The combination of price limit system and margin system plays a very important role in ensuring the operation of futures market, stabilizing the order of futures market and giving full play to the function of futures money field.
(1) The price limit system creates necessary conditions for the daily risk control of exchanges, member units and customers. The price limit locks the maximum floating profit and loss and liquidation profit that customers and member units may add each trading day, providing an objective and accurate basis for the exchanges and member units to set the initial margin level and maintain the margin level. So that the margin system of futures trading can be effectively implemented. Under normal circumstances, the margin charged by the futures exchange to its members is greater than the amount of losses that may occur within the fluctuation range, so as to ensure that the futures price will not be overdrawn when it reaches the upper limit of fluctuation.
(2) The implementation of the price limit system can effectively slow down and restrain the impact of unexpected events and excessive speculation on futures prices, and stabilize the market within a certain period of time, so as to fully resolve the impact of these factors on the market, prevent the price from soaring and plunging, and maintain the normal market order.
(3) The price limit system makes the futures price run on a more rational track and makes the futures market play a better role in price discovery. The interaction between market supply and demand and price inquiry should be a gradual process, but futures prices are sometimes too sensitive to market signals and news. By implementing the price limit system, the realization time of futures fluctuation range can be delayed, so as to better play the price discovery function of futures market. In the actual trading process, when one trading day closes at the daily limit, the price orange volatility of the next trading day tends to shrink or even reverse, which fully illustrates the above functions of the daily limit system.
(4) When there are abnormal phenomena such as excessive speculation and market manipulation, adjusting the range of price limit often becomes an important means for the exchange to control risks. For example, when there is a unilateral market with no continuous trading volume in the delivery month, the price limit can be reduced by appropriately reducing the range of the price limit, so as to control the losses of exchanges, member units and traders in a relatively small range.