Fee Reduction for Two Months Starting December 15
Rates Changed to Tiered Structure, 20?40% Lower Than Before
The Korea Exchange will lower stock trading fees for two months starting from December 15. The exchange’s decision to cut fees is driven by competition with NextTrade, an alternative trading system (ATS). Attention is focused on whether this fee reduction will lead to a full-scale fee-cutting competition between the two exchanges in the future.
According to the financial investment industry on December 15, the Korea Exchange will temporarily reduce stock trading fees for two months, from this day until February 13 of next year. The current single fee rate of 0.0023% will be changed to a differentiated rate, matching that of the alternative trading system. The new rates will be 0.00134% for limit orders (maker) and 0.00182% for market orders (taker). This is the same level as NextTrade and represents a 20-40% reduction compared to the previous rate.
The exchange’s fee reduction is due to the rapid growth of NextTrade. Launched in March this year, NextTrade accounted for an average daily trading value of 13.3158 trillion won as of October, which is about 49.4% of the Korea Exchange’s volume. In August, it even surpassed half of the Korea Exchange’s market share, demonstrating a sharp growth trajectory. This rapid growth of NextTrade has been affecting the exchange’s revenue. According to data submitted by the Korea Exchange to Assemblyman Kim Sanghoon, a member of the National Assembly’s Political Affairs Committee, trading fee revenue from January to June this year was 94.2 billion won, a 19% decrease compared to the same period last year.
As a result, the exchange has decided to implement a fee reduction. Although the reduction is set for two months, it could be extended by about a month. In an interview with The Asia Business Daily last month, Korea Exchange Chairman Jung Eunbo mentioned that the fee reduction could be extended depending on the situation. The exchange can decide on its own for fee reductions lasting up to three months. If the reduction exceeds three months, it must undergo review by the Financial Services Commission.
The exchange plans to closely analyze the impact of the fee reduction on trading activity. An exchange official stated, "Currently, for foreigners and institutions, about 80-90% of trades are routed by designation to the exchange, while for individuals, about 40% are designated and 60% are routed by best execution. Through this fee reduction, we will be able to assess to what extent fees influence investor choices."
The exchange believes that, since NextTrade has established itself in the market, competition should now take place on equal terms. Accordingly, the Korea Exchange is also pushing to extend trading hours, similar to NextTrade. Chairman Jung emphasized, "Although fee income has not decreased significantly due to this year’s stock market boom, ATS has moved beyond simply establishing itself in the market and is now playing its own role. Therefore, the exchange should now compete with ATS under equal conditions."
The market is watching closely to see whether a full-scale fee-cutting competition between the two exchanges will unfold. A securities industry official commented, "If the exchange embarks on a full-scale fee reduction, it could turn into a game of chicken. However, since lowering fees would significantly reduce revenue, the exchange is likely to make careful decisions regarding any permanent fee cuts."
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