I thank the editor, Robert Webb, and an anonymous referee for their thoughtful suggestions.
High Frequency Trading in the Korean Index Futures Market
Version of Record online: 23 AUG 2013
© 2013 Wiley Periodicals, Inc.
Journal of Futures Markets
Volume 35, Issue 1, pages 31–51, January 2015
How to Cite
Lee, E. J. (2015), High Frequency Trading in the Korean Index Futures Market. J. Fut. Mark., 35: 31–51. doi: 10.1002/fut.21640
- Issue online: 2 DEC 2014
- Version of Record online: 23 AUG 2013
- Manuscript Accepted: 12 JUL 2013
- Manuscript Received: 11 MAY 2012
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