Research On Cross-market Manipulations Of Stock Index Futures And Spots In China

The CSI 300 stock index futures has been launched at China for 8 years since 2010.After that,the launch of SSE 50 and CSI 500 stock index futures significantly increased the products of stock index futures in China' s market.The relation between the stock market and the stock index futures market gets more closely,which demonstrates that China entered the new era that the price of financial derivatives is interacted in real time.The launch of stock index futures improved the capital market system of China and increased tools of investment and trade,but it leaded to the possibility of cross-market manipulation.The manipulation of cross-market of stock index,futures and actuals and the problem that how to implement effective supervision raised wide concern.Although there is no unified and clear definition of manipulation,manipulation could be judged by corresponding standards.The precondition of formulating effective measures for cross-market supervision is that the cross-market manipulation should be comprehensively studied in many ways,including the basis of cross-market manipulation,the logical assumption and the feasibility of cross-market manipulation and so on.There are many investigations on the topic that the basis of cross-market manipulation and trade is the correlation between Stock Index Futures and Spot Markets,while only few researches have been carried out to study the construction as well as test of logical assumption of cross-market manipulation and feasibility of the assumptions.In addition,the discussion of stock index futures are mainly focused on CSI 300 index in current researches.In this paper,SSE 50 and CSI 500 stock index futures are considered.The objectively of this study is to investigate the feasibility of cross-market manipulation of stock index,futures and spots both qualitatively and quantitatively based on corresponding theoretical analysis.The outline of this study is listed as below.First,the basic logical assumption of manipulation of spots which aims to profit is constructed using three types of stock index futures and corresponding benchmark index as well as SSE composite index.Second,the correlation between stock index futures and spots is validated by applying Granger causality test,VAR and impulse response analysis and using high frequency data of market trading in 2017.Some weighted stock and specific industry sector are selected according to specific standards,including Ping An Insurance which belongs to weighted stocks of benchmark index,PetroChina which belongs to weighted stocks of non-benchmark index and bank sector which belongs to weighted sectors.The logical assumptions of cross-market manipulation are summarized to three logical routes.Finally,the trading sessions in 2017 with the causality necessary for manipulation are selected by applying Granger causality test with respect to Ping An Insurance,PetroChina and bank sector.Assume that these trading sessions are deployed by manipulators.Some essential parameters including funds for manipulation,profit and stock index futures positions are estimated and the feasibility of different manipulation methodologies are compared by employing analysis of costs and benefit and using transaction data such as volume.The conclusions of empirical research are listed below.SSE 50 index has the highest possibility for being manipulated among four types of stock price indices.Though the remaining stock price indices have a degree of anti-manipulation,multiple leverage between stocks and index make it possible to manipulate the market.For the manipulation path,the effectiveness of manipulating individual stock aiming to lead ups and downs of index is limited,which illustrates that index has a degree of anti-manipulation.An feasible method to manipulate market is the manipulation path making use of sector linkage effects whose rate of return is higher than the former.For the manipulation methodologies,the method that build long position of stock index futures contract and pull up the stock price is better than the method that build short position of stock index futures contract and suppress the stock price.It is essential to choose appropriate opportunity for the cross-market manipulation of stock index futures and spots.Also,the corresponding information and market activity are necessary.The causality,price limit and benefit condition all have uncertainty and it is difficult to implement cross-market manipulation with the temporary trading restriction of stock index futures.The cross-market supervision needs to promote with relaxation of related policy.This study makes suggestions for the system design of supervision for stock index futures and spots market and the regulatory measures in the manipulation path.