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High Frequency Trading in the Korean Index Futures Market
Author(s) -
Lee Eun Jung
Publication year - 2015
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21640
Subject(s) - futures contract , high frequency trading , price discovery , market liquidity , forward market , open outcry , economics , financial economics , equity (law) , futures market , index (typography) , transaction cost , business , algorithmic trading , monetary economics , alternative trading system , microeconomics , computer science , world wide web , law , political science
We investigate the trading behavior of high frequency trading (HFT), the impact of HFT on market quality, its role in the price discovery process, and its profitability, using a very detailed data set of the KOSPI 200 index futures market. We find that high frequency traders (HFTs) do not provide liquidity in the futures market, nor does HFT have any role in enhancing market quality. Indeed, HFT is detrimental to the price discovery process. This finding is contrary to those in the existing literature on HFT in equity markets. We also find that profitable opportunities for HFTs are rare after transaction costs are considered, with the notable exception that foreign HFTs can earn a profit in the index futures market. © 2013 Wiley Periodicals, Inc. Jrl Fut Mark 35:31–51, 2015