South Korea’s financial landscape is witnessing a noteworthy upheaval with the launch of Nextrade, the country’s first alternative trading system (ATS). Debuting on March 4, 2025, Nextrade challenges the long-standing monopoly of the Korea Exchange (KRX), which had dominated the scene for almost seven decades. This new platform sets the stage for a transformation with its longer trading hours, innovative order mechanisms, and reduced transaction fees, all of which could influence investor behavior and potentially chip away at the so-called “Korea discount” — the persistent undervaluation of South Korean stocks relative to their international counterparts.
Unlike the traditional Korea Exchange, which confines trading activities to an eight-hour window, Nextrade boldly extends trading to a full twelve hours, operating from 8:00 a.m. to 8:00 p.m. This schedule includes a pre-market session from 8:00 a.m. to 8:50 a.m. and after-hours trading from 3:30 p.m. to 8:00 p.m., time slots where the KRX remains closed. This dramatic expansion aligns South Korea’s market more closely with global trading standards, catering better to investors who seek to respond with agility to international market movements that often occur outside local time zones. By offering greater flexibility, Nextrade mitigates a sticking point that has frustrated traders and institutional players alike, potentially attracting higher participation and volume.
Another compelling innovation introduced by Nextrade is the inclusion of novel order types, such as intermediate price orders. These orders allow investors to set their trading prices within the range between the highest bid and lowest ask, improving the efficiency of price discovery and reducing friction in executing trades. Coupled with lower transaction fees—where even minor savings, like a one-won discount per 100,000 won traded, can motivate shifts in trading volumes—this platform fosters a competitive environment with the Korea Exchange. Lower costs and better order mechanisms may encourage more investors, especially retail participants, to engage actively, bringing greater liquidity and vibrancy to the market.
Despite these advantages, the challenge of addressing the Korea discount remains formidable. The valuation gap is rooted in deeper structural issues, including corporate governance concerns, regulatory constraints, and cautious foreign investor sentiment. Merely extending trading hours or introducing new order types may not suffice to close this gap. Experts highlight that institutional and foreign investors, who play critical roles in driving valuation standards, require stronger incentives and more meaningful reforms. For Nextrade to make a tangible impact on valuations and investor confidence, its innovations must be supported by changes in governance practices and regulatory frameworks that reassure market participants of transparency and fairness.
The early days of Nextrade’s operation have not been without hiccups. Technical glitches and system bugs surfaced soon after its launch, creating caution among brokerage firms and traders. Overcoming these operational challenges is crucial if Nextrade is to build a reputation as a reliable alternative to the entrenched Korea Exchange. Even so, the platform has shown promising momentum, capturing around 20 percent of the market share within weeks—a figure exceeding initial projections. Its ability to list large-cap stocks such as Samsung and SK Hynix has enticed both institutional and retail investors, showcasing a promising start for broad market engagement.
In injecting competition to a market long dominated by a single player, Nextrade opens the door to increased efficiency, enhanced transparency, and deeper investor involvement. By breaking the near seven-decade monopoly of the Korea Exchange, it injects fresh dynamics into South Korea’s capital markets, hastening the country’s transition toward developed-market status. This competitive push may also spur regulatory authorities to pursue more robust reforms aimed at improving corporate governance and investor safeguards. If successful, such changes could elevate foreign investment inflows, which are vital to narrowing the Korea discount over time.
In sum, Nextrade represents a landmark shift in South Korea’s financial ecosystem by extending operating hours, introducing innovative order types, and intensifying rivalry with the Korea Exchange. While its initial traction in market share and cost reductions is encouraging, its broader impact on overcoming entrenched valuation discounts will depend on systemic reforms and increased participation from key investor groups. Should it address technical challenges and gain wider acceptance, Nextrade stands poised to catalyze a new era in Korean capital markets—one more aligned with global standards and better positioned to attract the confidence of both domestic and international investors. The coming years will be critical in determining if this ambitious initiative can truly reshape investor perceptions and valuations in South Korea’s equity markets.
