The text discusses the development of South Korea’s first alternate trading system, Next Trade (NXT), which is beginning to establish itself in the market. One month after its launch, the variety of securities traded on the platform is gradually increasing, along with transaction volumes. The SOR (Smart Order Routing) system, which automatically sends stock orders to exchanges offering favorable conditions for investors, is seeing a growing percentage of orders being routed to Next Trade.
Despite this growth, most trades on Next Trade occur during regular market hours, with minimal engagement from foreign and institutional investors. Pre-market and after-hours trading account for merely 16% of transactions. This could be challenging for Next Trade to address as they expand their market presence. The text highlights the importance of time as investors adapt to more extensive trading hours and notes the stabilizing trend of average transaction amounts per stock.
Competition between Next Trade and the established Korea Exchange is intensifying with more transactions being directed toward Next Trade. Future competition could affect trading fees. There’s a need for strategies to attract institutional and foreign investors, who currently make up a negligible part of the trading volume on Next Trade. The introduction of a bulk basket trading market is expected to further diversify the investor base, although any significant impact will require time to manifest.
In the meantime, financial authorities are monitoring price fluctuations in pre-market trading due to insufficient trading volumes, which result in volatile stock prices. Measures to stimulate participation in alternate trading blocks and resolve these fluctuations are being considered.