[THE VIEW]After 69 Years of Monopoly, the Capital Market Faces a Choice

The Launch of NextTrade and the Significance of Exchange Competition
A Capital Market Shifted from Management to Competition

The Korean stock market in 2025 was on fire. Driven by the artificial intelligence (AI) boom, the KOSPI index soared to record highs, earning the title of the best-performing market in the world. However, an even more noteworthy structural change was the collapse of the exchange monopoly. For 69 years since the Korea Stock Exchange opened in 1956, the Korea Exchange had been the sole stage for the Korean capital market, but its dominance was broken with the emergence of the alternative trading system, NextTrade. This was not simply the addition of another platform, but a signal that the market ecosystem was shifting from centralized management to competition.

Looking back at history, competition among exchanges has always brought the fruits of innovation to investors. The most representative example is the United States. Until the 1990s, the New York Stock Exchange and NASDAQ divided the market between them, but with technological advancements, private trading systems sprang up rapidly. Early electronic communication networks (ECNs) penetrated the market by offering faster order execution, lower fees, and after-hours trading-features that traditional exchanges could not provide.

The transformation of the U.S. market was dramatic. The New York Stock Exchange, which had enjoyed a monopoly, was forced to adopt decimalization, breaking down price quotes into one-cent increments in response to the ECNs’ challenge, and eventually overhauled itself by fully embracing automated systems. The reason the U.S. stock market today boasts enormous efficiency, attracting global liquidity, is the fierce survival competition among exchanges that took place in the late 1990s. Competition set stagnant water flowing and narrowed spreads, drastically reducing investment costs.

The launch of NextTrade in Korea, when compared to these global trends, actually came rather late. However, its impact was powerful. From its first year, it rapidly gained market share with explosive support from individual investors. In particular, the extended trading hours from 8 a.m. to 8 p.m. precisely met the needs of Korea’s dynamic individual investors, who wanted to react to global news even after work. The fact that the previously monopolistic Korea Exchange hurriedly lowered fees and considered extending trading hours is a textbook example of the “catfish effect.”

Competition set stagnant water flowing. With the emergence of NextTrade, the floodgates of the Korean capital market opened, but artificial barriers still exist. Situations where investors face difficulties due to trading suspensions are not failures of the platform but failures of the system that is less prepared to embrace competition. Gemini generated image

However, where there is light, there is also shadow. The current confusion in the Korean market-where trading of popular stocks is suspended as NextTrade’s volume reaches the legal limit of 15% of the entire market-is a transitional pain. Japan’s experience should serve as a lesson here. In 1998, Japan allowed proprietary trading systems (PTS), but in the early days, they struggled due to the overwhelming liquidity and regulatory barriers of the Tokyo Stock Exchange. However, PTSs such as JapanNext targeted niche markets with night trading and smaller tick sizes, and as regulators strengthened best execution obligations, the market stabilized. In other words, once a system was established that required investors’ orders to be executed under the most favorable conditions across multiple exchanges, the multi-exchange system resulted in efficiency, not confusion.

What the Korean market needs now is not regulations that artificially suppress the growth of NextTrade. The 15% rule is nothing more than an outdated breakwater designed to protect the monopoly. Instead, what is urgently needed is the dismantling of barriers between exchanges and the advancement of “smart order routing,” which allows liquidity to flow naturally to wherever conditions are most favorable. Situations where trading is suspended and investors are left stranded are not failures of the platform, but failures of a system that is not yet ready to embrace competition.

The exchange industry has now become a major business battleground where IT and financial services converge, going beyond its public role as national infrastructure. Just as London and Frankfurt compete for financial supremacy in Europe, or as NASDAQ absorbs technology stocks from around the world, exchanges themselves are products. The emergence of NextTrade means that the Korean capital market has entered a multi-exchange system in line with global standards.

Competition inevitably brings pain. Existing exchanges must give up vested interests, investors must adapt to new order methods, and regulators must build more sophisticated monitoring systems. But at the end of this process await lower costs, greater liquidity, and more transparent price discovery. The year 2026 must be the starting point for the Korean capital market to achieve not only quantitative growth but also a qualitative leap forward.
Park Sungkyu Professor at Willamette University, USA