The Effect Of Stock Index Futures On Spot Market Liquidity

In finance, a stock market index future is a cash-settled futures contract on the value of a particular stock market index. The first index future was launched in the U.S. in February1982. Now index futures has developed for three decades. The stock market index futures has become an important part of the capital markets.HS300index futures was launched in April16,2010, which has great significance on Chinese capital market. HS300index futures provides a hedge tool to avoid systemic risk of the spot market. As the result, investors will be attracted to enter the index future market for risk-averse.In this paper, we analyze the relationship between the index futures and spot market. Base on general rules and basic theory of development of the index futures, we study the impact of spot market liquidity on the launch of HS300index futures. We use the empirical analyze and get the conclusion that:the launch of HS300index futures reduce the liquidity of spot market, and also, it increase the volatility of spot market liquidity.