Research On The Effectiveness Of China's Crude Oil Futures Price Discovery Function

Since the listing of China's crude oil futures in Shanghai International Energy Exchange in March 2018,the operation of the market is stable and the development trend is satisfactory.However,compared with the international mature crude oil futures markets,there are still many defects in China's crude oil futures market.The Price Discovery is not only the basic function of the futures market,but also an important indicator of the futures market's development level.In order to ensure the realization of the goal of establishing China's crude oil futures market and the orderly and stable operation of the national economy,this paper studies the efficiency of China's crude oil futures price discovery function.Theoretically,it can be concluded that information reflection and transmission performance of futures price in the market price system is the criterion to evaluate the efficiency of China's crude oil futures' price discovery function.The market traders,trading system and design of contracts have direct influence and restriction on the information reflection and transmission.These factors decide the efficiency of China's crude oil futures price discovery function in a deeper level.The establishment process and operation state of China's crude oil futures market have revealed that China's crude oil futures price discovery function may be inefficient.Three hypotheses are suggested that price discovery function of China's crude oil futures was efficient in the spot market,the international crude oil futures market and the crude oil transportation market.Through constructing VAR model,it is the information reflection and transmission performance that is the criterion to verify above three hypotheses.The empirical results show that China's crude oil futures can not transmit information to the spot market,international crude oil futures market and crude oil transportation market efficiently,and merely can reflect the information of international crude oil futures market.Therefore,it can be concluded that the price discovery function of China's crude oil futures is not efficient.The inefficiency of China's crude oil futures price discovery function can be attributed to four aspects: low participation of market traders,defects in system arrangement,imperfect contract design and immature development of domestic supporting markets.Therefore,it is suggested to improve the efficiency of China's crude oil futures price discovery function by pertinently improving the problems of market traders,institutional arrangements,design of contract and supporting markets,and to safeguard its price discovery function by improving the overseas crude oil production and enhancing the regulatory capacity.