Research On The Effect Of Transaction Costs On Stock Index Future's Function

In the early days,when Taiwan market debuted their first local stock index futures,most investors preferred to trade offshore markets' Taiwan stock index futures,because of the high transaction tax and commission charge in local market.In 2000,Taiwan Market adopted series of reform steps to improve the trading environment of local market,say,cut off 50%of transaction tax rate.As a result,the trading volumes increased gradually,the functions of local futures market also improved.After that Taiwan local financial futures market went into the track of sound development.The significant role which transaction costs had been played is evident.At present,mainland China is also actively preparing to debut local stock index futures.Just as what had been happened on Taiwan market,mainland China also has to face the challenges from the offshore markets.As what had been read from "The rules of Stock Index Futures Emulator Trading(revised edition) " which had been promulgated and implemented by China Financial Futures Exchange on May 14th 2007,the commission charge will be charged as 0.5(?) of the transaction value by CFFE.This level of charge is still much higher than other offshore markets.In order to study the effect which would likely to make to mainland China's financial futures market,this paper uses the method of theoretical research,comparative research and empirical research to study this issue.In this paper,we choose Taiwan Market as the object of comparative research.Firstly,compare the similarity and difference between Mainland China Market and Taiwan Market.Secondly,use Vector Error Correction Model and Unitary Regression Model analysis the efficient change of Price Discovery Function and Hedging Function before and after the change of transaction tax rate in Taiwan market.The empirical research result proves that the existence of high transaction cost would deeply harm the efficient of futures market.Finally,according to the experience and revelation from Taiwan market,make some pertinence suggestions to mainland China stock index futures Market.