pensions and individual savings accounts (ISA), transactions are concentrating at large securities firms with strong customer bases.
In fact, pension reserves exceeded 500 trillion won for the first time at the end of last year, and ETF balances within pension plans rose more than fivefold from 9 trillion won in 2023 to 48.7 trillion won last year.
However, some analysts say it is difficult to interpret the expansion of ETF transactions as an immediate weakening of competitiveness for existing brokerage leaders such as Kiwoom Securities.
Im Hee-yeon, an analyst at Shinhan Investment & Securities, said, "Considering factors such as fee waivers for ETF trades within pension accounts, shifts in market share do not directly translate into immediate earnings weakness or a loss of competitiveness," adding, "As total market transaction value is rising, brokerage revenue can be sufficiently defended."