Secret Trading And Price Manipulation In The Csi 300 Index In Empirical Research

China's stock market is characterized with traits distinct from mature financial markets in US and Europe. Unsophisticated individual investors, their proportion of overall investors and the lack of short sell opportunities all make the market irrational and vulnerable to manipulation. The Vice president of the Securities Association of China lately announced that the stock index future is ready to be launched soon. Thus the manipulability of the new product received great interest.With intra-day trading data of constituents of the CSI 300 index, this paper found medium size trades are associated with disproportionately large cumulative price change; and so do large size trades, though to a lesser extent. It gives strong support for the existence of the stealth trading and block trade price manipulation in the sample stocks. And as the sample stocks weigh heavily in CSI 300 index, it indicates that the CSI 300 index is subject to manipulation and also renders the new index future vulnerable.One observation sample and one control sample using the same stocks and the same trade size classification are constructed to examine the impact of transaction tax cut. The results display a sharp decrease of cumulative price change caused by smaller trades, and in contrast a big jump in that of large size trades. Hence it indicates the tax cut severed the situation of price manipulation.In conclusion, China's stock index future market appears to be vulnerable to manipulation, which demands regulators' efforts to restrain. Besides, transaction tax has strong impact on manipulation activities, thus requiring further attention in policy making.