Korea’s Nextrade stock exchange debuts; YG Entertainment tops 1st day

South Korea’s first alternative stock exchange Nextrade (NXT) started trading on Tuesday, challenging the Korea Exchange’s (KRX) long-standing monopoly.

The new exchange, designed to introduce competition into the country’s capital markets, opened trading with 10 selected stocks, including Lotte Shopping Co.

The NXT operator said it plans to expand its listing pool to 110 stocks by March 17, further increasing this to 350 by March 24 and 800 by March 31.

The gradual rollout will enhance market liquidity and establish NXT as a viable alternative to KRX, fostering greater competition in Korea’s equity markets, the operator said.

On Nextrade, pre-market trade is allowed between 8 a.m. and 8:50 a.m. before the market opens at 9 a.m. After-hours trade will take place from 3:30 p.m. to 8 p.m.

Overall, trading hours on NXT are longer than those of KRX, which opens at 9 a.m. and closes at 3:30 p.m.

The alternative stock exchange allows for more bidding options, while bringing down trading fees charged to brokerage firms, according to the operator.

Brokerages are required to buy or sell stocks in clients’ best interests to comply with the duty of best execution, the first rule introduced for stock brokers in the country.

YG ENTERTAINMENT TOPS FIRST-DAY TRADING

While the launch of NXT does not result in significant changes to brokerage home trading systems and mobile trading systems, a notable addition is the introduction of a “smart order routing (SOR)” feature, which allows investors to let the system automatically determine the optimal venue – KRX or NXT – for executing their trades.

On its first day, the NXT witnessed modest trading activity, with total volume across the 10 listed stocks reaching 213,983 shares.

YG Entertainment Inc. topped the first day of trading in terms of transaction value, followed by Kolon Industries Inc. and LG Uplus Corp.

Price discrepancies between KRX and NXT were minimal, with stock movements differing only by fractions of a percentage point.

Some investors said the dual-display of quotes from both exchanges, as well as gains and losses, made trading screens look complex.

KRX, launched in 1956, has been the country's only national operator of Korea’s two main bourses, the Kospi and the tech-heavy Kosdaq.

While short selling is broadly allowed on NXT, the practice is banned during pre-market and after-market trading hours.

Write to See-Eun Lee at see@hankyung.com

In-Soo Nam edited this article.