SPI FUTURES MARKET ACTS AS A MARKET$-$MAKER FACILITATING PRICE DISCOVERY IN THE S&P$/$ASX $200$ INDEXEach morning on the news, the market report contains information about the SPI futures price. As you know from reading this chapter, this is the futures contract on the S&P$/$ASX $200$ Index. It is the contract that facilitates speculation and hedging over the broad portfolio of $200$ stocks that make up the index. The purpose of mentioning the SPI futures price on the news each morning is to give some indication of the direction in which the S&P$/$ASX $200$ Index may move when the market opens. The S&P futures market acts as a market$-$maker for the S&P$/$ASX $200$ Index, facilitating price discovery. For instance, the price of the SPI futures index today is indicative of tomorrow's opening index value $($Lepone & Yang, $2013).$ Since futures trading takes place around the clock, relevant events that occur after the markets close in Australia $($such as movements in the American markets$)$ will be reflected in the SPI futures price. If the SPI futures price is trading at a discount to the previous closing value of the S&P$/$ASX $200$ Index, the index value is expected to fall when the markets open and vice versa.This is pretty good. An indication of where the markets will be heading when they open at $10$ am Sydney time. And it is an accurate indicator about $60\mathrm{.}00$ per cent of the time $($Commins$,2017).$ In October $2017,$ however, the Sydney Morning Herald ran a story with the headline, 'The Australian dollar could be behind why the futures can't pick the ASX'. The story was referring to the fact that the futures market and the stock market had become disconnected during September and October of that year. In fact, prediction accuracy had fallen by a third to around $40\mathrm{.}00$ per cent. The explanation, according to the traders interviewed for the article, can be found in the short selling behaviour of overseas hedge funds. Sensing weakness in the Australian dollar, the hedge funds were short selling both the Aussie dollar and the top $20$ Aussie stocks. This unusually high amount of short selling could lead to weakness in the S&P$/$ASX $200$ that was not reflected in the SPI futures contract value on any given dayWhy is the SPI futures contract an indicator of the expected movements in the S&P$/$ASX $200?$