Financial Services Commission grants final approval for ATS 'NextTrade'... "Launch on March 4"

Trading Fees to Be Reduced by 20-40%...
"Investor Benefits Expected to Increase"
Number of Tradable Stocks to Gradually Expand to 800 Over Four Weeks After Launch

The Financial Services Commission held its 2nd regular meeting and announced on the 5th that it has granted the full license for investment brokerage to NextTrade, an Alternative Trading System (ATS) operator. This comes three months after NextTrade applied for the full license on November 29 last year. With the launch of ATS in the domestic securities market, a full-fledged multiple market and competitive system will be introduced and operated.

NextTrade, which will launch on the 4th of next month, will operate pre-market hours from 8:00 AM to 8:50 AM and after-market hours from 3:30 PM to 8:00 PM, running simultaneously with the Korea Exchange’s regular trading hours. As a result, the daily stock trading hours in South Korea will extend to 12 hours.

Additionally, the Korea Exchange’s indicative opening price display time and the trading items in the off-hours single price market will be changed. Trading on NextTrade will be suspended during the single price trading sessions at the opening and closing prices. This is to maintain the representativeness of the opening and closing prices and to prevent market manipulation by exploiting the difference between single price trading, where orders are received and executed simultaneously at one price, and continuous trading, where trades are executed immediately when prices match.

A new type of order will also be introduced. Currently, the domestic securities market offers market orders and four types of limit orders (general, best, most favorable, and conditional). Added to these will be the "mid-price order," where the price is automatically adjusted to the midpoint between the best bid and ask, and the "stop limit order," which places a limit order when a specific price is reached. The Korea Exchange also plans to offer new order types in line with NextTrade’s launch.

NextTrade will select trading items focusing on highly liquid stocks listed on the Korea Exchange. For the first four weeks after launch, to ensure system stability and allow securities firms and investors to adapt to the multiple market system, the number of trading items will be gradually expanded each week, eventually trading about 800 items. Specific items will be announced at a joint briefing session on the 12th of this month.

Starting from the end of June this year, trading items will be selected and announced five trading days before the end of each quarter. Regular changes will be implemented from the first trading day of the following quarter. The same price fluctuation limits, market stabilization devices, market surveillance, and clearing and settlement systems as the Korea Exchange will be applied.

Regarding short selling, consistent management and supervision will be conducted in the NextTrade market as well. Short selling will be prohibited during NextTrade’s pre- and after-market hours. Short selling orders will only be allowed during regular hours from 9:00 AM to 3:20 PM. Short selling order display and the designation system for overheated short selling stocks will also apply equally to NextTrade. The uptick rule, which prevents direct price drops caused by short selling, will operate based on the last execution price of each market, Korea Exchange and NextTrade respectively.

According to financial authorities, a total of 33 securities firms have declared their intention to participate in the NextTrade market. Fifteen securities firms will participate in the entire market from the launch. Fourteen firms plan to participate only in the pre- and after-market from next month until September, then join the entire market thereafter. Four securities firms plan to participate in the entire market starting from September this year.

The financial authorities will also finalize the capital market system reforms to ensure smooth operation of ATS. Trading of Exchange-Traded Funds (ETF) and Exchange-Traded Notes (ETN) will be allowed on ATS. Considering that ATS fees affect the reduction of trading costs in the securities market, ATS will be included in the Market Efficiency Committee’s review, and inappropriate regulations on ATS will be rationalized, including the soundness regulations.

The financial authorities explained, "We expect that extending stock trading hours, diversifying order types, and reducing trading costs through fee competition will enhance investor benefits. NextTrade plans to reduce trading fees by 20-40% compared to the current Korea Exchange fees, and competition between markets is expected to translate into cost savings and benefits for investors."

This content was produced with the assistance of AI translation services.