[Contemporary Opinion] Alternative exchange, now is the time to actively consider_Dean Ahn Hee-jun
- bizskk
- Hit420
- 2021-11-26
안희준 성균관대 경영대학장
These days, discussions are underway in Korea on the establishment of alternative exchanges (ATS) established by securities companies as an alternative to the existing exchange market. Alternative exchanges are also called "multi-asset trading systems", which do not perform listing or market regulations like exchanges, but only function as securities transactions, enabling transactions outside the framework of the existing market. In advanced markets, alternative exchanges have already exchanges have already been established for a long time, accounting for 5% to 20% of the total trading volume. For example, in the United States, Canada, Japan, and Australia, alternative exchanges such as Chi-X, Bats, Japanext, and TMX are actively competing with the existing exchange market or over-the-counter trading market.
Korea, which has the world's top 10 stock markets, also needs to carefully consider the introduction of alternative exchanges to build infrastructure and strengthen competition in more advanced capital markets. The advantages of alternative exchanges are the advancement and diversification of transaction techniques by reducing transaction costs, improving transaction speed, expanding transaction time, and expanding order types.
The reduction in double transaction costs is possible through the effect of reducing the spread due to increased liquidity. However, it is difficult to expect a significant decrease in the domestic stock market as its spread has already been quite low compared to overseas markets for a long time. However, additional transaction costs can be expected to be reduced through the conclusion of intermediate prices, which can improve the efficiency of price discovery by enabling transactions at more improved prices.
Meanwhile, as high-frequency transactions (HFTs) increase in the future, the speed of transactions will become increasingly important. In the movie "Hummingbird Project", securities firms are fiercely competing to gain an edge in fast trading by establishing a faster network, which shows how important speed is in securities trading. Improving the speed of transactions due to alternative exchanges can greatly help improve the market's qualitative infrastructure.
The expansion of trading hours is also a factor that investors welcome. Currently, the Korea Exchange's trading hours are from 9 a.m. to 3:30 p.m. If the trading time is greatly expanded through alternative exchanges, transactions will be possible regardless of time, which will be welcome for general investors.
Compared to the types of orders allowed by major overseas exchanges such as the New York Stock Exchange in the United States, the types of orders that investors can use through the Korea Exchange are currently somewhat limited. The expansion of order types through the introduction of alternative exchanges can help investors implement more diverse investment strategies than before, which can be helpful in terms of advancing transaction techniques.
The advantages of alternative exchanges mentioned above can serve as an opportunity to further develop our stock market by expanding trading opportunities and increasing the overall liquidity of the market through the advancement of market infrastructure. However, as regulations are not as strong as the exchange market, possible transaction transparency and conflicts of interest may arise. Therefore, in the process of preparing for the introduction of alternative exchanges, it is necessary to prepare an efficient institutional mechanism to maximize advantages but minimize side effects through operational cases of advanced overseas markets.
If the introduction of alternative exchanges creates a more competitive and efficient trading infrastructure and increases market liquidity, improving price discovery efficiency, it can have a positive effect of expanding and developing the entire pie, not dividing the pie in the market monopolized by the Korea Exchange. I hope this will provide an opportunity for the Korean stock market to take a leap forward.
Source : The Asia Business Daily https://view.asiae.co.kr/article/2021111608183722926