The so-called compulsory liquidation system refers to a compulsory risk control measure for the exchange to liquidate the positions of members and investors according to relevant regulations. Specifically, it refers to the exchange's compulsory hedging of the positions of members and investors in order to close some or all positions under special circumstances. The implementation of the compulsory liquidation system can stop the expansion and spread of risks in time.

The Administrative Measures for Risk Control of China Financial Futures Exchange (Draft for Comment) stipulates that compulsory liquidation will occur in the following five situations: (1) The balance of member settlement reserve is less than zero, and it has not been replenished within the prescribed time limit; (2) The position exceeds the position limit standard and fails to close the position within the prescribed time limit; (3) Being punished by CICC for compulsory liquidation due to violation of regulations; (4) According to the emergency measures of CICC, the liquidation should be forced; (5) Other positions should be closed by force.

In actual transactions, ordinary investors are most likely to be forced to close their positions because of the first situation, that is, due to reverse price fluctuations or the exchange's increase in the margin collection ratio, investors' margin is insufficient, which leads to forced liquidation. The trigger conditions of this system are specified in the futures brokerage contract signed by investors and futures companies.