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High Frequency Trading in the Korean Index Futures Market


  • Eun Jung Lee

    Corresponding author
    1. Eun Jung Lee is an Assistant Professor of Finance, Department of Business Administration, Hanyang University, Ansan, Korea
    • Correspondence author, Hanyang University, Sa 3-dong, Sangrok-Gu, Ansan, Gyeonggi-Do 426-791, Korea. Tel: +82-31-400-5645, Fax: +82-31-436-8180, e-mail:

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  • I thank the editor, Robert Webb, and an anonymous referee for their thoughtful suggestions.


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