Programs trades and trade regulation: An evidence of the Korean securities market |
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| Authors: | Cheoljun Eom Steven J. Jordan Woo-Baik Lee Jong Won Park |
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| Affiliation: | 1. School of Business, Pusan National University, Busan, Republic of Korea;2. Econometric Solutions, Tampa, Florida;3. Department of Business Administration, Korea National Open University, Seoul, Republic of Korea;4. College of Business Administration, University of Seoul, Seoul, Republic of Korea |
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| 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. |
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| Keywords: | KOSPI 200 program trade halts program trades sidecar trade imbalance |
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