Research Of The Impacts Of 50ETF Option Listing On The Underlying Market

This paper mainly studies the impact of the 50ETF option on the market quality of its underlying market,namely,50ETF market.These impacts including impact on trading volume,effective bid-ask spread and volatility.In this paper,we use the paired sample t test and Wilcoxon rank sum test to study the effect of 50ETF trading volume and effective bid/ask spread.And concluded that the introduction of the options before and after the different time window,the underlying 50ETF trading volume has increased significantly,the effective bid-ask spreads decreased significantly.In order to ensure the accuracy of the results,the same method was used to study the trading volume and the effective bid-ask effect of the control group.The results showed that there was no significant change in the trading volume of the Shanghai and Shenzhen 300 ETF before and after the introduction of the option,and the effective bid-ask spread was significant rise.Which further validates the conclusion that option introduction can help improve the liquidity of spot market.Using the program evaluation model based on panel data,we conclude that the volume spread are significantly increased and the effective spread is significantly decrease,so the introduction of ETF option has positive effect to the liquidity of underlying.In addition,volatility of 50ETF is slightly increased after the introduction of the option.In general,the findings of this paper show that the introduction of 50ETF options effectively improves the quality of the cash market.It contributes 19.03 percent to the volume,decrease 27.29 percents to the effective spread and 6.26 percents to the volatility.How does the transaction of the option lead to changes in the spot market?This paper argues that this is mainly due to the following reasons:First,the introduction of the option that led to the emergence of more new information,these new information will be transmitted to the cash market,thereby reducing the spot Informal traders on the market and non-informants of the information asymmetry,the effective bid-ask spread also decreased.In addition,due to the natural leverage of the options and the convenient shorting mechanism,the option becomes a speculative tool better than the underlying,so informed speculators will shift their investment from the spot market to the options market,which further reduces The volatility of the spot market.Finally,due to the 50ETF listed a few months after the encounter a decade of A shares of the stock market,investors demand for risk management increased rapidly,many investors will treat 50ETF options as a good investment tool.With the 50ETF options trading volume of the rapid rise,due to hedging needs,50ETF trading volume is also rising.