What Makes a Successful Futures Contract?: Case of China's Stock Index Futures

China's stock index futures contract, known as the Hushen 300 Index futures, was launched just over three years ago on April 16, 2010. It has developed into one of China's most successful futures contracts in terms of trading volume, despite the declining underlying stock market. This study investigates the root causes of its success. The most important contributing factors are the difficulty in margin trading and short selling of the underlying stock market index, the continual loosening of regulations, and the improved futures contract's price-discovery functions. Although the spot market seems to have led the price-discovery process over the entire period, there have recently been significant improvements in the futures market's price-discovery functions and cross-market information flows.