Issues On Commodity Futures Delivery

Since the reform of China, Chinese futures markets have experienced three stages, which are initial development, chean-up effort and standardized process. In the gradually standardized process, practical delivery as the last step in futures has everything to do with risk. practical delivery has drawn more and more attention.How to improve practical delivery so as to better carry out functions of futures markets is a important problem which needs prompt solution.Practical deliveries in futures markets, which connect futures markets and spot markets, are system guarantee for the two basic functions in futures markets-----price discovery and hedge.Practical delivery is the precondition for price discovery. Thanks for the existence of practical deliveries in the futures market, that arbitrage between futures price and spot price can come true. At the same time, the practical delivery is the precondition for hedge in futures markets.Besides the two basic functions, the practical delivery is also able to prevent market manipulation and control market corner. At the same time, a sound practical delivery system also can enhance the market's liquidity. For the Chinese market, the research on practical delivery system is also of special significance.However, in the real futures market, practical delivery cannot always guarantee convergence between spot price and the futures price in delivery month. That is to say, the practical delivery cannot always connect futures markets and spot markets efficiently. The disconnection of two markets can be easily observed, especially in the Chinese newborn commodity futures markets. As a result, based on the research in practical deliveries, it makes sense to develop spot markets, to adjust related system in futures markets, and to standardize practical deliveries, for the purpose of making the two markets relative and uniform, and ensuring the healthy development in futures markets. For Chinese futures markets, these actions are especially important in reality.According to research contents of this article, in the process of writing I mainly adopts a combination of theory and empirical methods. I mainly use a theoretical method, in recalling the history of formation and development of the futures industry, discussing the different views about the delivery, designing delivery system as well as China's current status of the existing delivery systems. Chapter 5 and 6 as part of the empirical test employs many econometric methods, such as data comparison, causality test, and statistical analysis.Based on the theoretic analysis, The paper focuses mostly on the following three aspects:In the first place, the paper analyses the theories on the delivery in futures markets. Based on the analysis, it systematizes theories on the delivery in futures markets. The effort in systematization lies in three aspects. First, it defines the important role delivery plays in the futures market, focusing mostly on explaining viewpoints about delivery, which is zero-delivery viewpoint, limited-delivery viewpoint, and free-delivery viewpoint. Based on the analysis, the paper emphasizes the importance of free-delivery and the writer'opinion on free-delivery; Second, the paper analyses the influence delivery system exerts on deliveries and delivery risk; third, the paper systematically analyses all factors which affect futures deliveries, building a integrated model to explain the factors affecting futures deliveries. This model is an important contribution for the richness and an improvement of futures delivery theories. The efforts to summarize and systematize futures delivery theories provide a theoretic basis and value judgment for following system research, empirical analysis, and policy advice.Secondly, the paper performs an empirical analysis on delivery systems of important kinds of futures, both domestic and abroad, especially domestic. This empirical analysis exploits objective facts and influencing factors, such as market efficiency, risk generating process of futures deliveries under certain Chinese delivery system. The results of empirical analysis are as follows:The copper futures which has nice spot markets, and sound delivery system, runs the best; The farm product futures is becoming better in the process of improving delivery system. As a whole, all kinds of futures delivery rate are rational, which match the developing stage of Chinese futures markets. However, many weak points in delivery system are obvious. Disconnection between futures and spot markets, improper basis, arbitrage, and futures corner events are the important causes of excessive delivery rate and high volatility in Chinese futures markets. In the third place, the paper provides a series of advices on how to improve Chinese futures delivery system, how to increase efficiency of Chinese futures transaction, and how to sufficiently bring the function of futures markets into play. The empirical analysis provides evidences for the proposition on rationalizing delivery system. There is a sound base on practical delivery, but as a result of misunderstanding, the excess pursuit for low delivery rate in system device, and the adoption of limited delivery, futures markets accumulate more and more risk. So, the free delivery is the orientation of delivery system reform. Now, releasing limitation of deliveries is coming into use in Chinese top three exchanges.The paper's innovation lies in following three aspects:first, the innovation in theoretic perspectives. based on the analysis on futures deliveries, it analyzes realization of futures function, so it will play a important role in development in futures markets and effective implement of futures markets'functions; Second, the innovation in research methods. The paper employs both econometric and statistic methods, analyzing the influence futures delivery performs on the futures pricing function, and the influence on the efficiency of futures markets. As a result, the paper provides a quantificational measurement on how much contribution the futures delivery has on the smooth running of futures markets, and also provide theoretic guidance on further perfecting delivery system; Third, the innovation of viewpoints. The paper makes practical suggestions on how to improve Chinese delivery system in futures markets. This will help the futures markets to develop smoothly and healthily.