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, the futures trading is subject to the margin system, and each transaction must pay a certain percentage of the margin. When the market changes unfavorably, that is, when the market changes reversely, and the delivery month enters, members or customers should also add margin according to the trading rules and the contract. 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.
Members or customers violate the trading rules of the exchange, and the trading ownership violates the trading rules and forcibly closes positions, mainly including: exceeding positions in violation of position restrictions; Failing to report or making a false report in violation of the large household reporting system; Acting as an agent for futures business for those who are prohibited from entering the market; Brokerage companies engage in self-operated business; Manipulate the market together; Other violations that require compulsory liquidation.
(3) Closing positions under special market conditions.
In case of daily limit or daily limit for several consecutive days, the futures exchange may, for the purpose of risk control, carry out compulsory bilateral liquidation, and pair long positions with short positions to close positions. This is to avoid systemic risks in the entire futures market. Usually, the positions of speculative accounts are matched first, and then the positions of hedging and arbitrage accounts are matched.