When the trading margin of exchange members or customers is insufficient and not replenished within the specified time, or when the positions of members or customers exceed the specified limit, or when members or customers violate the rules, the exchange will forcibly close the open positions held by them to prevent the risk from further expanding. This is the compulsory liquidation system, which is a risk management system that cooperates with the position restriction system and the price limit system. Why should futures be forced to close their positions? How to deal with it?

Why should futures be forced to close their positions?

The Administrative Measures for Risk Control of China Financial Futures Exchange stipulates that compulsory liquidation will occur in the following five situations:

1 The balance of the member's settlement reserve fund 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 that should be closed by force.

Treatment of forced liquidation:

1 When the balance of the member's settlement reserve fund is less than zero, the forced liquidation that is not replenished within the specified time can be divided into three situations:

First, when only the proprietary account defaults, the proprietary account shall be closed in the order of the total contract positions. If the settlement reserve is still less than zero after the forced liquidation, the investors in their agency accounts will be moved;

Second, when only the brokerage account defaults, it will be compensated by the balance of settlement reserve and the liquidation amount of the self-operated account, and then the position in the brokerage account will be leveled according to certain principles;

Third, when both the proprietary account and the brokerage account default, the order of forced liquidation is proprietary account first, then brokerage account. If the settlement reserve is greater than zero after forcibly closing the brokerage account position, investors will be passive.

2. Forced liquidation of positions exceeding the position limit:

In this case, when there is only one member, the self-operated account should be closed first, and then the brokerage account should be closed. For positions in brokerage accounts, the number of positions closed by relevant investors shall be determined according to the ratio of the number of members exceeding positions to the number of positions held by members;

When there are multiple members in this situation, members with a large number of backlogs are preferred as the object of forced liquidation. Investors overstock, forcibly liquidate their positions; If an investor holds positions in multiple members, the member shall be selected for compulsory liquidation according to the order of the number of positions from large to small. If both members and investors exceed positions at the same time, the investors who exceed positions shall be closed first, and then the positions shall be closed according to the method of members exceeding positions.