New bourse operator to change landscape of stock market
The Seoul office of Busan-headquartered bourse operator Korea Exchange (KRX) in Yeouido / Korea Times file
By Yi Whan-woo
The launch of a new bourse operator in Korea is in sight, fueling optimism that it can become a game changer in stock trading that has been dominated by the Korea Exchange (KRX) for nearly seven decades.
On Wednesday, the Financial Services Commission (FSC) gave preliminary approval for the alternative trading system (ATS) being planned by a coalition of major brokerage houses, ICT firms and Korea Financial Investment Association (KFIA), a finance think tank.
The ATS will be a trading venue that matches orders for buyers and sellers of securities besides the country's sole bourse operator KRX.
The coalition, Nextrade, can obtain final approval by ensuring a secure electronic trading system and taking other corresponding preparatory steps within 18 months from the date it won preliminary approval.
The FSC in return will complete all necessary reviews and make a decision no later than 30 days after it receives a request from Nextrade on final approval.
“Under such timetable, we believe we can get started on the ATS by the end of next year or early 2025 at the latest,” a Nextrade staff said on condition of anonymity, Thursday.
Korea first paved the way for the establishment of a new bourse operator in August 2013 when the relevant Capital Markets Act was amended.
But talks for an ATS only gained momentum beginning in 2020 as the Korean stock market saw robust growth in the midst of the COVID-19 pandemic.
KFIA accordingly worked with other concerned parties in the industry and set up Nextrade in November 2022.
Asked about the prospect of forthcoming ATS, market observers said it can encourage more trading and improve relevant services as it will break the market monopoly by the KRX after it was established in 1956.
“It's going to be a competitive market, and we'll need to win so that we can reap profits as much as we did in the past,” a KRX official said, asking not to be named.
He noted the KRX currently takes up a 100 percent share of Seoul's stock market, as compared to New York Stock Exchange and Nasdaq in the United States, which account for no more than 50 percent of the U.S. stock market.
A researcher at Korea Capital Market Institute, also a finance think tank, noted Korea so far had no ATS, whereas the U.S. had 62 as of 2021 and they accounted for 11.3 percent of the trading volume in 2020.
“The KRX's decades of monopoly thus can be said to be over soon,” said researcher Maeng Joo-hee.
Maeng assessed charging transaction fees “in a reasonable manner” will be critical for the envisioned bourse operator to succeed.