NextTrade's plans to expand its exchange-traded fund (ETF) trading are facing setbacks. Contrary to its previous schedule to begin ETF trading in November, the company is now expected to struggle with its application for full approval in September. The Korea Exchange is pushing to exclude ETFs from trading in the aftermarket, complicating the trading timeline.
As of August 28, financial industry sources indicate that NextTrade has not yet applied for full approval for ETF trading. The industry anticipates that the application will be difficult to submit in September. Given that the approval process typically takes more than two months, the prospect of starting ETF trading in November now seems unlikely.
The uncertainty surrounding the start date for NextTrade's ETF trading has raised questions about how far trading hours can be extended. Initially, NextTrade considered opening all trading sessions—pre-market, main, and aftermarket—but is now reviewing the option of starting with regular market trading and expanding based on market conditions.
Earlier this year, NextTrade planned to apply for full approval after system testing following the Korea Exchange's extension of trading hours on September 14, aiming to commence ETF trading in November. Methodological discussions regarding ETF trading had largely been concluded, and technical development was nearly complete.
However, recent controversies surrounding single-stock leveraged products and increased market volatility have rapidly changed the situation. Asset management firms and securities companies have expressed concerns about market operations and price management amid volatility, leading to an agreement earlier this month to refrain from participating in the Korea Exchange's aftermarket ETF trading.
Financial authorities are also prioritizing market stability. Reports suggest that authorities and the exchange are considering amendments to the implementation rules for the aftermarket, which would exclude ETFs and exchange-traded notes (ETNs) from tradable products.
As a result, NextTrade's timeline for launching ETF trading, initially set for November, is now under review. Although the exchange's rule amendments do not directly involve NextTrade, the challenges faced by market participants remain significant.
In the current situation where the Korea Exchange's aftermarket ETF trading is blocked, if NextTrade were to proceed with its ETF trading first, it could face the burden of directly coordinating liquidity provider issues with securities firms.
A NextTrade representative stated, "While we can technically proceed regardless of the exchange's decision on aftermarket ETF trading, the positions of market participants, such as asset management firms, are more important. We believe there is no need to push aggressively to persuade the market. We are carefully considering various aspects of the market situation."
* This article has been translated by AI.
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