The main difference between China's price limit system and foreign countries is that after the stock price reaches the price limit, it does not completely stop trading, but the trading within the price limit or within the price limit can continue until the close of the day.
1. The price limit system originated from the early foreign securities market. It is a trading system that appropriately limits the fluctuation range of the price of each stock on the same day in order to prevent the trading price from soaring and plunging, and to curb excessive speculation in the securities market, that is, it stipulates that the maximum fluctuation range of the trading price in a trading day is a few percent above and below the closing price of the previous trading day, and trading will be stopped after exceeding it.
2. The price limit refers to the situation that a futures contract only has a buy (sell) declaration with a stop-loss price within 5 minutes before the closing of a trading day, and there is no sell (buy) declaration with a stop-loss price, or a transaction is made as soon as a sell (buy) declaration is made, but no stop-loss price is set.
3. Under the price limit system, the settlement price of the previous trading day plus the maximum allowable increase constitutes the upper limit of the price increase of the day, which is called the daily limit; The settlement price of the previous trading day MINUS the maximum allowable decline constitutes the lower limit of the price decline, which is called the daily limit.
Four, the determination of the price limit, mainly depends on the frequency and amplitude of the spot market price fluctuation of the commodity. Generally speaking, the more frequent and violent the price fluctuation of a commodity, the greater the daily stop loss of the commodity futures contract; On the contrary, it is smaller.
5. The establishment of the price limit system is because the daily settlement system can only control the risk within one trading day. If the futures price fluctuates violently during the trading day, it may still cause large-scale losses or even overdrafts in the margin accounts of members and customers, and it will be difficult for futures exchanges to guarantee the performance of contracts and control risks.