Nextrade’s Rise & Regulatory Limits: What’s Next for South Korea’s Stock Market

The introduction of Nextrade marks a significant structural shift in South Korea’s equity market. By late 2025, this alternative trading system (ATS) had garnered around one-third of trading turnover by value, in a market with ~$2.4 trillion in listed equities. This is a rapid accumulation of market share rarely observed elsewhere, especially given Nextrade’s launch just months earlier in March.

Nextrade’s growth has been fueled primarily by aggressive participation from domestic retail investors. These account for roughly 85% of the platform’s trading value, compared with only ~10% foreign and 5% domestic institutional. Extended trading hours, pre- and post-market sessions, and fees 20–40% lower than those at the Korea Exchange (KRX) have combined to attract those investors. This strategy leverages the convenience and cost sensitivity of retail traders, especially white-collar workers trading outside standard hours.

The broader market context is one of extraordinary performance: the KOSPI index has rallied ~75% in 2025, driven by AI optimism (especially semiconductors), export strength, corporate governance reforms, and foreign investor rebalancing. South Korea appears to be narrowing its “Korea discount” through regulatory change, returning foreign capital, and improved investor protections.

However, regulators have been compelled to impose constraints. Under the Capital Markets Act, Nextrade must not exceed 15% of KRX’s average daily trading volume over a rolling six-month period. When usage surged, the system imposed suspensions of stocks to stay within the cap; for example, suspending trading in ~145 stocks and reducing the count of active securities from nearly 800 to ~630. These measures have introduced uncertainty, particularly for foreign investors, who cite lack of transparency in which names may be removed and when. There is also some regulatory accommodation: allowing temporary breaches of the cap if corrected within two months, and delaying per-issue volume limits for up to a year.

Strategic implications are multiple:

• KRX is under meaningful competitive pressure: it is responding with fee cuts and considering extended trading hours.
• Retail-driven volume surges expose tensions between access/competition and regulation. The 15% cap protects KRX’s dominance but creates operational risk for Nextrade and its users, especially during strong market upswings.
• Foreign and institutional participation remains marginal on Nextrade; regulatory opacity and sudden stock suspensions may discourage more serious long-term capital inflows.
• If Korea seeks developed-market status (e.g. MSCI reclassification) and improved valuations, maintaining transparency and predictability in its trading architecture will be essential.

Open questions include whether the 15% cap regime will be relaxed permanently or restructured (especially for pre-/after-market sessions), how Nextrade plans to enhance institutional and foreign investor engagement, and whether KRX’s incumbency can adapt in ways that preserve its market position while promoting modernization.