Research On The Relationship Between Chinese And American Cotton Futures Markets

Cotton is a major agricultural products of the world market, cotton futures is extremely profound on the cotton industry. When the global market did not have the cotton futures, cotton prices often frequently fluctuated by the sudden factors, it is not conducive to the normal production and operation of cotton enterprises, more over, it is not conducive to the stability and development of the global cotton market. In recent years, with the continuous mature and the development of the cotton futures market, participants paid more attention to the futures price on the New York ICE cotton futures market and China Zhengzhou cotton futures market. With the production and demand of cotton increasing, Chinese participants of cotton futures market researched more deeply and detailed on the relationship between spot price and cotton futures prices, Chinese market and American market, investor behaviors, price discovery and Hedging of futures market.Based on the above background, this paper chooses the Chinese and American cotton futures markets as the researching object, through the comparison of the volume, turnover rate, holdings, prices changes, contract designing, structure of investors, using correlation analysis, co-integration test, Grainger causality test to analysis characteristics, differences and contacts between two markets.The results show that:there are bidirectional relationship between Chinese and American cotton futures markets, but American market is more significant than Chinese market; America cotton futures market has the leading position in the function of price discovery; there is a long-term equilibrium relationship between the Chinese and American cotton futures prices, but the Chinese cotton futures market is easy to promoted by the speculative funds, running Irrational in a short period of time. In recent years, Chinese cotton futures market had been beyond American in the size of the transaction, but the stability and function of futures market still need to be improved, American cotton futures market was still the most powerful market in the pricing right. The above results explain the inherent characteristics and market efficiency of Chinese and American cotton futures market, so we put forward three policy suggestions. First of all, Chinese cotton futures market needs to improved contract designing, deposit management and trading time selection, so we can deepen the cooperation with international cotton futures market; Secondly, Chinese cotton futures market needs to improve the regulatory system, credit rating system and, structure of investors and strengthen efficiency of cotton futures market; Finally, China should accelerate the development of financial derivatives market, and establish a complete system of financial with futures and options, it will help the development of the cotton industry effectively.