A Careful Consideration to the Market Regulation : Focused in the Korean ELW Market

Park, Soo Cheol; Woo, Min Cheol

doi:2018.47.2.349

Korean J Financ Stud > Volume 47(2); 2018 > Article

Korean Journal of Financial Studies 2018;47(2):349-378.
DOI: https://doi.org/10.26845/KJFS.2018.04.47.2.349 Published online April 30, 2018.

A Careful Consideration to the Market Regulation : Focused in the Korean ELW Market

Soo Cheol Park, Min Cheol Woo

ELW 시장을 통해 살펴 본 시장규제에 대한 재고

박수철, 우민철

¹울산대학교
²한국거래소

Abstract

The Korean ELW market had growed very quickly and had been the second largest market in just five years. However, the market regulation for protecting investors and making the market efficient reduced the market liquidity and finally depressed the market.
This study examines effects on the market and the investors’ trading performance of market regulations in the Korean ELW market, especially focused on the restriction of LP (liquidity provider).
Our major findings are as followed. First, the ELW trading volumes rapidly were decreased so that the market was depressed after the market restriction.
Second, the liquidity decrease makes the trading clustering on a few ELWs.
Third, the market restriction makes the illegal trading by HFT disappeared. However, it leads to the voluntary exit of general investors and the reinforcement of foreign investors’ market power.
Our results imply that the market restriction with good intention can be bad to the market. Thus, the regulatory authorities must make a restriction to the market very carefully.

Key Words: 투자성과,투자자 보호,ELW (Equity-Linked Warrants),LP (Liquidity Provider),HFT (High-Frequency Trade),Profit,Investor Protection