Programs trades and trade regulation: An evidence of the Korean securities market

Cheoljun Eom; Steven J. Jordan; Woo Baik Lee; Jong Won Park

doi:10.1002/fut.22056

Programs trades and trade regulation: An evidence of the Korean securities market

Cheoljun Eom, Steven J. Jordan, Woo Baik Lee, Jong Won Park

School of Business Administration

Research output: Contribution to journal › Article › peer-review

1 Scopus citations

Abstract

This study addresses the effects of program trade regulation during large market moves. To address this issue, we analyze the effect of sidecars (halts that only affect program trades) on trade imbalance using Korean intraday data. We find that sidecars, as currently designed to halt all program trades, are not effective at controlling trade imbalance around volatile markets. Resolution of trade imbalance is more effective when program trade is unrestricted. Program trade, at least a subset, provides liquidity when it is at a premium. We conclude that current sidecars should be more carefully crafted as some program trades are market stabilizing.

Original language	English
Pages (from-to)	44-66
Number of pages	23
Journal	Journal of Futures Markets
Volume	40
Issue number	1
DOIs	https://doi.org/10.1002/fut.22056
State	Published - 1 Jan 2020

Keywords

KOSPI 200
program trade halts
program trades
sidecar
trade imbalance

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10.1002/fut.22056

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title = "Programs trades and trade regulation: An evidence of the Korean securities market",

abstract = "This study addresses the effects of program trade regulation during large market moves. To address this issue, we analyze the effect of sidecars (halts that only affect program trades) on trade imbalance using Korean intraday data. We find that sidecars, as currently designed to halt all program trades, are not effective at controlling trade imbalance around volatile markets. Resolution of trade imbalance is more effective when program trade is unrestricted. Program trade, at least a subset, provides liquidity when it is at a premium. We conclude that current sidecars should be more carefully crafted as some program trades are market stabilizing.",

keywords = "KOSPI 200, program trade halts, program trades, sidecar, trade imbalance",

author = "Cheoljun Eom and Jordan, {Steven J.} and Lee, {Woo Baik} and Park, {Jong Won}",

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AB - This study addresses the effects of program trade regulation during large market moves. To address this issue, we analyze the effect of sidecars (halts that only affect program trades) on trade imbalance using Korean intraday data. We find that sidecars, as currently designed to halt all program trades, are not effective at controlling trade imbalance around volatile markets. Resolution of trade imbalance is more effective when program trade is unrestricted. Program trade, at least a subset, provides liquidity when it is at a premium. We conclude that current sidecars should be more carefully crafted as some program trades are market stabilizing.

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Programs trades and trade regulation: An evidence of the Korean securities market

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Keywords

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