Key Points:
- South Korea will launch the country’s first alternative stock exchange. Nextrade Co. will offer extended trading hours compared to the Korea Exchange (KRX).
- Introduction of pre-market and after-hours trading sessions. Reduction in trading fees for brokerage firms on Nextrade.
- It enhanced government supervision of stock exchanges, with consistent standards for market stability measures.
- Requirement for brokerage companies to fulfill the duty of best execution. Restrictions on short selling and daily price movements on Nextrade.
South Korea is set to inaugurate its inaugural alternative stock exchange, Nextrade Co., in the first half of the upcoming year, according to an announcement from the Financial Services Commission (FSC) on Thursday. This move aims to facilitate stock trading with extended hours compared to the existing bourse operator, the Korea Exchange (KRX).
Nextrade will introduce pre-market trading, allowing investors to trade from 8 AM to 8:50 AM before the regular market opens at 9 AM. Additionally, after-hour trading will be available from 3:30 PM to 8 PM. This extended trading window will allow investors to trade stocks listed on both the Kospi and the Kosdaq junior market for longer than the standard trading hours on KRX.
One of the notable features of Nextrade is the provision of various bidding options, offering investors greater flexibility in their trading activities. Moreover, the new exchange plans to reduce trading fees for brokerage firms by 20 to 40% compared to those charged by KRX, aiming to attract more market participants.
With the introduction of Nextrade, the South Korean government will enhance its oversight of the stock exchanges. The FSC will implement consistent standards regarding market stability measures, including circuit breakers, sidecar curbs, and regulations on short selling, payment, and settlement.
Additionally, brokerage companies will be required to adhere to the duty of best execution, ensuring that orders are executed in clients’ best interest. This marks the first application of this rule in South Korea.
Short selling on Nextrade will only be permitted during regular market hours, with daily price movements limited to 30% above and below the stock’s closing price from the previous day. To ensure fair competition with KRX, the FSC plans to revise laws to allow exchange-traded funds and exchange-traded notes to be traded on the alternative trading platform.
