The More Transparent, the Better? Effects of Transparency Regime Changes on Large/Actively Traded Stocks on the Korea Exchange

This paper studies the effects of four events initiated by the Korea Exchange (KRX) aimed at enhancing pre-trade transparency: two for market opening by single-price call auction, and two for regular trading hours by continuous auction. We select the ten largest stocks, and another ten of the most actively traded, before and after each event. Market liquidity and depth were generally improved but not by a statistically significant margin. Investors adjusted their trading strategies as a smaller number of orders was canceled and it took less time for order cancellation. Our study shows that policies aimed at enhancing pre-trade transparency might have only a marginal impact on the trading of large and/or actively traded stocks.