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Korean Journal of Financial Studies 2015;44(5):1065-1090.
Published online December 31, 2015.
Dynamic-Price-Range Volatility Interruptions on the KRX: Characteristics, Price Stabilization, and Price Discovery
Kyong Shik Eom, Sung Chae Ra, Jong Ho Park, Ilchan Ahn
KRX 종목별 변동성완화장치의 특징과 가격안정화 및 가격발견 효과
엄경식, 라성채, 박종호, 안일찬
Abstract
A volatility interruption (VI) is a sophisticated microstructure mechanism providing coolingoff periods and effective price discovery in brief periods of abnormal volatility for an individual stock. On September 1, 2014, the KRX adopted an experimental VI confined to a dynamic price range, in addition to the existing ±15% daily price limits. We study the main characteristics of the specific VI that the KRX experiment employed in the continuous trading session and the closing call auction, and its effects on price stabilization and discovery. We analyze all VI events in the three months following the adoption. First, we find that VI occurs more frequently among the smaller, more volatile, lower priced, and less liquid stocks. Second, VI shows an inverse J-shaped diurnal pattern. The number of days when the stock prices hit the upper or lower price limits has increased (not decreased) since the introduction of VI to KOSDAQ (KOSPI) market, suggesting that VI does not contribute meaningfully to market stabilization. Third, during the continuous trading session, the signs of disparity ratios between the last execution price right before VI triggering and the potential execution price, and between the potential execution price and the VI call auction price, are reversed, suggesting VI makes some contribution to price stabilization. Fourth, the price discovery and stabilization during the VI call auction are considerable. However, due to overshooting right before VI triggering, the price changes considerably in the ten minutes following the VI call auction. Taken all together, the VI that the KRX introduced on September 1, 2014 produced a positive but limited improvement. KRX adopted a more sophisticated VI on June 15, 2015.
Key Words: 가격발견,가격안정화,동적 가격변동범위,변동성완화장치,접속매매 및 종가 단일가매매,Continuous Trading and Closing Call Auction,Dynamic Price Range,Price Discovery,Price Stabilization,VI,Volatility Interruptions
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