brief introduction
The legal holder of the registered warehouse receipt shall go through the delisting procedures at the exchange.
The spot dealer delivers the goods that meet the delivery standard to the delivery warehouse of the exchange. After the delivery warehouse is qualified, it will issue a standard warehouse receipt to the holder, who will go through the registration formalities with the delivery department of the exchange. Only registered warehouse receipts can be delivered, and the total quantity is the inventory quantity announced by the exchange. ?
The registered warehouse receipt can also be cancelled, but at this time, the goods marked by the warehouse receipt may not have left the warehouse, and may still be in the delivery inventory. ?
When the contract is delivered in a certain month, some warehouse receipts will be cancelled for delivery, because some warehouse receipts will enter the spot market for each delivery. ?
But sometimes, in order to influence the price, the makers (or the main holders of warehouse receipts) who participate in futures trading will change the inventory quantity announced by the exchange by registering or canceling warehouse receipts.
Practical example
For example, when the main force wants the price to rise, a large number of registered warehouse receipts are cancelled, which leads to the shortage of deliverable goods, which leads to traders' expectation of future prices, but in fact, deliverable goods have not decreased and are still stored in the warehouse. When the main force wants the price to fall, they will re-register the warehouse receipt, which will lead to the increase of goods, which will lead to the fall of futures prices. ?
It is worth noting that the cancellation of warehouse receipts is also one of the important tools for the makers (or the main holders of warehouse receipts) involved in futures trading to manipulate the futures price trend. They mainly change the inventory quantity announced by the exchange by registering and canceling warehouse receipts. ?
Futures trading is a zero-sum game, and mainstream funds make more use of psychological opposition in technical operation. Generally speaking, the increase in inventory will be transmitted to the market sentiment of falling prices. ?
However, the rise of LME copper price at the end of July 2005 was completed against the background of increasing inventory. At that time, the State Reserve announced that it would sell copper stocks one after another, Shanghai warehouse receipts increased substantially, and the price of "diamonds" reversed the bearish pattern. However, the main force once again moved against the market psychology, guiding speculative funds to follow up and pushing the price to a new high. ?
In the use of warehouse receipt cancellation, mainstream funds are more handy. It is widely rumored in the market that this large fund entered the commodity market in 2002, and by 2005, its scale had reached $65,438 +0.5 trillion, and most of LME's inventory belonged to this powerful institution. ?
In the callback of Lyme Copper in September, 2005, the warehouse receipt was cancelled to be below 3,000 tons, giving the public the illusion that "the bulls are already poor". With the price falling, the falling pattern has become very obvious. Unexpectedly, when the price soared from $3,490, the cancellation of warehouse receipts began to increase to nearly 20,000 tons. The continuous delivery of warehouse receipts made the total inventory drop, which made the price rise again. In this way, the main funds use the illusion of inventory reduction to "fool" retail investors, and the rapid rise of copper prices has caused heavy losses to short-selling funds. ?
References:
Baidu Encyclopedia-Cancel Warehouse Receipt