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Korean J Financ Stud > Volume 46(2); 2017 > Article
Korean Journal of Financial Studies 2017;46(2):459-496.
DOI: https://doi.org/10.26845/KJFS.2017.    Published online March 31, 2017.
The Effect of Securities Transaction Tax on Arbitrage Markets: Evidences from the Korean Securities Markets
Woo-baik Lee, Min-cheol Woo, Jong Won Park
거래비용이 차익거래시장에 미치는 영향
이우백, 우민철, 박종원
Index arbitrage is an important mechanism that links the futures and spot markets, maintains relative market pricing, and so enhances the market efficiency. In Korean securities markets, public funds and funds managed by the government such as the National Pension Fund and Korea Post used to be exempt from securities transaction tax (STT), but the government revised its tax ruling so that the funds except Korea Post became subject to the STT in late December 2009. The Korea Post also became subject to the STT effective from January 1, 2013. In this study, we examine the effects on program trading, especially arbitrage markets of trading costs based on the sample data of a STT levy in Korean securities markets. We exploit this feature via analyzing the effect of structural change of arbitrage markets on the market linkage and price discovery before and after a STT levy using the intra day high frequency transaction data. Major empirical results are summarized as follows; 1) The results show that trading volume and liquidity in arbitrage markets are drastically shrank in the STT taxation period compared to the tax-exempt period. 2) In the taxation period, the leading role of index arbitrage in price discovery and market linkage is significantly weakened, but the non-index arbitrage leads more strongly the spot-futures markets linkage relation. 3) Index arbitrage has a following tendency the spot-futures price disparity ratio rather than leading the spot-futures market linkage. These results mean that a STT taxation on public and government managed funds in Korean securities markets adversely affected the arbitrage mechanism and market efficiency, and the basic role of index arbitrage, market linkage and price discovery.
Key Words: 가격발견,거래비용,증권거래세,차익거래,프로그램 매매,Arbitrage,Price Discovery,Program Trading,Securities Transaction Tax,Trading Costs

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