earticle

영어

In an effort to improve market transparency, Korea Exchange (KRX) has continuously adopted measures to publicly disclose more information regarding quotes and orders. This paper studies the effects of four events initiated by KRX aimed to enhance the pre-trade transparency: two for market opening by single-price call auction, and two for regular trading hours operated by continuous auction. Our focus is on the effect of the improved pre-trade transparency on the trading of large and/or most actively traded stocks. We select 20 stocks, 10 largest stocks in market capitalizations, and another 10 most actively traded stocks based on trading volumes, before and after each event. We proceed to directly analyze on how liquidity, depth, and investors trading behavior were affected by these events. Market liquidity and depth were generally improved but not by statistically significant margin. Investors adjusted their trading strategies as smaller number of orders was cancelled and it took less time to for traders to cancel their orders. Our study shows that policies aimed to enhance pre-trade transparency might have only marginal impact on the trading of large and/or actively traded stocks as they have limited success in providing additional information to the investors of these stocks.