Ahead of ATS Launch... 'Capital Markets Act Amendment Bill' Passed in National Assembly Plenary Session

On March 3rd, a bill revising related regulations ahead of the launch of the country's first Alternative Trading System (ATS) passed the National Assembly plenary session on the 27th.

The Financial Services Commission announced that with the passage of the amendment to the "Financial Investment Services and Capital Markets Act" (Capital Markets Act) at the plenary session, the system under the Capital Markets Act has been revised to enable the smooth launch and operation of the ATS. The country's first ATS, NextTrade, is scheduled to launch on April 4th.

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Under the current law, ATS performs a market role similar to the Korea Exchange, but its legal status is defined as an investment dealer or investment broker, leading to ambiguity about whether certain regulations under the Capital Markets Act apply to ATS. To address this, the amendment stipulates that the best execution obligation does not apply to ATS. The best execution obligation requires investment brokers to execute customer orders under the most favorable conditions for the customer.

Additionally, the amendment includes ATS within the definition of "securities market," ensuring that regulations related to tender offers apply equally to both the Korea Exchange and alternative trading systems. Previously, tender offer regulations were excluded when large purchases of stocks occurred on exchanges defined as "securities markets," while there was legal uncertainty as tender offer regulations applied to ATS, which were designated as outside the "securities market."

Furthermore, the scope of the Korea Exchange's joint compensation fund has been expanded to include defaults arising from trading on alternative trading systems. Under the upcoming multi-market system, the exchange will serve as the clearinghouse responsible for the final settlement of ATS transactions. Also, the contribution amount per member will be determined proportionally based on the integrated trading volume of the member's transactions on both the exchange and ATS.

The amendment will take effect immediately upon promulgation. A Financial Services Commission official stated, "With today's legal amendment, a foundation has been established for the stable launch and operation of ATS, and we will make every effort to build a stable trading system before the launch." He added, "Related stock market institutions will continue to cooperate to ensure the stable operation of the multi-market system."

When NextTrade opens on April 4th, stocks will be tradable for 12 hours daily, from 8 a.m. to 8 p.m. The ten stocks available for trading on the first day are Lotte Shopping, Cheil Worldwide, Kolon Industries, LG Uplus, S-Oil, Golfzon, Dongkook Pharmaceutical, SFA, YG Entertainment, and Com2uS.

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