[Interview] Chairman Eunbo Jung: "Korea Exchange Needs Equal Competition, Including Extended Trading Hours, for Survival"

Pursuing 12-Hour Trading Extension
Ultimately, 24-Hour Trading Needed to Align with Global Trends
Preparing for Asset Tokenization
Successful Industrial Restructuring Is Essential for Achieving 'Kospi 5000'

"The challenges facing the Korea Exchange are ensuring fair competition with alternative trading systems (ATS) and developing new revenue models."

Eunbo Jung, Chairman of the Korea Exchange

Eunbo Jung, Chairman of the Korea Exchange, made these remarks regarding the challenges faced by the Korea Exchange during an interview with The Asia Business Daily on November 28.

ATS Stabilization, Need for a Level Playing Field... Pursuing Extended Trading Hours

Chairman Jung stated, "With the launch of NextTrade in March this year, a competitive system was introduced into the capital market. Currently, regulations limit the trading volume of ATS to no more than 15% of the Korea Exchange's trading volume. However, when measured by trading value, ATS already accounts for more than 40% of the Korea Exchange's trading value. ATS also operates for 12 hours, which is longer than the Korea Exchange, and its fees are 20% to 40% lower. ATS has not only stabilized but is already playing a significant role," he said. "Although the boom in the stock market this year has prevented a significant drop in fee income, now that ATS has established itself in the market, the Korea Exchange must also be able to compete with ATS on an equal footing."

Accordingly, the exchange is also working to extend its trading hours to 12 hours, similar to NextTrade, and plans to temporarily lower its fees by about 20% to 40% from the current level starting from the 15th.

Extending trading hours is also a global trend. Chairman Jung said, "Globally, especially in the United States, the New York Stock Exchange (NYSE) Arca has been approved to extend trading to 22 hours, and Nasdaq plans to operate its own market on a 24-hour basis from the second half of next year. According to the Nasdaq CEO's presentation, 20% of pre- and after-market investors on Nasdaq are from the United States, while 80% are overseas investors. Of those overseas investors, half-40%-are Korean investors. Ultimately, both Nasdaq and NYSE are aiming for 24-hour operations to attract investors from Asia, including Korea, Japan, and China. Korean investors also play the most important role at the Chicago Board Options Exchange (CBOE), the world's largest futures and options exchange, highlighting the significant influence of Korean investors in the global capital market."

Chairman Jung continued, "Investors in Korea also want the Korea Exchange and ATS to extend their trading hours to create a competitive environment. Furthermore, they want overseas market conditions to be reflected in real time. Currently, the pre-market is the most active segment on ATS because investors want to adjust their portfolios in response to market conditions in the United States or Europe. Following the global trend, we must also transition to a 24-hour trading system."

He added, "Ultimately, the Korea Exchange must also transition to a 24-hour trading system in the near future. For now, considering the burden on IT systems, we are pursuing a 12-hour extension, as ATS has done. Since this is a matter of survival for the Korea Exchange, we are aiming to implement it as quickly as possible."

Need to Quickly Adapt to the Global Trend of Asset Tokenization

From a revenue model perspective, Chairman Jung is focusing on virtual assets and security token offerings (STO). He said, "The global capital market is already undergoing structural changes, moving beyond 24-hour trading and shortened settlement cycles (T+1) to asset tokenization. For example, in bond tokenization, major asset management firms like BlackRock are already trading U.S. bonds as a type of dealer. Furthermore, stock tokenization is also underway, with XStocks issuing tokens for shares of major companies such as Nvidia and Tesla, which are already being traded on cryptocurrency exchanges like Kraken." He continued, "As token securities become commonplace and payments and settlements are conducted using stablecoins, there may no longer be a need for current institutions such as depositories, securities firms, and commercial banks. This will lead to a revolution in payment and settlement methods and clearing processes. There will also be no need for each country to have its own exchange. In 20 to 30 years, only major hub exchanges will survive. In this context, the Korea Exchange must break out of the traditional securities exchange framework and move forward. We must quickly adapt to the global trend of asset tokenization."

Successful Industrial Restructuring Is Key to Reaching 'Kospi 5000'

Regarding the record-breaking rally of the Kospi index surpassing the 4000 mark this year, Chairman Jung said, "The most important driver of this rise is the value-up program. The ongoing efforts to enhance corporate value since May last year have provided the fundamental environment for the rise in stock prices." He explained that efforts to enhance corporate value and protect the rights of minority shareholders have begun to be institutionally supported through amendments to the Commercial Act and other measures this year, which has increased trust in the Korean capital market. He added, "Secondly, the rapid improvement in international evaluations and outlooks for advanced industries such as semiconductors, defense, shipbuilding, artificial intelligence (AI), as well as K-bio and K-culture, has been a major factor."

For the Kospi to reach 5000 or 6000, successful industrial restructuring is essential. Chairman Jung said, "To surpass 5000, ongoing value-up efforts such as amendments to the Commercial Act, tax reforms, share buybacks and cancellations, and separate taxation of dividend income must proceed without setbacks, and, in addition, structural transformation of industries is necessary. Korea's per capita national income has now reached 36,000 dollars, and in terms of purchasing power parity (PPP), we have already surpassed Japan and are at the level of France or the United Kingdom. Traditional manufacturing can no longer secure global competitiveness at our current per capita income level. To maintain competitiveness, these industries have no choice but to expand overseas. The key is how well we can fill the resulting industrial gap with new advanced industries and create added value."

Meanwhile, Chairman Jung said that it is necessary to continue strengthening the delisting standards for listed companies to ensure market trust. He said, "Compared to the U.S. market, our gross domestic product (GDP) is one-fifteenth that of the United States, and our market capitalization is about one-thirtieth. However, the number of listed companies is half that of the United States-there are about 5,500 in the U.S. and about 2,800 in Korea. We even have many cases of duplicate listings. When there are too many stocks, the average price tends to fall, and stocks that do not attract investor attention can become targets for unfair trading. When investments are made based not on fundamental value analysis but on rumors, the market becomes unhealthy." He added, "To create a virtuous cycle in the capital market, companies that cannot generate revenue models should be delisted immediately to prevent the market from stagnating, which is essential to earning the trust of market investors."

Interview by: Kim Pilsoo, Economic and Finance Editor and Head of the Securities and Capital Markets Department

Compiled by: Song Hwajeong and Kim Jinyoung, Reporters

This content was produced with the assistance of AI translation services.