Past life of stock index futures

Time flies, 30 years is fleeting. During the 30 years of the development and operation of the domestic futures market, although the introduction of many varieties is of great significance, the stock index futures, which was born only 10 years ago, is undoubtedly one of the most influential varieties in the domestic financial market. It not only provides a hedging tool for stock spot, but also makes great contribution to the perfection of domestic financial market system.

Research on Restarting Stock Index Futures in China Driven by Internal and External Risks

Referring to the emergence of stock index futures, according to the reporter of Futures Daily, it has always been closely related to the safe-haven demand of the market.

In the early 1970s, with the disintegration of the Bretton Woods system and the free floating of the US dollar exchange rate, the inflation level continued to rise and the stock market was severely impacted. In the absence of relevant derivatives, investors can only reduce their risks by selling stocks, resulting in huge losses. Considering that Chicago agricultural futures can provide risk management and hedging tools for agricultural product price fluctuations at that time, people began to develop stock index futures and put them into practice.

1977 10, Kansas Futures Exchange (KCBT) formally submitted a report to the Commodity Futures Trading Commission (CFTC), suggesting the development of futures products with stock index as the target, so as to avoid systematic risks in stock investment.

Without any precedent, it is difficult to develop American stock index futures. Relevant exchanges not only need to communicate with index companies repeatedly to obtain the right to use their indexes, but also need to explore the delivery methods of stock index futures. In addition, in view of the fact that stock index futures spanned two markets, namely, the American stock market and the futures market were supervised by two different institutions, it was difficult to define the subject of supervision for the time being. In this case, the listing of stock index futures has to be postponed.

198 1, things finally turned around. In the case that Eurodollar futures introduced by Chicago Mercantile Exchange (CME) adopt the cash settlement method at maturity, the delivery problem of stock index futures has finally found a solution from the operational level. In the same year, with the signing of Shad-Johnson Agreement by the Securities and Exchange Commission and CFTC, the institutional problems of stock index futures disappeared. In addition, related party transactions have either reached an agreement with index companies, or the target of opinions has turned. Under such circumstances, the long-awaited stock index futures 1982 contract was finally listed in KCBT and CME respectively.

After the listing of Standard & Poor's 500 stock index futures was a great success, stock index futures began to accelerate. All major exchanges in the United States have launched stock index futures, which have gradually evolved and developed according to the changes in market demand and played a great role in the economic crisis.

Because of this, in 2006, when the overheated economy led to the increase of institutional investors and the instability of the stock spot market, the relevant departments decided to introduce stock index futures to reduce market volatility. It is understood that in the absence of short-selling mechanism, asymmetric information and different expectations of investors, the volatility of domestic stock market was even higher than that of some developed countries at that time.

Moreover, before this, many related institutions in many countries have launched many stock index futures based on domestic stock indexes, which have had a certain impact on the domestic market. In this case, in order to reduce the influence of overseas markets, it is necessary to launch local stock index futures contracts.

Of course, stock index futures was not a "new thing" for China at that time. This is because in the 1990s, Hainan Stock Exchange Quotation Center launched stock index futures contracts including Shenzhen Composite Index and Shenzhen A-share Composite Index, with a term of four months, but it was not approved by the relevant state departments at that time.

Under such circumstances, after half a year's operation of stock index futures, China Securities Regulatory Commission found that the domestic market at that time was far from share price index futures's conditions in terms of scale, market maturity, regulatory measures and laws and regulations. In view of this, the liquidation of stock index futures trading became the inevitable result at that time.

Because of this, China did not begin to study stock index futures until 2000. At that time, the main content of the study was to explore the applicability and necessity of stock index futures in China by analyzing the domestic and international market and policy environment.

It was not until the bull market came in 2006 that the domestic market realized that with the sustained and rapid growth of China's economy and the steady expansion of the securities market, there was an increasing demand for derivatives tools. In fact, it was not until the establishment of CICC and the determination of Shanghai and Shenzhen 300 index futures that stock index futures gradually became a hot spot in the market.

Despite the storm, stock index futures finally went public.

2006 is undoubtedly a very important year for stock index futures.

First, with the consent of the State Council and the approval of the China Securities Regulatory Commission, the Shanghai Stock Exchange, Zhengshang Institute, Dashang Institute, Shanghai Stock Exchange and Shenzhen Stock Exchange jointly initiated the establishment of China Financial Futures Exchange, which is of strategic significance for deepening financial market reform, improving financial market system and giving full play to financial market functions. Subsequently, China Financial Futures Exchange announced the Temporary Contract of Shanghai and Shenzhen 300 Index Futures, and started the simulation trading activities of Shanghai and Shenzhen 300 Index Futures at the end of 10 to prepare for the listing of stock index futures.

It is understood that the simulation trading contract consists of two consecutive contracts in recent months and two quarterly contracts. On the first day of trading, the gap was 176, with more than 50,000 lots and at least 600,000 participants. Relevant researchers found through simulated trading that simulated trading does have the functional characteristics of real trading, and it may be one-sided to judge the early warning effect of stock index futures on Shanghai and Shenzhen stock markets only by simulated trading.

Under such circumstances, in order to ensure the healthy development of the stock index futures market and maintain social stability, from 2006 to 20 10, China Securities Regulatory Commission and CICC have been working hard to design and improve the corresponding rules and regulations, with a view to establishing an effective supervision and risk control system and avoiding the vicious impact of stock index futures on China's economy and securities market.

In order to strengthen the joint supervision of the stock market and stock index futures market, and prevent and resolve the cross-market risks that may occur after stock index futures trading, China Securities Regulatory Commission also organized Shanghai Stock Exchange, Shenzhen Stock Exchange, China Financial Futures Exchange, China Securities Depository and Clearing Corporation and China Futures Margin Monitoring Center to establish a joint meeting system for cross-market supervision and cooperation, and began to study and establish a cross-market supervision and cooperation system for stock and stock index futures markets. In August of the same year, a cross-market supervision and cooperation system for stock futures was established. Under the unified deployment and coordination of the China Securities Regulatory Commission, the five parties signed a series of agreements on cross-market supervision and cooperation between the stock market and the stock index futures market in Shanghai.

The cross-market supervision and cooperation system aims at preventing market risks, maintaining the stable operation of the market and ensuring the healthy and coordinated development of the spot and futures markets. In line with the principles of clear responsibilities, responsible division of labor, smooth information, sound mechanism and practical results. Its main content is to build a cross-market joint supervision and cooperation mechanism between the stock market and the stock index futures market, including information exchange mechanism, risk early warning mechanism, risk control mechanism and joint investigation mechanism. After the signing of the agreement, through the supervision and cooperation of the five parties, effective joint supervision measures can be taken in time within their respective responsibilities, which can effectively improve the supervision efficiency, prevent and promptly investigate and deal with illegal acts such as cross-market manipulation and insider trading, and ensure the smooth launch and smooth operation of stock index futures trading.

20 10 and 1 China Securities Regulatory Commission announced that the State Council agreed in principle to launch stock index futures trading. Since then, according to the unified deployment of China Securities Regulatory Commission, CICC has been intensively and methodically promoting various preparations for the listing of stock index futures.

To this end, China Securities Regulatory Commission and China Financial Futures Exchange organized a large number of high-density trainings, and thousands of senior executives, business department heads, marketers, account opening personnel, IB business personnel and related post business personnel from futures companies and securities companies participated in the trainings. At the same time, China Financial Futures Exchange has done a good job in investor education in all directions and at multiple levels, and widely disseminated the basic knowledge and correct investment ideas of stock index futures through various media such as the Internet, newspapers, television, radio and magazines.

In February of the same year, in addition to the promulgation and implementation of the Provisions on Establishing the Investor Suitability System of Stock Index Futures (Trial) and its supporting documents, China Financial Futures Exchange officially issued the revised Shanghai and Shenzhen 300 stock index futures contracts and CICC trading rules and implementation rules, further strengthening risk control measures.

On April 16, after more than 8 years of research and preparation, the Shanghai and Shenzhen 300 stock index futures were finally listed in CICC.

In the following period, relying on the rapid development and huge scale of China's capital market, the trading volume and amount of the Shanghai and Shenzhen 300 Index developed rapidly. By the beginning of 2065438+2005, the Shanghai and Shenzhen 300 stock index futures have become the largest futures product in the world.

On the basis of the success of Shanghai and Shenzhen 300 stock index futures, CICC launched SSE 50 stock index futures and CSI 500 stock index futures on the occasion of the fifth anniversary of listing of Shanghai and Shenzhen 300 stock index futures. Since then, China's stock index futures market has achieved full coverage of large, medium and small markets.

However, 20 15 is destined to be written into the history of China's capital market. After the crazy bull market, the domestic stock market suffered a more tragic bear market. The Shanghai Composite Index soared from 3 160 at the beginning of the year to 5 178 in mid-June, and plunged to 2870 at the end of August in just two and a half months.

In this stock market crash, there are market rumors that stock index futures are one of the important drivers of this disaster. Because it not only provides a short-selling tool for the market, but also the discount of the three major stock index futures is one of the main sources of negative market expectations in the later period of the stock market crash.

Of course, the follow-up study found that stock index futures were not the main reasons for the decline of the 20 15 stock market, but the fundamental changes and technical failures. As for the large negative basis difference between the later three futures indexes and the spot, in the view of researchers, on the one hand, it may be due to the unsynchronization of futures traders, that is, stock index futures are under downward pressure on prices because of selling a large number of safe-haven demand, while the spot index has not fallen synchronously for various reasons; On the other hand, the panic of extreme events in the market has caused great selling pressure, not malicious manipulation.

In fact, in the eyes of the above-mentioned people, stock index futures are the only hedging tool except 50ETF options in China stock market. After the abnormal fluctuation of the stock market, stock index futures fully played the role of flood discharge channel. However, due to the excessive demand for hedging, it has caused a large negative basis.

But these are all later stories. From July 2065438 to July 2005, the regulatory authorities first tried to "control" the short selling of stock index futures by limiting the short selling of futures and increasing the transaction fee. Little effect was achieved. On September 2nd of the same year, CICC threw a bombshell into the market, which not only increased the intraday closing fee of stock index futures to 23/10000, the margin for non-hedging trading to 40%, and the margin for hedging trading to 20%, but also defined the number of futures traded in a single day as "excessive trading behavior". So far, the liquidity of China's futures trading has fallen to the bottom.

Although the liquidity of stock index futures has recovered with the four adjustments of CICC since then. However, compared with the heyday of 20 15 stock index futures, there is still a big gap in its liquidity.

Get through the current period and help improve the domestic financial market system

Although the stock index futures have not been fully liberalized at present, as an important basic tool of the capital market, the introduction of stock index futures has undoubtedly played an irreplaceable positive role in the domestic capital market.

Relevant research shows that the introduction of domestic stock index futures not only provides a hedging tool for the stock market, but also enriches the investment tools in the market, which not only improves China's financial market system, but also enhances China's macro-control ability.

Specifically, with stock index futures, its hedging mechanism can not only reduce the selling pressure and market impact of the stock market, but also make it unnecessary for investors to change positions frequently with the help of hedging tools. In addition, the arbitrage operation of stock index futures can also reduce the fluctuation of the stock market. In this case, it is of great significance to reduce the systemic risk of China stock market.

Stock index futures trading has diversified characteristics and can meet the investment needs of investors with different preferences. While enriching investors' investment tools and strategies, its two-way trading mechanism, combined with the margin trading system, can greatly reduce transaction costs while changing the traditional profit model, so it is deeply loved by institutional investors and widely used in asset allocation.

In addition, stock index futures also provide an effective risk prevention and risk monitoring mechanism for China authorities, which is conducive to further optimizing and perfecting financial macro-control.

According to reports, the macro-prudential policy directly aims at maintaining the stability of the financial system itself, restraining excessive leverage expansion and procyclical behavior, and solving the problem of risk mismatch in time; Prevent and contain the cross-market transmission and vibration of risks and solve the cross-market mismatch of risks.

History has proved that stock index futures can play an important role in promoting the effect of macro-prudential policies because of its advantages of good liquidity, high leverage and high information dissemination efficiency.

In addition, during the abnormal fluctuation of 20 15 stock market, China's stock index futures market also cooperated with the national macro-policy regulation, providing a rare hedging means when the stock market was in extreme market, and partially accepting and transferring stock market risks. In the stage of stock market crash and stampede, the internal stability of the market is improved through risk management function, which provides a more stable market foundation for the effect of regulatory policies of various government departments.

In addition, the introduction of stock index futures is also conducive to the improvement of China's financial system. Over the years, due to the characteristics of immature development, imperfect related mechanisms and lack of financial derivatives, there is a big gap between Chinese markets. The introduction of stock index futures just connects the spot and futures markets: futures brokers can indirectly set foot in the stock market, and investors in the stock market can also indirectly enter the traditional commodity futures market. In addition, it is closely related to spot, securities lending and related index products, which can lay a solid foundation for the further development of China's financial market to some extent.

Referring to the relationship between stock index futures and stock spot, in the eyes of researchers, it is like lightning and thunder in rainy days, which is essentially a response to weather changes. Only the futures market has the advantages of good liquidity, high leverage and high information dissemination efficiency. New information is usually reflected in the futures market first, so it is more like lightning. Although it will react faster than the spot market, its price and spot market are generally determined by the influence of external information.

Under such circumstances, it is more efficient for relevant institutions to use stock index futures for arbitrage and hedging. In addition, there is a mutual promotion and interdependence between stock index futures and securities lending: stock index futures are conducive to the development of securities lending business, while the convenience of securities lending in turn helps to reduce arbitrage costs and promote price discovery and risk management of stock index futures.

Generally speaking, the market generally believes that the introduction of stock index futures will undoubtedly help improve the operation quality of the spot market.

In fact, the rapid development of stock ETF in recent two years is also related to the wide application of stock index futures in its market-making business.

Compared with overseas markets, ETF products in China started late. Considering that this product has many advantages, such as high efficiency, low cost, convenient transaction and small tracking index error. An ETF market with rich varieties and good liquidity can broaden the channels for long-term funds to enter various capital markets such as stocks and enrich its investment strategies and tools, which is of positive significance for improving long-term capital return, improving market structure and promoting capital formation.

In view of this, relevant domestic institutions began to launch ETF market-making business on 20 12, aiming at enhancing the liquidity of such products.

Considering that in the process of market making, ETF liquidity service providers can get some income through bid-ask spread and transaction commission return, but in order to meet the mandatory requirements such as bid-ask spread, minimum quotation quantity and participation rate, ETF liquidity service is also prone to passive positions, so it also faces greater risks.

In this case, it is very important to use related derivatives for risk management. It is understood that at present, in the market-making business of ETF liquidity service providers, stock index futures are mainly used to hedge the predictable risk of conventional overnight positions and the passive position risk of unpredictable extreme markets.

According to reports, the expected regular overnight position refers to the position that the liquidity service provider must hold when making bilateral quotations, which is generally 20%-30% of the market-making scale, so as to ensure that the liquidity service provider can fulfill the obligation of selling quotations when investors need to buy ETF funds. In order to avoid the risk of falling ETF positions, liquidity service providers can make short hedging in the stock index futures market.

As for the unpredictable passive position, the liquidity service provider will continue to passively accept a large number of positions sold by investors when the market continues to decline unilaterally and rapidly. Considering that in this case, the positions tend to rise sharply, and the risk positions may even exceed the risk control requirements. In this case, the liquidity service provider reduces the risk exposure by short hedging in the stock index futures market.

In addition, when the market is depressed, it is often difficult to promote new funds. If the fund is not raised enough at maturity, it will face the dilemma of fund issuance failure and disrupt the rhythm of product development, application and overall layout of fund companies. In this case, some institutions will also subscribe for some newly issued fund shares according to the requirements of relevant cooperative fund companies to ensure the success of fund issuance. And this part of the position also needs to hedge risks through stock index futures.

In addition, some studies have found that stock index futures are also of great significance to the international competition in financial markets. After all, in the future, the opening process of China's financial market will continue to improve, and more and more foreign investors will directly invest in the A-share market. If there are no financial derivatives including stock index futures to hedge risks, these investors will naturally choose to go to Singapore or other overseas exchanges to hedge risks, and the trading rules will be out of China's control. In this case, if there is a big price fluctuation, China investors will be in a passive position.

Therefore, market participants generally believe that it is very necessary to further restore the normalization of stock index futures trading, which is of great significance for introducing foreign medium and long-term funds into the A-share market and ensuring the security of China's financial market.