Empirical Analyses Of Futures Market Microstructure

"Futures market functions" has been a hot issue. Around the functions of hedgingand price discovery derive a series of quantification assessment model, which providingreference objectively for evaluating the futures market. In recent years, with thedevelopment of computer science and technology, high frequency data have started tobecome a new hotspot of research, and the relevant empirical model also graduallymature, which provides an important basis for market microstructure theory of empiricalresearch, and also makes this theory into new spotlight of finance. Futures marketmicrostructure theory provides great convenience for recognizing the relationship ofsystem design and futures function. Based on the futures market microstructure theory,make the comparing of Shanghai copper futures and LME copper futures as thebreakthrough point, got a conclusion that:Firstly, there is a obviously daily trend of absolute returns, Open Interest andvolume in the Shanghai copper futures market; And the volume of LME copper futurespresents not only significant "U" trend, and overall also is more steady, but absolutereturns and open interest have no obviously daily trend. LME copper futures marketstability are far better than Shanghai copper futures market, the ability of absorb anddigest information of LME copper futures market is more strong, and the tradingbehaviors are more rational;Secondly, the Shanghai copper futures market absolutely returns and volume aretwo-way causality, and there is no such relation in LME copper futures market. Thismeans investors will buy futures if absolute yields rise in Shanghai copper futures market,leading to increasing of volume; the volume`s increasing also lead to absolute returnsincreasing, which means the increasing of volume exacerbating the price fluctuations.And there is no significant relationship between volume and absolute returns in LMEcopper futures market which means LME copper futures market is more stable andinvestors are more rational, which is relate to dominance of institutional investors in themarket;Thirdly, judging from the graph of duration, linear function of price duration isdifferent in different period, for example, price duration of Shanghai copper futuresincreasing after open the market, it means the trading activity that gradually becomeweak; then duration decreasing which means transactions become active, duration is minimum at the end of market day which means the most actively traded at this time;price duration of LME copper futures is different from Shanghai copper futures, priceduration of LME copper futures have no obviously trend in the market day which meansmarket liquidity relatively stable. For absolute value of duration, Shanghai copper futuresis far below the LME copper futures which means Shanghai copper futures marketoverall fluidity stronger too.Fourthly, fluctuation spillover models shows that the interactivity of Shanghaicopper futures market and LME copper futures market is stronger, the price hassignificant two-way "fluctuation spillover effect", and Shanghai copper futures incomewave "spillover" for LME copper much greater influence extent deeper, role, time islonger. From another side that Shanghai copper futures prices have started to a certainextent guide LME copper futures trend.Finally, this paper made some suggestion to perfect futures market microstructurefrom the aspect of investors structure, information communication system, informationrelease mechanism, delivery system, market variety structure based on the the empiricalresults.