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

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Listed:
  • Cheoljun Eom
  • Steven J. Jordan
  • Woo‐Baik Lee
  • Jong Won Park

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.

Suggested Citation

  • Cheoljun Eom & Steven J. Jordan & Woo‐Baik Lee & Jong Won Park, 2020. "Programs trades and trade regulation: An evidence of the Korean securities market," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 40(1), pages 44-66, January.
    • Handle: RePEc:wly:jfutmk:v:40:y:2020:i:1:p:44-66
    DOI: 10.1002/fut.22056
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    References listed on IDEAS

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