As the most important financial innovation in the international financial market in 1980s, stock index futures is now one of the financial derivatives with the best trading volume and liquidity in the world, and is recognized as one of the most effective risk management tools in the stock market. The introduction of stock index futures has a positive impact on the market, but it will also increase the volatility of the market under certain conditions.
Positive influence of stock index futures
Improve the financial market system and promote the integration of financial markets.
Derivatives market is an important part of financial market, which provides risk management tools for market participants, supplements and perfects the basic financial market, and helps to improve the market structure and expand the market scale. After the establishment of the financial futures market, the stock market, money market, foreign exchange market, insurance market and commodity futures market will be interconnected through financial futures intermediaries, and the huge investor groups and networks in the capital market will be fully utilized to realize the integration of various financial sub-markets, which will help to establish a sound financial market system.
The introduction of stock index futures is the first step to develop derivatives market, which connects stock spot and futures. At present, domestic securities companies mainly focus on stock spot market business, while futures brokerage companies mainly focus on commodity futures brokerage business, and there is little communication between the two industries. After the introduction of stock index futures, the two industries will realize docking, and brokers can participate in futures brokerage companies to enter the financial futures market. At the same time, they will indirectly enter the traditional commodity futures market, bring incremental customers to the commodity futures market and increase the liquidity of the commodity futures market. Futures brokerage companies can also indirectly set foot in the stock market by participating in stock index futures. The connection between the two industries will lay a solid foundation for the further development of the financial futures market. In the future, bonds and interest rate futures will connect the capital market and the money market, and the forward foreign exchange market will connect the foreign exchange market and the capital market.
Improve the function of capital market and promote the development of institutional investors.
Lack of tools to avoid systemic risks in the stock market is one of the important factors that restrict institutional investors' capital investment. After the introduction of stock index futures, the stock market will further attract institutional investors to invest, increase the proportion of institutional investors in the stock market and promote the healthy development of the market.
Increase the liquidity of the stock market and serve the development strategy of blue-chip stocks.
The experience of overseas stock index futures development shows that stock index futures and stock spot trading have a mutually promoting relationship. Due to the increase of investment strategies such as arbitrage and hedging, stock index futures will increase the demand for stock trading, thus enhancing the liquidity of the stock market and improving market efficiency.
Change the unilateral operation mechanism of the market and diversify the investment model.
On the premise of shorting, stock index futures will end the current situation that the stock market can only make profits by doing more unilaterally, and the rules of the market will be more reasonable. The introduction of stock index futures not only increases the investment varieties, but also facilitates the introduction of subsequent related products, such as stock index options. Stock index futures diversify investors' investment methods. According to their own needs and risk tolerance, investors can adopt hedging, arbitrage, speculation and asset allocation in the futures and spot markets to realize diversification of investment methods.
The stock price structure is gradually optimized and the investment tends to be rational.
With the introduction and development of stock index futures, blue-chip stocks with strong influence, good fundamentals and high liquidity in the underlying index will be favored and concerned by more institutional investors, which will have a stronger influence on the index and improve its activity, while companies with poor quality will gradually be abandoned by the market, the stock market structure will gradually become polarized, and the concept of blue-chip value investment will occupy a dominant position in the market.
Negative influence of stock index futures
Transaction transfer has increased the liquidity of market funds.
Because of its low transaction cost, low margin ratio and high leverage ratio, stock index futures will attract some investors who prefer high risk from the stock market to the futures market in the short term. The nominal trading volume of futures index may exceed that of the stock market, and the trading in the stock market will become relatively light. In this process, the capital flow in different markets will also accelerate. But in the medium and long term, stock index futures will greatly promote the development of the stock market scale.
Operational risks may increase.
Stock index futures is a double-edged sword: on the one hand, it can avoid risks; On the other hand, the characteristics of stock index futures using margin trading may bring greater market risks to investors.
Fluctuations that affect the stock market.
Although the empirical evidence of various countries shows that stock index futures trading will not increase the volatility of spot prices, and even contribute to the stability of the stock market, in some cases, stock index futures will also affect the price behavior and fluctuation characteristics of the stock market. First of all, the trading of futures index will increase the speed of information transmission and quickly affect the market price of stocks through index arbitrage or other channels; Secondly, the leverage of futures trading is high, which may make the futures price fluctuate greatly and affect the spot price; Thirdly, the "expiration effect" of futures index may also aggravate the price fluctuation of the stock market.
Speculative manipulation may increase.
The unique high leverage ratio of stock index futures is very suitable for speculators. Therefore, after the introduction of stock index futures, speculators and speculators will increase significantly. At the same time, stock index futures trading makes the spot and derivative markets have an interactive relationship, which provides convenience for speculative capital to manipulate the market by using stock index futures. Especially in the case of small market scale, speculators are more likely to use stock index futures to manipulate the market.
Influence on stock market funds
The author's empirical analysis shows that the volatility of most stock markets has not changed significantly within one year before and after the introduction of stock index futures (see table). Therefore, it can be speculated that the introduction of Shanghai and Shenzhen 300 stock index futures has no significant impact on the short-term fluctuation of the stock market.
The impact of the introduction of stock index futures on the liquidity of the stock market is first manifested in the limited "crowding out effect" on the stock market. In the short term, because there is often a certain degree of substitution between stock index futures and spot stocks, stock index futures may have a capital crowding-out effect on the stock market at the initial stage of listing, especially some speculators who attach importance to the index will transfer some funds invested in the stock market. Judging from the amount of funds, the trading volume of stock index futures may exceed the trading volume of the stock market, but stock index futures are traded through margin. Even if the trading volume of stock index futures is twice that of spot, the actual trading volume is only 20% of the stock market according to the margin of 10%. Considering that the futures market is T+0 trading, and the trading volume is mainly made by short-term speculators, the actual funds involved in trading may be only 5% to 10% of the stock market, which is not enough to impact the stock market.
Secondly, arbitrage between futures and spot will increase market liquidity. The futures market is characterized by low transaction cost, T+0, short selling and leveraged trading. The liquidity of stock index futures contracts is good, and the nominal transaction amount may reach 1 ~ 2 times or more of the spot transaction amount, in which speculative trading accounts for a considerable proportion. For emerging markets, at the beginning of the introduction of stock index futures, the basis difference between futures and spot tends to widen, which provides conditions for market arbitrage trading. From 2004 to 2005, Hong Kong Hang Seng Index futures arbitrage transactions accounted for about 1 1.9% of the total trading volume. Arbitrage funds often need to buy spot and sell futures, thus improving the liquidity of index stocks.
Third, the impact of the introduction of stock index futures on the stock market is also reflected in the valuation. According to the relationship between stock index futures and the stock market, stock index futures will not affect the valuation of the stock market in the medium and long term. The key factors affecting the trend of China A-share market are economic growth rate, exchange rate, interest rate and corporate profit growth rate. In the short term, the impact of stock index futures on the stock market is mainly reflected in the role of "helping the stock index rise and fall".
To sum up, the author believes that the impact of stock index futures on stock market funds is only partial and short-term. From the overall and long-term point of view, stock index futures will promote the active trading in the stock market and the reasonable fluctuation of prices, thus making the stock market develop more healthily.
Choice of conditions and opportunities
The main purpose of introducing stock index futures is to bring efficient pricing mechanism to the market, thus eliminating excessive speculation and maintaining market stability. Whether financial derivatives can be priced efficiently and reasonably by the market is an important symbol of whether the market is healthy or not.
The experience of mature stock index futures market shows that stock index futures can achieve high market pricing efficiency. Judging from the development history of stock index futures in emerging markets, the initial trading volume is small, the basis is large and the arbitrage profit is high. However, with the expansion of the market scale, the market has gradually matured and the pricing efficiency has improved. In addition, foreign investors play an important arbitrage role in the stock index futures market in emerging markets. The reason why stock index futures can be priced efficiently by the market is that the market has flexible and efficient arbitrage mechanism, high liquidity and stable arbitrage power.