A reformation of the taxation system for public offering fund in 2010 rapidly increases the arbitrage trading by nation/local government investors. This paper analyses the impact of program trading on return volatility and trading behaviors of investors in the KOSPI market and examines structural changes after the tax reform. Results of EGARCH models support the positive relationship between program trading and volatility. Compared to non-arbitrage trading, the impact of arbitrage trading is distinct. After the tax reform in 2010, the influence of program trading on both daily and intraday volatility diminishes. Especially, for the 30- minute intraday volatility, the impact of both arbitrage and non-arbitrage trading decreases. Results of VAR analysis show that nation/local government investors concentrate on a shortterm arbitrage trading. Their dependency on futures trading of foreign investors is stronger than that of institutional investors. Therefore, the negative relationship between selling futures by foreign investors and the reverse cash-and-carry trading of nation/local government is valid in the KOSPI market.