[Exchange Competitiveness Diagnosis]② Overseas Exchanges Also Strive to Strengthen Competitiveness

Overseas Exchanges Fiercely Compete to Attract IPOs in the Global Market
Efforts to Diversify Businesses through Data and Index Services
Revenue from Information Services Rivals Trading Income
KRX Still Relies Heavily on Fee-Based Revenue

Strengthening competitiveness is not an issue exclusive to the Korea Exchange. Overseas exchanges are also striving to enhance their competitiveness by attracting listings of outstanding companies and diversifying their businesses. Foreign exchanges that have long diversified into information services and other sectors through subsidiaries are generating revenues from these businesses comparable to their trading income.

"Catch the Best Companies"... Overseas Exchanges Compete to Attract Firms

According to the '2024 EY Global IPO Trends Report' published by global accounting and consulting firm EY Hanyoung, the United States attracted 183 IPO listings last year, with 55% of these being foreign issuers, marking an all-time high. During the same period, South Korea secured 80 IPOs, ranking fourth globally, but none were foreign companies. Currently, there are 21 foreign companies (including Depositary Receipts) listed on the Korea Exchange, down by one from the previous year.

In terms of IPO fundraising amounts, although the U.S. lost the top spot in the number of IPOs to India (327 deals) last year, it ranked first globally in IPO proceeds with $32.8 billion. During the same period, South Korea's fundraising increased by 2% to $2.9 billion but lagged significantly behind Hong Kong ($10.7 billion) and Japan ($6.2 billion).

As the offshore listing market becomes increasingly concentrated in the U.S., Asian exchanges are encouraging domestic companies to list locally while fiercely competing to attract foreign firms. The Tokyo Stock Exchange (TSE) launched the 'TSE Asia Startup Hub' last year to attract Asian unicorn companies. The goal is to discover promising Asian startups and provide funding and legal services to encourage them to expand their businesses in Japan. Currently, 14 companies from six countries have been selected and are aiming for a TSE listing, with South Korea’s sole representative being the e-book company 'Ridi.'

India, which recorded the highest number of global IPOs last year, established an International Financial Services Centre (IFSC) in the Special Economic Zone (SEZ) of GIFT City to open its doors to foreign IT companies. The IFSC exchange, operated separately from India’s mainland exchanges, has introduced incentives such as lowering the mandatory public float requirement for listed companies from 25% to 10%. The Indian SEZ hosts numerous U.S. big tech firms like Google, Oracle, and SAP, as well as global investment banks including Citibank, JP Morgan, and Goldman Sachs.

Nam Gil-nam, Senior Research Fellow at the Korea Capital Market Institute, stated, "Major global exchanges are aggressively attracting tech companies to strengthen competitiveness and are actively engaging in mergers and acquisitions (M&A) to adapt to changing environments. The outcome of competition among exchanges will significantly impact the financial competitiveness of the cities or countries where they are located, and South Korea cannot avoid this." He added, "Despite this, domestic strategies to compete for unicorn companies among exchanges have yet to be concretized. There is a need for social discussions to develop infrastructure advancement strategies for domestic exchanges."

Business Diversification through M&A and Data Services

Global exchanges have long sought new revenue sources for survival. By expanding through data and index businesses and various mergers and acquisitions (M&A), they are evolving beyond being mere stock market trading venues.

The London Stock Exchange (LSE) expanded its business scope from traditional trading and clearing to financial market data analysis and sales by acquiring financial data provider Refinitiv for approximately $27 billion (about 40 trillion KRW) in 2019. Additionally, LSE established the index company FTSE as a subsidiary in 2011 and acquired the U.S. index developer Russell in 2014. Intercontinental Exchange (ICE), which owns the New York Stock Exchange (NYSE), purchased financial data company Interactive Data (IDC) for $5.2 billion in 2015.

The Chicago Mercantile Exchange (CME) took a stake in the index company S&P DJI in 2012. Deutsche B?rse (DB) established STOXX as a joint venture and later fully acquired its shares. Japan Exchange Group (JPX) operates data and index businesses through its subsidiary JPXI, and the Taiwan Stock Exchange (TWSE) owns Taiwan Index Plus (TIP), a subsidiary responsible for index business.

Advanced exchanges such as Nasdaq, ICE, and LSE have already seen revenue from IT information businesses exceed about half of their total income over the past decade. The Korea Exchange is also diversifying its revenue models by exporting clearing and settlement systems to Thailand, Malaysia, and the Philippines, and recently building cloud services to support large-scale data sales. However, it still relies heavily on traditional trading fees, which account for 83% of its total operating revenue.

An industry insider commented, "When comparing the competitiveness of securities exchanges, various factors are considered, but recently the focus has shifted to how much revenue is generated outside of trading. In the case of LSE, revenue from market information business rivals that from trading. This highlights the development direction pursued by overseas exchanges."