At present, there are more than 30 kinds of commodities in the domestic futures market, which provide enterprises with tools to manage risks in the time dimension of production cycle, but at the same time there are still management gaps in the price dimension, and option products can just make up for them. The introduction of options will contribute to the establishment of a comprehensive price management system in China's real economy.
Options promote industrial scale
Taking agricultural production as an example, agricultural products are highly substitutable and competitive. Under the given planting area and production level, the price of products directly guides the decision-making of producers. Once the sowing decision is made, it is difficult to adjust the planting structure at any time, which largely leads to a more obvious periodicity in the supply and price of such commodities.
In order to get closer to the real demand, financiers have designed options, a new risk management tool, which can not only enable farmers to gain the benefits of rising agricultural product prices, but also avoid the risk of price fluctuations. Farmers' use of option products is equivalent to insuring their crops. It is precisely because option products have the financial characteristics of separation of rights and obligations that it is possible to "protect and forget", which reduces the difficulty of agricultural hedging to a certain extent and makes it easier for agricultural producers to manage price risks.
Unlike China, where the minimum purchase price of some agricultural products is determined by the state in the annual harvest season, in the early years of the birth of option products, the US government subsidized farmers a lot with options as the target. In this way, producers can comprehensively use futures and options products to lock in the price in advance (under the condition of deciding the planting intention), and sell the products calmly in the receiving season, which is helpful to stabilize production and resolve the impact brought by huge price fluctuations. At present, with the help of futures and option products in the United States, American farmers have obtained very stable income at the micro level; From a macro point of view, the United States has become an important agricultural product trading center in the world, won the position of the global agricultural product pricing center, and became a financial empire after the agricultural power. In such a global pricing system, American farmers have all the advantages.
China's agriculture is mainly a small-scale production mode of one household, which is not conducive to increasing farmers' income and ensuring the stability of national grain production. For China, a big agricultural country, it is of great significance to launch appropriate financial products to help farmers effectively manage price risks and obtain stable income. At present, China needs to solve the risk of price fluctuation through various financial means, and the introduction of option products will be beneficial to the design of agricultural insurance products. Insurance companies need more diversified channels to resolve risks. Through the innovation of financial products, we can effectively reduce the production price risk of agriculture, effectively implement the slogan of "agriculture, rural areas and farmers" by means of real marketization, help farmers increase their income steadily, and improve the scale and efficiency of production. At the same time, it will help to promote the effective matching between the financial market and the real economy, resolve the risk of the transfer of the real business, and help China to upgrade from a big producer and consumer country to a commodity pricing center.
At present, China's industrial chain is relatively complete, covering a wide and deep range from the demand for bulk basic raw materials, primary processing to deep processing. When choosing the subject matter of options, we need to fully consider the physical industry scale and market participation of such futures. You can choose to participate in the variety priority listing option with good foundation in the futures market.
Give priority to the development of stock index options
At present, there is no corresponding short-selling mechanism for ETF products in China, and there are technical problems in the creation of such option products. Judging from the current system and corresponding rules of individual stock trading, this kind of option products will be limited by the scale of future securities lending to a certain extent. The successful listing of stock index futures has successfully introduced a short-selling mechanism for China capital market, which helps option participants to find and meet the risk management needs of option positions at a more reasonable price.
The existing products of institutional investors represented by funds and insurance in the financial field are seriously homogenized. The application of option products can help institutions design more diversified products, meet the needs of different groups for financial products under the premise of more effective risk management, broaden investment channels, help funds enter the direct financing market, and resolve financial risks with excessive indirect financing ratio.
Establish a market where bidding and market makers coexist.
In order to adapt to the characteristics of many option contracts, inactive market transactions, difficult to effectively match transactions and complex pricing, some institutions can be considered to provide continuous quotations for option products in the market to ensure market liquidity. At the beginning of any market design, we need to consider two aspects: market participation and product price rationality, which fully reflect the effectiveness of the market.
Judging from the current trading situation in the futures market, the liquidity of different varieties varies greatly. Even for star varieties, the activity varies greatly in different months. The phenomenon of light trading in a single month is not conducive to customers in the physical industry to hedge their own production cycle needs. Because of the particularity of option product design, there may be dozens or even more listed contracts in the same month, and the liquidity will face a greater test. The introduction of market maker system will help investors avoid liquidity risk, have more confidence to participate in the market, and improve the recognition and participation of options. In the process of quotation, market makers focus on the management of inventory. Market makers often use futures to hedge risks, rather than the opposite option positions, which helps to promote the liquidity of futures in different months.
Bidding system is allowed in the market, and market makers do not have monopoly advantage. In this market, the bid-ask spread is small, and the profit that market makers can get from the spread is very small, which is conducive to reducing the transaction cost of investors as a whole. In the market where the bidding system and the market maker system coexist, the counterparty of the market maker is the whole market participant, so reasonable pricing is the key factor to be considered, and relatively rational participants contribute to the stability of the market.
In the introduction of market makers, it is suggested to adopt the principle of openness, that is, the number and quota of market makers should be fixed in advance without restricting specific institutions. Institutions (including individuals) with strong technical and financial strength can participate in market making as long as they can fulfill the market-making obligations stipulated by the exchange. Institutions and individuals should be given equal opportunities to participate in the market.
At present, there is no real capital gains tax in China's tax system, which is very different from the American market. Therefore, individual investors have certain advantages over institutions in the tax expenditure of investment. In the future, the proportion of professional individual investors in the market will gradually increase, especially in the futures market, investors will be relatively more professional, the scale of assets held will be further expanded, the investment concept will be deepened year by year, and the use and level of corresponding financial derivatives will also be improved year by year. It is suggested that individual investors with capital and technology be allowed to participate in market making.
Capital occupation and inventory management
In order to establish a healthy ecological environment for the whole derivatives market, the existence of liquidity providers is very necessary. The principle of market construction should not only prevent abnormal competition caused by monopoly and information asymmetry, but also promote the healthy and sustainable development of such institutions. Therefore, in a certain assessment period, we can consider ranking the trading volume of a single account and giving preferential treatment to the top traders.
Large investors have inherent advantages in capital and equipment. Compared with ordinary investors, such investors can use resources and technical input to ensure faster transactions at faster speed and price.
At present, all exchanges are emphasizing the fairness of the market and protecting the interests of small and medium investors. But at present, the principle of transaction matching is time first and price first. If there are institutions similar to market makers in the future options market, the possibility of mutual trading between market makers will greatly increase, and it will be difficult for investors who really need to open positions in the market to obtain good prices without speed advantage. In the future, the principle of handling large orders should be added when determining trading orders, and a mechanism of giving priority to handling small orders under the same circumstances should be established. In the design of the basic trading system, attention should be paid to protecting the interests of small and medium investors.
The experience of American market shows that system is the bottleneck of the development of option trading. The trading system in the United States must support three times the current trading volume to be reliable. It is suggested that the exchange should give priority to improving its ability to handle a large amount of data. In the initial stage of the options market, it is necessary to fully consider the big data processing capabilities necessary for a large number of exchanges in the future market. In addition, we must ensure the security, reliability and stability of key IT technology fields, especially in liquidation. A good credit foundation of the exchange is the premise of trading. The exchange is the central counterparty of all market participants, and the security (effectively resisting external attacks) and accuracy of its trading data are the necessary guarantee for the smooth completion of the transaction. Futures companies need large-scale technical transformation and upgrading to participate in the option market. At present, the financial strength of China's futures companies is relatively weak, and it will lead to greater financial pressure on member units to cope with a large amount of capital investment in a short time. It is suggested that the exchange provide financial and technical support to futures companies in the early stage of option preparation and listing.
Upgrade software and hardware to meet the option era.
Option settlement is an important guarantee for the normal operation of the option market. American option market is the most innovative market in the world, one of the reasons is that it benefits from a unified clearing system. The clearing business of American option market is under the unified responsibility of OCC. The clearing of the US futures market is completed by the exchange itself, and the trading positions are not interchangeable. To buy (sell) futures contracts on the exchange, you must close your position. Because the underlying assets of options can be individual stocks, stock indexes, foreign exchange, commodities, futures contracts, volatility and so on. The exercise of the option holder will involve the sale of individual stocks. If the stock exchange and options exchange realize unified liquidation, it will be more convenient to exercise option rights and save costs for investors. For futures companies, unified liquidation can improve the utilization rate of funds. For the transaction clearing institution, it can concentrate the advantages of capital and talents and strengthen the central clearing investment, which is conducive to further improving the clearing efficiency and ensuring the settlement safety. Establishing a unified central clearing institution can form a win-win situation.
At present, the system backup ability of China's futures companies has been significantly improved. All companies can back up daily trading data, and most companies store data in different places. The online information protection measures of futures companies are gradually improving. 98% companies have taken strict isolation measures to protect the security of core trading systems, and all futures companies have formulated emergency plans for information system security.
Futures companies need to further strengthen technological transformation, focusing on risk process management, effective implementation of rules and regulations, and focusing on market cultivation and improving customer experience. In the transformation of futures companies, it is urgent to improve the system's ability to process data. The nonlinearity of option returns and the complexity of portfolio trading strategy pose new challenges to the risk control department. How to formulate the liquidation instruction under the premise of effectively controlling risks, formulate the differentiated margin collection principle for different varieties, and combine the preferential margin scheme for positions are all concrete manifestations of future futures companies to improve their competitiveness, which requires futures companies to make the management and control system after the typhoon more convenient and humanized while seriously studying.
In addition, the vitality of futures companies comes from the market, and options are brand-new tools. How to make investors accept and make good use of option products not only needs large-scale popularization, but also needs to improve customer experience.