(1) The price limit can restrain the overreaction of the market. The establishment of the price limit board can slow down and restrain the impact of unexpected events and excessive speculation on futures prices, give the market a certain time to fully resolve the impact of these factors on the market and maintain the normal market order.
(2) The price limit system is helpful to reduce the credit risk when traders face adverse price changes. If the price limit is not set, when the market price fluctuates greatly, the loss of investors' positions may greatly exceed the amount in their margin accounts, and some investors may default or abandon their positions.
(3) From the historical experience, setting up a price limit board in the early stage of market development can effectively maintain the healthy and normal operation of the market. Judging from the early establishment of the national debt futures market in the United States, CME's national debt futures products such as T.bond and T.bill in the United States once had a price limit system, which was cancelled in 2002. In order to effectively control risks, China's national debt futures market should set up a price limit system.
It is worth noting that the calculation method of the price limit is to replace the closing price with the settlement price of the previous day as the comparison standard, because the settlement price is based on the weighted average price of the last hour, which is more stable, difficult to manipulate and relatively fairer. The closing price is the price of the last transaction and is easily manipulated.