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Developing the exchange traded market for government bonds: Effect of recent quote rule changes in South Korea

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  • Jang, Woon Wook
  • Kim, Hak Kyum
  • Kang, Yong Joo

Abstract

The 2010 new quote rule changes imposed on the exchange market primary dealers (PDs) for the Korea Treasury Bonds (KTBs) have increased the exchange market quality for the 5-, 10- and 20-year maturity KTBs. Knock-on effects have subsequently led to an increase in market quality for the 5- and 10-year maturity bonds in the over-the-counter (OTC) KTB market. However, the imposition of a spread width below a reasonable level in the KTB exchange traded market for the 3-year maturity KTB has led to a significant reduction in trade volume in the OTC KTB market for bonds of the same maturity.

Suggested Citation

  • Jang, Woon Wook & Kim, Hak Kyum & Kang, Yong Joo, 2016. "Developing the exchange traded market for government bonds: Effect of recent quote rule changes in South Korea," Finance Research Letters, Elsevier, vol. 19(C), pages 130-138.
    • Handle: RePEc:eee:finlet:v:19:y:2016:i:c:p:130-138
    DOI: 10.1016/j.frl.2016.07.004
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    References listed on IDEAS

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    1. Chung, Kee H. & Van Ness, Bonnie F. & Van Ness, Robert A., 1999. "Limit orders and the bid-ask spread," Journal of Financial Economics, Elsevier, vol. 53(2), pages 255-287, August.
    2. Huang, Roger D & Stoll, Hans R, 1997. "The Components of the Bid-Ask Spread: A General Approach," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 995-1034.
    3. Stoll, Hans R, 1978. "The Pricing of Security Dealer Services: An Empirical Study of NASDAQ Stocks," Journal of Finance, American Finance Association, vol. 33(4), pages 1153-1172, September.
    4. Hans R. Stoll, 2000. "Presidential Address: Friction," Journal of Finance, American Finance Association, vol. 55(4), pages 1479-1514, August.
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    Cited by:

    1. Jieun Lee, 2023. "Dollar and government bond liquidity: evidence from Korea," BIS Working Papers 1145, Bank for International Settlements.

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    More about this item

    Keywords

    Market microstructure; Exchange bond market; OTC bond market; Trading cost; Liquidity; Korea treasury bond;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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