The "Corner" Manipulation Pattern Of Forthcoming CSI 300 Index Futures Based On Blue-chip Stocks

The financial derivatives are accused one of the causes of the "Sub-prime crisis", and the de-leveraging slows down the development of financial innovation.However, it is self-evident that index futures could hedge systematic risks if used properly.The forthcoming CSI300 index futures will provide hedging tool for the investors, while there are risks of being manipulated by institutional investors.The regulators are hesitating about when to initiate the index futures,because it is hard to forecast or measure the manipulation.The manipulation scandals before,like the "327 Government Bond Futures" and the "Shanghai Rubber Futures",had negative effects on the capital markets.This paper analyzes the possibility of "corner" manipulation on index futures, using 5 minutes transaction data.It will answer the questions of "What are the possible manipulation patterns" and "What are the key factors that magnify the potential return in the chain of manipulation",and the conclusion will provide guidance for the regulators.To be specific,this paper builds model based on the "corner" manipulation of "PetroChina",and takes abnormal situations into consideration.It analyzes and measures the five magnifiers in the chain of manipulation,caused by the low tradable proportion,the interaction of blue-chips,the following of small caps,the following of futures return,and the margin trade.In conclusion,the "corner" manipulation based on blue chips has relatively high potential return,so the motive of futures manipulation still exists.The regulators should take measures to prevent the manipulation from happening,and foster the healthy development of index futures markets.