This study examines the price discovery patterns in the three BRICS countries’ stock index futures markets that were launched after 2000 – China, India, and Russia. We detect two structural breaks in these three futures price series and their underlying spot price series, and use them to form subsamples. Employing a Vector Error Correction Model (VECM) and the Hasbrouck (1995) test, we find the price discovery function of stock index futures markets generally improves over time in China and India, but declines in Russia. A closer examination not only confirms the findings of Yang et al. (2012) and Hou and Li (2013) regarding price discovery in China’s stock index markets, but also reveals the inconsistency of futures’ leading role in the price discovery process. Further, we find some evidence of day-of-the-week effects in earlier part of the sample in China, but not in India or Russia. And our GARCH model results show bidirectional volatility spillover between futures and spot in China and India, but only unidirectional in Russia.

This paper studies the presence of informed trading in Taiwan stock index options (TXO) and analyzes the informational role of foreign institutions in incorporating information into Taiwan stock index futures (TX). We have found that only the option-induced part (OOI) of the total TX order imbalance can predict future TX prices, and the OOI calculated from open-buy TXO, defined by Ni et al. (2008), provides incremental predictability. This finding shows that the price predictability stems from the information flow resulting from option transactions rather than from liquidity pressure. We conclude further that option transactions from foreign institutions provide the most significant predictability, out-of-the-money option transactions in particular. These empirical results show that option transactions conducted by foreign institutions have played the primary role in conveying the information inherent in the TXO market to the TX market, foreign institutions being delta-informed traders. Retail investors, the major players in both the TXO and TX markets, have done almost nothing of significance with regard to TXO information transmission into the TX market, with the exception of some near-the-money and out-of-the-money options.

This paper studies the magnet effect of market-wide circuit breakers and examines its possible forms using high-frequency data from the Chinese stock index futures market. Unlike previous studies that mainly analyzed the price trend and volatility, this paper is the first to consider the intraday price jump behavior in studying the magnet effect. We find that when a market-wide trading halt is imminent, the probability of a price decrease and the level of market volatility remain stable. However, the conditional probability of observing a price jump increases significantly, leading to a higher possibility of triggering market-wide circuit breakers, which is in support of the magnet effect hypothesis. In addition, we find a significant increase in liquidity demand and insignificant change in liquidity supply ahead of a market-wide trading halt, suggesting that the deterioration of market liquidity may play an important role in explaining the magnet effect.

As the launch of the China’s first stock index futures (SIF) approaches with no exact date for its eventual introduction. The Chinese stock market has increased dramatically due to this expectation recently, especially the futures contracts related stocks have raised significantly which are good examples of this influence. As the stock index futures is a new financial product, Chinese investors cannot help wondering whether the launch of the stock index future will have a positive or negative impact upon the underlying stock market. On the other hand, the new instruments which, will be followed by the introduction of other derivatives, will require broker-dealers to upgrade their systems and invest in new technology. Therefore, it has become pertinent to investigate the opportunities and challenges this eagerly awaited derivative instrument has to offer to fund managers in the booming Chinese economy.