| Difference in Capability of Liquidity Provision among Liquidity Providers in Korean ELW Market |
|
Hyuk Choe, Min Cheol Woo |
| ELW 시장에서의 유동성공급자 간 차이 |
|
최혁, 우민철 |
|
|
|
|
| Abstract |
|
This paper examines whether there are differences in capability of liquidity provision among the liquidity providers in the Korean Equity Linked Warrant (ELW) market, after controlling for potential factors which might affect liquidity. From the opening date of the Korean ELW market to May, 10 2007, we analyzed a variety of measures associated with liquidity provision. In doing so, we employed the complete minute-by-minute trading records and order records of ELW of which underlying assets are KOSPI index and individual stocks. Empirical results indicate that there exist statistically significant differences in the capability of providing liquidity among LPs, after controlling for market risk, idiosyncratic risk, type of warrant, inherent option nature and regulation-related features. Specifically, we make rankings for index warrant LPs and individual stock warrant LPs respectively according to the capability of liquidity provision. The correlation between the two rankings turns out to be very high. This implies that the difference in the capability of liquidity provision among LPs should be attributed to their level of operational competencies or (unknown) intentional purposes. Our study indicates that optimal liquidity provision might not be achieved only through market competition such as between similar ELWs and/or between investors placing limit-orders. To protect investors especially in the individual stock ELW, it is necessary for the financial regulatory institution to develop periodic and systematic evaluation processes as well as appropriate feedback procedures. |
| Key Words:
시장조성,워런트,유동성공급자,유동성공급지표,회귀분석,Liquidity Provider,Liquidity Provision Measure,Market Making,Regression,Warrant |
|
PDF Links
Full text via DOI
Download Citation
