A Research On The Effectiveness Of Warrants Creation System In China

Speculation in warrants market has always been popular in China, warrants'price rose or fell acutely is common to happen. In order to curb excessive speculation in the market warrants, the relevant departments introduced warrants creation system since November in 2005, allowing qualified brokerage to create and write-off warrants on the base of full guarantee. But the market has different views to the system. On one hand, the Shanghai Stock Exchange and relevant brokers believed that the system can curb excessive speculation, it is good for the development of capital market. On the other hand, some academics and investors thought that there are great unfairness in the system, it equal to robber the investors.The article does a research on warrants creation system in China, from the point of whether the system can inhibit excessive speculation and protect the interests of small investors. It illustrates the creation of a system is effective which can inhibit excessive speculation and protect the interests of small investors.First of all, though the game theory and the payment function of brokers, the main and small and medium investors, it illustrates whether the warrants creation system is effective depends on the number of creation. If the number of creation is large, it can inhibit excessive speculation effectively, but doesn't have a good effect on protecting the interests of investors, vice versa. So the article tries to find the existence of an optimal amount.In chapter IV of this article, the warrants of warrants market in our country are divided into two groups: creation group and non-creation group. And tests whether the current warrants creation system can curb excessive speculation by introduces three indicators: premium rates, deviation of the market price and theoretical price and implied volatility.Through research it found that our warrants creation system doesn't have a good effect on curbing excessive speculation, and there are not enough creation number. According to the conclusions of the theory in the third chapter, it shows the number of creation is insufficient. But if the current creation system can play an important role in protecting the interests of investors, it is possible to have a optimal creation number.The fifth chapter selects the case of Southern Airlines JTP1 to analysis whether the current creation system in China can protect the interests of medium and small investors. It found that it doesn't effective. So it draws a conclusion of the current creation system is invalid.