There are many reasons for compulsory liquidation in futures trading, such as customers' failure to add trading margin in time, violation of trading position restrictions and other irregularities, temporary changes in policies or trading rules, etc. In the standardized futures market, it is most common that customers are forced to close their positions because of insufficient trading margin. Specifically, it refers to the behavior that a futures company forcibly closes some or all of its customers' positions in order to avoid losses. When the trading margin required by the customer's position contract is insufficient, the futures company fails to add the corresponding margin in time according to the futures company's notice or actively reduce the position, and the market situation is still developing in an unfavorable direction, the obtained funds are used to fill the margin gap.

Rules of compulsory liquidation system:

The exchange implements a compulsory liquidation system. If the investor violates the rules, overstocks, fails to add the margin in time, or other circumstances stipulated by the exchange, the transaction owner shall take measures to force the investor to close the position.

In case of any of the following circumstances, members will forcibly close their positions:

(1) The trading system measures investors' risks with "investor risk rate". When the investor's account risk rate is less than 100%, the investor's trading margin is insufficient, and additional trading margin is needed, otherwise the investor can only reduce the number of positions until the investor's account risk rate is equal to or greater than100%; When the risk rate of investors' accounts is lower than 50%, members will forcibly close all the remaining positions of investors.

(2) Being punished by the exchange for compulsory liquidation due to violation of regulations.

(3) Forced liquidation is required according to the emergency measures of the Exchange.

(four) other circumstances that should be forced to close the position.

Members should strictly implement the above risk control measures, supervise the ownership of transactions, and directly implement them when necessary.

Related calculation formula:

Investor risk rate = investor's equity ÷ trading margin occupied by positions.

The forced liquidation price shall be executed according to the first quotation that can be closed after reaching the forced liquidation standard.

If the forced liquidation cannot be carried out due to market reasons, price reasons or other reasons, or the remaining funds after the execution cannot cover the losses caused by the forced liquidation, which exceeds the losses calculated according to the risk rate, the remaining funds of the investor shall bear the losses until the liquidation is completed; If the investor's funds are insufficient to repay, it shall be borne by the investor's member first, and then the member shall recover from the investor.

Execution procedures for compulsory liquidation:

(1) When the risk rate of investors reaches or falls below 100%, the trading system will automatically issue a notice of additional margin;

(2) When the risk rate of investors reaches or falls below 50%, the trading system will automatically force investors to close their positions.

Compulsory liquidation case extraction