Forced liquidation is also called forced liquidation, and it is also called being cut/cut/exploded. According to the different subjects of compulsory liquidation, compulsory liquidation can be divided into exchange compulsory liquidation and brokerage compulsory liquidation.
According to the different reasons of forced liquidation, forced liquidation can be divided into the following categories:
1. Forced liquidation due to failure to fulfill the obligation of additional margin. According to the rules of the Exchange, a margin system is implemented for futures trading, and a certain percentage of margin must be paid for each transaction. When the market changes unfavorably, that is, when the market reverses and changes in the opposite direction, members or customers should also add margin according to the trading rules and the contract when entering the delivery month. If the member or customer fails to fulfill the obligation of additional margin within the specified time, the trading ownership will forcibly close the position held by the member or brokerage company.
2. Forced liquidation due to violation of regulations. If a member or customer violates the trading rules of the exchange, the trading ownership will be forced to close the position and violate the trading rules. It mainly includes: exceeding positions in violation of position restrictions; Failing to report or making a false report in violation of the large household reporting system; Carry out futures business for those who are prohibited from entering the market; Brokerage companies engage in self-operated business; Manipulate the market together; And other violations that require compulsory liquidation.
3. Forced liquidation due to temporary changes in policies or trading rules. This often happens in previous years, and trading rules are often modified because of the temporary regulations of policies or regulatory authorities, or can not be implemented normally for the time being.
The compulsory liquidation right of the exchange means that when the spread loss between the open contract held by the customer and the current transaction settlement price exceeds a certain proportion, and the customer fails to pay the additional margin within the prescribed time limit, the futures brokerage company has the right to compulsory liquidation of the customer's hand contract, so as to reduce the margin level and risk and ensure that the customer is free from greater economic losses, and the consequences of compulsory liquidation shall be borne by the customer.
The forced liquidation of customers by futures companies refers to the forced liquidation of customers due to insufficient funds and backlog.
For example, if you originally bought 100 lots of soybeans, the margin ratio was 10%, and the position occupied 300,000 yuan. Because of the drastic changes in the market, the exchange increased the margin ratio to 15%, and 300,000 yuan can only maintain 80 lots of positions, so either additional funds will continue to maintain the position of 100, or the futures company will close 20 lots of soybeans.