South Korea’s first alternative stock trading system, Nextrade, also known as NXT, has expanded its trading service to 110 stocks, following the smooth launch of its operations earlier this month.
The system opened to the public on March 4, initially offering 10 different stocks for trading, and expanded to 110 on Monday.
From the Kospi, newly listed stocks include Korean retail giant Shinsegae, energy-to-construction giant GS, top ramyeon maker Nongshim, Hyundai E&C and Samsung Securities. Newly available Kosdaq stocks include entertainment powerhouses Studio Dragon and CJ ENM, as well as biopharmaceutical company Medytox.
From its launch on March 4 until March 13, 10 stocks were available for trading on Nextrade, which recorded a transaction volume during that time of 131.5 billion won ($90 million). On the Korea Exchange, the main bourse operator, the transaction volume for the same 10 stocks over that period reached 494.8 billion won, putting Nextrade’s market share at around 25 percent.
Of the shares, YG Entertainment was the most traded stock on the alternative platform, with a volume of 45.7 billion won during the period, followed by Dongkook Pharmaceutical at 32.2 billion won and S-Oil at 21.6 billion won.
However, in its initial days, Nextrade failed to attract institutional and foreign investors, with most transactions coming from retail investors.
From March 4 to 7, the trading volume on Nextrade was 79.9 billion won, with retail investors accounting for 78.1 billion won, or 97.8 percent of the total. Trading by institutional investors and foreign investors stood at 1.2 billion won and 460 million won, respectively.
“Retail investors accounted for most of the trading volume for both the Kospi and the Kosdaq markets on Nextrade,” analyst Jeon Kyun from Samsung Securities said.
“Most retail investors chose to trade via the Smart Order Routing system based on the (brokerage firms’) duty of best execution.”
Brokerage houses are required to fulfill the duty of best execution, meaning they evaluate which bourse operator can better serve customers in terms of price or stability. Trades are executed via an automated system called Smart Order Routing.
"More investors are likely to use Nextrade to take advantage of companies updating their regulatory filings after the main market closes," analyst Shin Min-sub from DS Investment & Securities said.
"Nextrade's market share has the potential to increase as competition to bring down commission rates heats up and investors are drawn to the alternative system for its cheaper fees."
From March 24, Nextrade will expand the range of shares for trading to 350 stocks, including market bellwethers Samsung Electronics and SK hynix. The number will increase to 800, accounting for over 30 percent of listed companies here, on March 31.
silverstar@heraldcorp.com
