The Impact of Open APIs of Financial Market on the Trade Outcomes in Perspectives of Retail Investors

This research investigates the impact of financial Application Programming Interfaces (APIs) on retail investors’ trading behavior in the stock market. Traditionally, accessing financial information necessitated manual procedures. The advent of APIs, however, has simplified the retrieval and analysis of corporate data. Initially exclusive to institutional investors, financial APIs grant retail investors access to the data. This study examines the impact of financial APIs on retail investors, leveraging the introduction of the OpenDART in South Korea. Analyzing trading volume, net-buying trends with stock returns of retail investors, we find an increase trading volume and a decrease in the trade quality post introduction. For lesser-known stocks, we observe a more pronounced increase in abnormal trading volume and a notable decline in trade quality. The findings contribute to the literature on electronic disclosure systems, and the behavior of retail investors, offering managerial implications for both retail investors and policymakers in the stock market.