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FSS, FSC brush up assessment guidelines for preliminary approval of ATS
By Anna J. Park
The Korea Exchange's (KRX) monopoly over stock trading is likely to be broken up as soon as 2024, as moves are being accelerated to launch an alternative trading system (ATS) ― a trading venue or platform operated with looser regulations compared to traditional stock exchanges.
According to the financial investment industry earlier this week, the Financial Supervisory Service (FSS) will release guidelines as early as next month for the assessment of preliminary applications for establishing an ATS, which is being worked on by the FSS' ATS taskforce team in collaboration with the Financial Services Commission and the Korea Capital Market Institute.
FSS Governor Jeong Eun-bo also reiterated the financial authority's intention last month to support preparatory moves for the establishment of an ATS, which is regarded as the financial authority's medium- and long-term direction for the advancement of the country's capital market infrastructure.
Brokerage houses that have been preparing for the establishment of ATS platforms are also planning to submit their preliminary applications to the financial authority as early as next month, once the guidelines are set up.
Seven local securities firms ― Mirae Asset, Samsung, NH Investment, Korea, KB, Kiwoom and Shinhan ― as well as the Korea Investment Financial Investment Association, formed a commission together in 2019 to push forward the establishment of ATS in the country jointly. They plan to invest around 80 billion to 100 billion won ($65 million to $80 million) in initial capital for the launch of the ATS. If it proceeds as planned, the ATS would be launched as early as the first half of 2024, two years after submitting the preliminary applications sometime within this year.
Market experts expect that the introduction of an ATS would finally bring a competition factor to the country's stock trading system, ending the KRX's monopoly after six decades. As such alternative trading system platforms only handle stock trading contracts, without strict functions of listing assessments or market surveillance, the stock trading system is expected to see a number of innovative changes, such as the reduction of trading fees, an expansion of transactional time and the acceleration of transactions.
In contrast to the current situation in Korea, such systems are already in operation in the U.S. and Canada, with equivalents in the U.K., the EU, Germany, and Japan, varying in their forms, including electronic communication networks (ECNs), priority trading systems, dark pools and systemic internalization. In the U.S., a total of 54 alternative trading systems have been registered at the U.S. Securities and Exchange Commission, with their weight in entire stock transactions accounting for some 40 percent. In the EU, more than 200 are said to be operating as multilateral trading facilities (MTFs), with ATS-based stock transactions taking up about 30 percent of the entirety.
"If several exchanges are to be set up and compete with one another, it would end up benefiting the market system, as they contend with more innovative services for customers," a market insider said, adding that there are no advanced capital market countries in which only a single stock exchange maintains a monopoly over stock transactions.
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