Position limit for the CSI 300 stock index futures market

Lijian Wei, Wei Zhang, Xiong Xiong and Lei Shi ()

Economic Systems, 2015, vol. 39, issue 3, 369-389

Abstract: The aim of this study was to find the optimal position limit for the Chinese stock index (CSI) 300 futures market. A low position limit helps to prevent price manipulations in the spot market, and thus keeps the magnitude of instantaneous price changes within the tolerance range of policymakers. However, setting a position limit that is too low may also have negative effects on market quality. We propose an artificial limit order market with heterogeneous interacting agents to examine the impact of different levels of position limits on market quality, measured as liquidity, return volatility, efficiency of information dissemination, and trading welfare. The simulation model is based on realistic trading mechanisms, investor structure, and order submission behavior observed in the CSI 300 futures market.

Keywords: Position limit; Stock index futures; Agent-based modeling; Market quality (search for similar items in EconPapers)
JEL-codes: C63 D44 G14 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:39:y:2015:i:3:p:369-389

DOI: 10.1016/j.ecosys.2015.01.003

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