An employee is seen at the Nextrade office in Seoul, Monday, as tests are underway for Korea's first alternative trading system ahead of its official launch on March 4. Newsis

As Korea's first alternative trading system, Nextrade (NXT), is scheduled to launch on March 4, a dual-market structure for stock trading will be established alongside the Korea Exchange (KRX).

According to industry officials on Wednesday, securities firms, which will need to route orders to both markets, are in the final stages of infrastructure preparation.

NXT will operate a pre-market from 8:00 a.m. to 8:50 a.m. and an after-market from 3:30 p.m. to 8:00 p.m., extending the total trading time by approximately 5 hours and 30 minutes.

With this change, investors will be able to trade stocks for up to 12 hours a day, including morning and evening sessions, while also benefiting from lower transaction costs and an improved trading environment.

Participating brokerage houses will operate an order system that reflects the extended trading hours and the new trading environment.

With the formation of the dual-market structure between the KRX and the NXT, trading conditions may vary across markets, requiring securities firms to ensure that investor orders are executed under the most favorable conditions. This means the firms must consider price, cost and execution likelihood when determining which market to route orders to.

According to the guidelines established by the Financial Supervisory Service (FSS) last year, investors can choose a specific market for their orders, and securities firms must prioritize those instructions.

If no specific market is designated, the firms are responsible for routing orders to the most favorable market for the investors. For unexecuted orders, they should be directed to the market with the highest likelihood of execution.

Participating firms will implement a smart order routing system to automate the best execution of investor orders.

The FSS said the best execution obligation is a procedural duty to implement orders under the most favorable conditions available at the time of execution, and it does not guarantee the best investment outcome.

As long as a securities firm complies with this obligation based on the market conditions at the time of order execution, it is not held responsible for the final investment results.

To ensure the stable launch of the alternative trading system, the initial rollout will prioritize securities firms that have expressed their intention to participate. Additional firms and tradable stocks will be added gradually over time.

"With the introduction of the dual-market structure, securities firms' brokerage services, previously focused primarily on simple order transmission, are expected to become more sophisticated through increased competition," an FSS official said. "The FSS will ensure the smooth launch of the alternative trading system to help expand the capital market and enhance investor convenience."