| With the rapid development of domestic futures market,algorithmic trading that is highly consistent with the characteristics of futures market is booming.The CSI 300 futures contract(IF)has become the most active futures with the largest trading volume in the domestic market ever since it was listed in 2010,facilitating the development of algorithmic trading to a great extent.Most algorithmic trading is characterized by high frequency and therefore accounts for a large proportion of market volume in stock index futures market,providing high market liquidity.However,after the abnormal fluctuation of the Chinese stock market in 2015,the function of stock index futures became highly controversial and CFFEX was forced to adjust the trading rules to raise the transaction fees and the margin ratio.As a result,total market volume reduced by over 95%,with high-frequency algorithmic trading particularly affected.Since stock index futures are one of the most important risk management tools in capital market,it is of great practical significance to study the impact of this event.This study aims to explore how restriction on high-frequency trading affects the hedging function,liquidity and volatility of stock index futures.Trading data of Index Future from 2011 to 2017 were used in this study.By applying the GARCH model,the study found that after the trading rules adjustment,liquidity of the stock index futures significantly decreased while volatility amplified,causing a decline in price discovery efficiency.In addition,restriction on high-frequency trading lead to significant decline in stock index futures positions,indicating weakening the hedging and risk management function of the market.The study also found out that the impact of the trading restriction subsided over time.With the findings from quantitative research,the study analyzed the causes of the phenomenon from a market perspective and provided some research support and enlightenment to the market and regulatory practice. |
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