"NextTrade Introduction Leads to 9% Increase in Trading Value...Positive Initial Results"

Since the launch of NextTrade in March this year, the introduction of a multi-trading venue system has led to an expansion of the overall market size by nearly 10%, demonstrating positive initial results, according to recent evaluations. However, concerns have also been raised that the implementation of market share cap regulations starting in September could undermine the original intent of introducing multiple trading venues. Experts advise that it is necessary to reconsider the appropriateness of these regulations and the flexibility of their operation at this point.

Kang Sohyun, Senior Research Fellow at the Korea Capital Market Institute, stated in the report "Capital Market Focus - Initial Outcomes and Improvement Tasks of the Introduction of Multiple Trading Venues," released on the 24th, "The introduction of NextTrade has resulted in an approximately 9.1% increase in trading value." This analysis was based on controlling key market variables such as the number of stocks, market capitalization, index returns, volatility, and the moving standard deviation of returns, covering the period from March 2024?one year prior to the launch of NextTrade?up to June 13, 2025.

Kang explained, "When estimating what would have happened if NextTrade had not been introduced, the total market trading value was found to have increased significantly due to NextTrade." She assessed that "the multi-trading venue system has likely had a positive impact not only by introducing simple competition but also by improving overall market efficiency and expanding the trading base."

As of early June, the average daily trading value on NextTrade was about 10 trillion won, with a trading volume of approximately 300 million shares. These figures correspond to 30% and 15% of the total market trading volume, respectively. Kang emphasized, "It is unusual for such rapid growth to be recorded within just three months of the introduction of the multi-trading venue system." This growth far exceeds the industry's initial expectation that a double-digit market share could be achieved within three years.

Kang also pointed out, "NextTrade has greatly expanded market accessibility by operating pre-market and after-market sessions, allowing trading outside of regular hours." She noted, "As of the second week of June, the average daily trading volume of the pre-market and after-market sessions accounted for 19% and 16% of NextTrade's total trading volume, respectively." This demonstrates that trading outside regular hours is functioning as a stable source of liquidity within the market.

However, the report also highlighted that, due to current regulations under the Capital Markets Act regarding multilateral trading facilities, the continued growth of the multi-venue system may be difficult to sustain. Kang pointed out, "Due to the market share cap regulations set for individual stocks and total trading volume, there are concerns that trading in many stocks could be restricted as soon as six months after the market's launch."

Under current law, trading through multilateral trading facilities is only permitted up to a certain limit if specific conditions are met. Specifically, the average daily trading volume of the multilateral trading facility over the past six months must not exceed 15% of the Korea Exchange (KRX) trading volume. For individual stocks, the average daily market share must not exceed 30% compared to the KRX trading volume for that stock.

Kang noted, "The number of stocks meeting the 30% individual market share criterion is rapidly decreasing under current regulations," adding, "By around September, when the regulation is set to take effect, a large number of stocks are likely to face trading restrictions."

She further stated, "On a daily basis, the total market share has already started to exceed the 15% cap allowed under the Capital Markets Act since June." Although the cumulative average daily market share calculated after the full-scale trading of about 800 stocks on NextTrade has not yet reached 15%, she predicted that, if the current trend continues, the cap will soon be reached.

In this case, the result would run counter to the original purpose of the system, which was to promote autonomous innovation through market competition. Kang warned, "In order to comply with the current market share cap in the short term, the only option would be to suspend trading, which could negatively impact the market as a whole by disrupting investor trading convenience, limiting securities firms’ ability to recover system investments, and increasing regulatory uncertainty." She expressed concern that "not only would this undermine the competitive effects of the multi-venue system, but it could also damage the trust of both domestic and international market participants in the long term."

She argued, "A policy review of the appropriateness of the current market share cap regulations and the flexibility of their operation is necessary." She pointed out that "currently, the market share of multilateral trading facilities is calculated based on the ratio to KRX trading volume, but this does not fully reflect the growth or structural changes in the overall market size. It is necessary to improve the criteria to reflect the dynamic changes in market competition structure and the diversification of trading environments."

Furthermore, she insisted that, beyond simple quantitative assessments based on trading volume, there should also be substantive evaluations of the qualitative outcomes of introducing multiple trading venues, such as increased liquidity, improved pricing, and reduced trading costs. She recommended, "To ensure that the multilateral trading facility, which has appeared in the domestic market for the first time in 12 years, can make a substantial contribution to the development of the capital market, rational policy reviews and continuous improvement efforts must be pursued in parallel."