Extended Trading In CSI 300 Index Futures Market

On April 16,2010, CSI 300 index futures were listed on the China Financial Futures Exchange (CFFEX) after several years of preparations. As the first and the only stock index futures in China, CSI 300 futures, boast such functions as price discovery, risk hedging and market stabilization. Compared with the CSI 300 index market, the futures market opens 15 minutes earlier in the morning session and closes 15 minutes later in the afternoon session.Trading after-hours of index futures has received much attention in the existing literature. However, there is no detailed and comprehensive study into this issue. This paper studies the trading of CSI 300 index futures on the CFFEX when the underlying cash market is not trading. In order to studies the after-hours trading, much of our analysis contrasts the after-hours trading session (from 9:15 to 9:30 a.m. and 15:00 to 15:15 p.m.) with the CSI 300 index trading session (from 9:30 a.m. to 15:00 p.m.) on returns, volumes, pricing efficiency, volatility, liquidity and informed trading.The arrangement of stock non-trading period in index futures market is helpful for price discovery; this paper provides evidence that the futures returns lead the stock returns. The price characteristics in after-hours session differ from the stock trading session. Using the weighted price contribution measure, this paper find that after-hours trades especially preopen trades are associated with significant price discovery. The liquidity and volatility is also different in trading and non-trading period. Index futures market presents low liquidity and high volatility in preopen period. When the stock market closes, liquidity in the futures market increases but volatility in the futures market drops. Because of the information asymmetry between informed and non-informed traders, we expect these two types of traders to have very different participation rates in trading and non-trading period. The results suggest that there are more informed traders in the preopen trading session.