With the consent of the China Securities Regulatory Commission, the China Financial Futures Exchange will further adjust the trading arrangements for stock index futures:

First, from the time of settlement on April 22, 2019, the margin standard for CSI 500 stock index futures trading will be adjusted to 12%.

Second, starting from April 22, 2019, the regulatory standard for intra-day excessive trading of stock index futures will be adjusted to 500 individual contracts, and the number of open positions in hedging transactions will not be subject to this limit.

Third, since April 22, 2019, the standard of transaction fee for stock index futures will be adjusted to 3.45/10000 of the transaction amount.

This adjustment is a positive measure to further optimize the trading operation of stock index futures, restore normal trading management, and promote the functioning of the market, which is conducive to further meeting the risk management needs of investors and guiding more medium-and long-term funds to enter the capital market. promote product innovation and better meet the needs of all kinds of investors. After the implementation of the above measures, the China Financial Futures Exchange will strengthen market risk monitoring and trading behavior supervision in accordance with the principles of marketization and the rule of law, and actively improve the regulatory system to ensure the safe and stable operation of the stock index futures market.

In fact, the wind of loosening stock index futures has been there all the time. As early as the two sessions in early March, Fang Xinghai, vice chairman of the Securities Regulatory Commission, said that measures related to the liberalization of stock index futures are being studied and should come out this year.

China Finance, a magazine in charge of the central bank, published an article on April 9 that the liberalization of stock index futures is imperative. this paper expounds and demonstrates in detail from several aspects, such as the tight supervision of stock index futures, the necessity of further liberalizing the trading of stock index futures, the course and international experience of the development of stock index futures, and the future development direction of the stock index futures market.

The beginning and end of "binding hands and feet"

Stock index futures were "bound" more than three years ago. After the 2015 stock market crash, stock index futures were thought to be one of the reasons for the stock market slump, bearing the "bad name" of a tool for shorting the stock market.

As a result, in August and September 2015, CICC made five consecutive adjustments, increasing the margin ratio from the unified 10% to 40% (non-hedging) and 20% (hedging); the intra-day opening limit was first adjusted from unlimited to 600, and finally to 10; intraday trading fees also rose from 0.23 per 10,000 to 23 per 10,000, a 100-fold increase.

Under such a severe adjustment, the hedging tool of stock index futures has almost lost its hedging function, and the whole stock index futures market is silent. However, facts have proved that the irrational volatility of the A-share market has not been significantly improved by binding the hands and feet of stock index futures, which makes the management begin to re-examine and evaluate the positive significance of stock index futures.

On January 22, Fang Xinghai, vice chairman of the Securities Regulatory Commission, said at the Davos site that the further liberalization of the stock index futures policy will be launched as soon as possible.

Just a month ago, stock index futures experienced the third deregulation. On December 2, 2018, the China Financial Futures Exchange (hereinafter referred to as the China Financial Futures Exchange) announced on its website that it would reduce the margin and closing fees for stock index futures trading from the settlement date on December 3, and increase the number of positions opened within a single contract day. In evaluating the measures, CICC used the word "promote the effective functioning of the market".

According to the above announcement, the release of stock index futures is specifically manifested in three points. The first is to adjust the trading margin ratio of Shanghai and Shenzhen 300 stock index futures (hereinafter referred to as IF) and Shanghai 50 stock index futures (hereinafter referred to as IH) to 10%, and the proportion of trading margin of CSI 500 stock index futures (hereinafter referred to as IC) to 15%; the second is to increase the number of open positions in a single contract from 20 to 50; and the third is to reduce the handling fee of Pingjin from 6.9 to 4.6 million.

Prior to this, in February 2017 and September 2017, stock index futures have experienced two deregulation, stock index futures margin and handling fees have been cut twice in a row, and the number of positions opened within the day has also risen to 20. After this wave of deregulation, the margin ratio of stock index futures has basically adjusted to the level before the crash in 2015. In fact, whether it is the adjustment of the margin ratio or the decline of the fee rate, it is beneficial for financial institutions to reduce costs and provide efficient use of funds. At the same time, the gradual normalization of stock index futures also helps to quantify the development of hedge funds and inject more liquidity into the capital market.

What is the impact of the loosening of stock index futures on the market?

For the market, the biggest advantage of the loosening of stock index futures lies in two aspects: first, the relevant policies can support the valuation of brokerage stocks, because after the loosening of stock index futures, the capital scale of quantitative hedging will come up, and the turnover rate will increase. The stability of brokerage stocks is conducive to the stability of the market; second, the loosening of stock index futures may lead to large-scale running water, which is the financial management funds at the bank level. Bank wealth management funds need stable returns. If quantitative hedge funds are active again and can provide stable investment returns, the probability of bank wealth management funds entering the market on a large scale will increase.

Analysts believe that at this stage of the market, it is clear that northward funds are controlling the pricing power, which is certainly not a long-term solution. If you want to regain pricing power, you must have large-scale funds from the mainland to enter the market. The entry of large-scale funds will undoubtedly bring greater movement to the market, in this case, stock index futures need to play a role.

Stock participation Futures concept stocks welcome good profit

In the short term, it is naturally good for the concept of futures, especially the stocks with the background of brokerage superposition, benefit from the performance growth of the company and the relaxation of the industry.

With the increase of investment enthusiasm in the market after the increment of funds, the performance of the brokerage sector will be significantly improved. in addition, the individual stock opportunities of its own pure participation futures will also be gradually highlighted.

The necessity of further liberalizing Stock Index Futures Trading

China Finance, a magazine in charge of the central bank, published an article on April 9 that the improvement of the capital market system is the key to the development of direct financing, and the development of the stock index futures market is an important part of the capital market infrastructure. At present, the development demand of China's stock index futures market is urgent.

First, improve the function of price discovery. At present, China is making great efforts to develop the direct financing mechanism, in which a sound pricing mechanism, especially the risk premium pricing mechanism is indispensable. The stock index futures market through a sound intertemporal long-short mechanism to improve the price discovery function, avoid index sentiment is too high or too low, further enhance the liquidity and value of the stock market, and curb excessive speculation.

Second, the demand for risk management is rising rapidly. In recent years, social security funds, pension funds, foreign funds and other institutions medium-and long-term funds have flowed into the A-share market, and the demand for risk aversion has increased rapidly. The stock index futures market can provide the stock market with effective risk management tools, carry out flexible and low-cost hedging, and establish a mechanism that can promote the sustained and stable entry of long-term funds into the market (including quantitative funds and neutral strategy funds). Promote the institutionalization and marketization of the stock market.

Third, the competitive impact of overseas stock index futures. The Singapore Exchange has already launched FTSE A50 index futures in 2006, which is a widely used derivatives hedging tool for foreign funds. On March 11, 2019, the HKEx announced that it had signed an authorization agreement with MSCI to jointly launch MSCI China A-share stock index futures, and the pricing power of overseas funds is expected to be further enhanced. The further liberalization of China's stock index futures market will help our financial institutions to better cope with the competitive pattern of the global financial market (foreign financial institutions are increasing the layout of the domestic market), but also provide domestic institutions with more convenient and efficient professional hedging.

The Development course and International experience of Stock Index Futures

Looking back to the source, part of the reason for the opening of China's stock index futures market comes from the reflection of the 2008 financial crisis, which began in 2010. At that time, the market thought that the lack of short selling mechanism made it difficult to restrain the accumulation of bubbles and the selling pressure of shunting stocks when the market fell sharply, so the demand for the stock index futures market became stronger and stronger. On April 6, 2010, the Shanghai and Shenzhen 300 stock index futures contract was officially listed for trading, and the scale gradually increased. In 2012, restrictions were further relaxed and institutions were allowed to apply for long or short hedges. There is no such thing as only short hedging and restrictions on long hedging. On April 16, 2015, Shanghai 50 stock index futures and CSI 500 stock index futures were launched. In May 2015, CSI 300 stock index futures became the most traded stock index futures in the world.

Stock index futures have been completely restricted since the 2015 stock market crash, and liquidity has tightened sharply. In June 2015, the stock market crash broke out, and the panic in the equity market spread. Then, on June 25, 2015, there was a substantial discount in the stock index futures market. While the temporary regulatory policies of the stock market have been issued one after another, since September 2015, CICC has also comprehensively tightened the regulatory policy on stock index futures and restricted the trading of stock index futures. On September 7, 2015, when the CICC implemented the strictest restrictions on stock index futures, the trading volume of the three main contracts IF1509, IC1509 and IH1509 were all nearly 90 per cent lower than the previous day. The stock index futures market has been in the doldrums ever since.

Coincidentally, the market of stock index futures in the United States and Japan has also experienced a similar development process from public criticism to independence, which can be used for reference in the development of China's capital market. During the "911" incident and the global subprime crisis in 2008, the stock index futures market played an escort role in the spot market, diverting a lot of selling pressure from the spot market.

Let's start with the story of America. The United States first introduced stock options in 1973 and stock index futures in 1982, and then developed rapidly until the stock index futures regulatory policy was tightened when the stock market crash broke out in 1987. On October 19, 1987, the United States suffered a stock market crash. The S & P 500 fell more than 20% and the Dow Jones index fell 22.61%. On October 20, 1987, the New York Stock Exchange immediately banned index carry trading and adopted temporary regulatory measures. On the one hand, the New York Stock Exchange restricts cross-arbitrageurs of the spot market and stock index futures to use the electronic automatic order matching system (DOT) to sell automatically; on the other hand, the Chicago Mercantile Futures Exchange has suspended trading one after another to prevent the chain reaction between the stock index derivatives market and the spot market.

Subsequently, the US capital market strengthened cross-market supervision, established a cross-margin system, and upgraded the settlement and clearing system. On December 16, 1988, Chicago Stock Exchange CME launched the standard portfolio risk Analysis system (SPAN) to calculate the performance margin at the settlement member and client level, collecting dynamic margin from the portfolio of a single account. the level of margin is determined by credit level and portfolio volatility. Subsequently, American stock index futures developed rapidly and matured again by improving risk control and enriching the product line. In 1990, the nominal trading value of S & P 500 futures contracts exceeded that of spot stocks.

The development process of Japanese stock index futures market is also similar. On September 3, 1986, the Singapore Exchange took the lead in launching Nikkei 225 index futures, and the trading volume of the Japanese stock market was under pressure. In September 1988, the Osaka Stock Exchange officially listed Nikkei 225 index futures, which became active quickly after its launch, competing for the pricing power of funds.

Until the 1990s, when Japan's asset bubble burst and market panic spread. On January 4, 1990, the Nikkei 225 index fell back from its high and began to fall sharply, and the economy fell into a long-term downturn. Since August 1990, Nikkei 225 futures have been under strict control. First, the level of margin continues to improve. After four increases, the commission margin increased from the initial 9% to 30%, and the transaction margin ratio increased from the initial 6% to 25%. Second, increase transaction tax and service charges. A 0.1/10000 transaction tax will be levied on stock index futures trading, doubling transaction fees from 4 per 10,000 to 8 per 10,000. Third, reduce the quotation range and trading time of stock index futures. The quotation of stock index futures is shortened, which increases the disclosure time of the market and reduces the profit of the carry trade, while the trading time is shortened by 15 minutes in the morning and 5 minutes in the afternoon. Fourth, increase the disclosure of information and gradually disclose the situation of arbitrage transactions among members. The exchange announces the total carry trade volume of its members to the whole market every day, and announces the weekly and daily carry trade volume of the top 15 clearing members. In mid-November 1992, criticism of Nikkei 225-share futures intensified, and the market strongly called for the development of new index products. On October 8, 1993, the Singapore-based Nikkei 300 index was officially released to replace Nikkei 225 stock index futures. On February 14, 1994, trading in the Nikkei 300 stock index was officially launched. Even so, the performance of the spot stock market remains lacklustre.

It was not until November 1997 that the supervision of stock index futures was liberalized. On the one hand, restore the stock index futures operation policy before the stock market slump: reduce margin, reduce handling fees, abolish transaction tax and extend trading hours. In 1995, the Osaka Stock Exchange lowered the commission margin level of Nikkei 225-share futures from 30% to 15% and the trading margin level from 25% to 10%. Japanese regulators announced that they would no longer regulate brokers' fees; abolished the transaction tax in 1999; and resumed the original trading hours. On the other hand, optimize the margin system. The dynamically adjusted margin calculation method has been implemented since 1997, which is linked to the volatility in the last three months. In 2000, the Japanese futures market formally implemented the SPAN margin model.

Since then, Nikkei 225-share futures on the Osaka Stock Exchange have become increasingly active. The share of trading volume in global Nikkei 225-share futures has gradually increased from 40% to 80% in 2008, regaining the dominance of Nikkei 225-share futures trading.

The Future Development Direction of Stock Index Futures Market

Drawing lessons from overseas regulatory experience and the operating characteristics of the domestic capital market, the development of China's stock index futures market needs to be liberalized as soon as possible, and the trend direction will mainly focus on three aspects.

First, the normal management of stock index futures should be restored and trading restrictions should be further relaxed. That is, gradually abolish the temporary control measures and fully open the stock index futures market. On the one hand, reduce the trading costs of stock index futures, slightly relax the restrictions on the amount of speculators to open positions, reduce the margin ratio, reduce the intraday closing fees, and relax the term matching restrictions for short hedging; on the other hand, with reference to the margin collection system of CME and other large international exchanges, the SPAN model is used to dynamically adjust margin and make more targeted risk premium pricing.

Second, strengthen cross-market supervision, improve the risk control system, and increase information disclosure. Cross-market regulation. With the increasing scale of the stock index futures market, the linkage of the stock index futures market and the securities market is getting closer and closer. the cross-regulatory cooperation mechanism between the stock index futures market and the securities market can effectively manage market fluctuations. to supervise the position and trading of the two markets as a whole.

Third, enrich the product line of stock index futures and launch industry stock index futures, mini stock index futures and stock index options tools. From overseas experience, most overseas stock index futures market contracts are launched in the order of the size of constituent shares from large market value to small market value and contract value from large to small. Whether the launch of the new product and the previous product complement each other, that is, the difference in scale or constituent stocks, is the key factor of whether the follow-up can be active. The United States has the most active stock index futures market at present, and its product line is very perfect. There are corresponding stock index futures products from the SP500 index, the RUSSELL2000 index of small and medium-sized enterprises, and the NASDAQ100 index of emerging industries. At present, the products in China's stock index futures market are still relatively single. The release of small and medium-sized index, industry index and style index can better expand the extension of coverage and reduce the risk of hedging. The release of mini-stock index, reduce the original face value, can lower the threshold of investment in stock index futures, and encourage individual investors and institutional investors to better hedge risk. In addition, CICC originally expected to launch stock index options products in 2015, but due to the impact of the stock market crash, financial innovation has been suspended, while the current floor option market only has Shanghai 50ETF options, the variety and flexibility of market tools are limited, and there is still a great demand for risk management.