Brown and Errora (1987) pointed out in their book Energy Futures Trading that there are three necessary conditions for the success of futures contracts: first, the underlying goods must be homogeneous and have substitutes; Second, there must be market demand for hedging specific commodities; Third, there must be large and unpredictable price fluctuations. It should be noted that the above three points are only necessary conditions, far from sufficient conditions. In other words, not all energy futures that meet these conditions can succeed. In fact, most contracts have been delisted. At the end of last century, several major futures exchanges in the United States successively launched power futures contracts, which is a typical example. These power futures contracts all meet the above three conditions, but they all failed in the end. Generally speaking, the success rate of energy futures is low. Empirical research in silber (198 1) shows that only about 25 energy futures contracts in the United States have been successful. The same happened to fuel oil futures. June1978165438+1October 14 the New York Mercantile Exchange (NYMEX) successfully launched heating oil futures, while the high-sulfur fuel oil futures contract launched by Singapore International Financial Exchange (SIM-EX) in June 1989-

The most direct sign of the success of futures contracts is the stable high trading volume, and the market participants are mainly hedgers and institutional investors. Hedgers are the foundation of the futures market, and institutional investors are the key to enhance market liquidity. The ratio of contract positions held by hedgers and institutional investors to the total amount can determine the fate of a futures contract to some extent. New York Futures Exchange: Is the exchange successful? Natural gas futures 1990 the New York Mercantile Exchange is natural gas futures 1990 Kansas City Futures Exchange (KCBOT) No.2 natural gas contract as an example. The two contracts were launched by NYMEX and KCBOT in 1990 respectively, with basically the same design, but the final fate was diametrically opposite. NYMEX's contract was a great success, while KCB0T's contract withdrew from the market a few years later. Two months after the contract was launched, the New York Mercantile Exchange hedgers held more than 6O of the total contract amount, while KCBOT's position reached 6O only two years later. The average position ratio of institutional investors in the New York Mercantile Exchange is about 8, while that of KCBOT is less than 1. The average retail position of NYMEX is around 19, while KCBOT is as high as 44.

Compared with NYMEX, KCBOT cannot attract hedgers and institutional investors, who are the main force in the futures market, so it is easy to understand that KCBOT's contract failed.

So, what causes KCBOT to fail to attract hedgers and institutional investors like the New York Mercantile Exchange? It is believed that the main reason is that the New York Mercantile Exchange launched this natural gas contract before KCBOT. When the futures contract of a commodity has not yet been launched and there is potential demand for the contract in the market, the futures contract launched first is often easy to win the favor of the market, and the contract launched after that is usually abandoned by the market.

The deep reason for the phenomenon of "the promoters succeed first and then fail" is the path dependence psychology of hedgers and institutional investors. The first contract launched at the right time will often attract a large number of potential hedgers and institutional investors, making the depth and breadth of the product market reach the level of sustainable development in a short time. When other exchanges realized that the contract was profitable and successively launched such contracts, most hedgers and institutional investors were already familiar with and used to using the first contract. Although the contract introduced later provided them with more choices, they were reluctant to leave the market because of path dependence.

At the same time, new market participants are often more willing to join the existing mature markets with high liquidity, and are often in a wait-and-see state for new contracts, or only conduct small transactions. In other words, the late contract can not attract more participants, the liquidity of the market can not be guaranteed, and the trading orders of market participants can not be effectively matched. This has led to the subsequent contracts have to accept the fate of being delisted due to insufficient trading volume. Of course, we can't simply think that as long as the first futures contract is launched before other exchanges, it will be successful. What needs to be pointed out again here is that the first futures contract can be successful only when there is potential demand for a futures contract in the market.