Defying Industry Opposition! Korea Exchange to Launch Post-Market ETF Trading on September 14 to Compete with Crypto Exchanges and ATS

According to recent foreign media reports, despite industry concerns about recent volatility in leveraged products, Korea Exchange (KRX) will officially launch post-market ETF trading on September 14, aiming to compete with alternative trading systems (ATS) such as Nextrade and 24-hour cryptocurrency exchanges.

Asset management institutions have warned that the inability to accurately calculate real-time post-market net asset value (NAV) could widen the price deviation of ETFs from their NAV. However, KRX has reportedly finalized its decision and formally requested asset managers to submit lists of ETFs eligible for post-market trading. Previously, industry players had urged KRX to delay the launch, and leveraged single-stock ETFs will not be included in the post-market trading scope.

According to The Chosun Ilbo, KRX's determination to proceed is partly driven by pressure from ATS operator Nextrade (NXT), which operates 12 hours daily (pre-market 8:00–8:50, post-market 15:40–20:00), putting KRX at a disadvantage in trading hours. Although NXT currently cannot trade ETFs and awaits full regulatory approval (expected in November–December), actual launch is anticipated in 3–4 months. During this period, KRX will enjoy a monopoly window. A senior asset manager stated, "KRX wants to maximize its first-mover advantage during this lead period."

The rise of tokenized securities (STO) is further intensifying competition with 24-hour virtual asset platforms, whose core appeal is "24-hour trading + instant settlement." The revised Electronic Securities Act, including STO provisions, passed the National Assembly in January and will take effect on February 4 next year. Once blockchain-based securities enter the market, virtual asset exchanges and tokenized securities platforms will directly compete.

In the U.S., the SEC has approved Nasdaq for on-chain tokenized trading, and NYSE has been authorized to develop an on-chain settlement platform. Nasdaq’s 23-hour trading plan (day session 4:00–20:00, night session 21:00–next day 4:00) was approved in April, with both exchanges targeting year-end launch.

Asset managers are concerned that inaccurate post-close estimated NAV (iNAV) calculations could widen the gap between market price and NAV. iNAV relies on real-time underlying prices, with KOSCOM providing real-time data during regular hours. In April, KRX decided not to disclose iNAV during pre- and post-market hours, instead requiring liquidity providers (LPs) to calculate and quote fair value, with obligations similar to regular trading.

However, the industry objects: LPs would need additional staff and systems to calculate fair value for four post-close hours, and most brokers would avoid the cost. Redemption and creation infrastructure is also incomplete. Without iNAV, prices based purely on matching trades may deviate significantly.

On Wednesday (July 29), CEOs of South Korea’s eight major asset managers and executives from eight securities firms met under the chairmanship of Financial Investment Association President Hwang Sung-yeop, reportedly reaching a consensus on cautious implementation.

Meanwhile, recent ETF market contraction adds to concerns. As of last month, South Korea’s domestic ETF net assets stood at 434.615 trillion KRW, down 15.2% (77.793 trillion KRW) from June’s 512.408 trillion KRW, falling below the 500 trillion KRW mark in a single month. On Thursday (July 30), amid a stock market crash, it plunged further to 398.0339 trillion KRW, breaking below 400 trillion KRW.

Of 1,138 ETFs, 891 declined last month, with 531 dropping over 10%. The early implementation on Friday (July 31) of restrictions on single-stock leveraged products further dampened sentiment. Average daily trading volume in the four days after restrictions was 1.6991 trillion KRW, down 84% from the previous five-day average of 10.7305 trillion KRW.

KRX has recently notified major asset managers that new ETF listings in August may be delayed due to regulatory review backlogs and increased workload.