Effects of innovative futures contracts on spot markets in Taiwan

The Taiwan Futures Exchange (TAIFEX) was established in 1998 as an emerging futures market. Since introducing its first product, namely TAIEX Futures, on July 21, 1998, in response to high market demand, to date the Exchange offers 12 innovative futures contracts. The extent to which index futures influence the share market has attracted considerable attention within the field of finance. However, empirical findings remain contentious, warranting a closer examination of this topic. This study examines both 100 and 250 days before and following of GreTai Securities Market Stock Index Futures and NonFinance NonElectronics Sub-Index Futures trading on 8 November 2007 affecting spot share price volatility. Empirical findings indicate that volatility of spot market returns differ significantly after the two index futures contracts began trading on the market.