How to control the risk of stock index futures market
From the risk events of foreign stock index futures, such as 1987 international stock market crash, 1995 baling incident, 1998 Hong Kong defense war, it is very important to establish and improve the risk management system of stock index futures market.
A stock index futures risk characteristics and types
The risk of stock index futures market is large, involving a wide range, with the characteristics of amplification, complexity and prevention. The risk causes of stock index futures mainly include frequent fluctuation of stock index, leverage effect of margin trading, irrational speculation and imperfect market mechanism. The risk types of stock index futures are complex, which can be divided into uncontrollable risk and controllable risk from the perspective of whether the risk is controllable or not. From the perspective of trading links, it can be divided into agency risk, liquidity risk, leveling risk and delivery risk; Risks can be divided into exchange risk, brokerage risk, customer risk and government risk, while financial risks faced by investors can be divided into credit risk, market risk, liquidity risk, operational risk and legal risk. Below we focus on the risk management of stock index futures from the perspective of uncontrollable risk and controllable risk.
Second, the prevention of uncontrollable risks in stock index futures.
Uncontrollable risk means that the generation and formation of risk is not controlled by the risk taker. This kind of risk generally comes from outside the stock index futures market and may have an impact on market-related subjects.
(1) Classification and causes of uncontrollable risks:
Uncontrollable risks include two kinds: one is the risk of macro-environmental changes. This kind of risk is produced by affecting other financial markets and then the stock index futures market. Specifically, it can be divided into the risks caused by force majeure, the impact of international hot money and the risks caused by political, economic and social factors. The changes of these factors will affect investors' reasonable expectations of prices, especially the occurrence of sudden or accidental events, which will bring great risks. The other is policy risk. Whether the policies affecting the stock index futures market are reasonable or not depends largely on the managers' understanding and experience of the market. Such as unreasonable policies, frequent policy changes or lack of transparency in policy release. , may directly or indirectly affect the relevant subjects of the futures market to varying degrees, resulting in unpredictable losses, and then lead to risks.
(b) Preventing uncontrollable risks
Although there may be uncontrollable risks in the stock index futures market, its root lies outside the futures market. Only by fundamentally improving the national economic situation, perfecting the market structure and legal system, especially the financial system, and adopting correct policy guidance can we prevent it. So, are we completely helpless about the risks brought by such problems? A series of risk control systems and measures in the futures market still play a certain role in preventing and controlling such risks. In addition, once this risk breaks out, the exchange can take a series of emergency measures to control the risk according to the handling methods of abnormal situations in the trading rules, such as suspending trading, closing positions within a time limit, raising the margin and adjusting the price limit. It is also necessary for the government to intervene in a timely and appropriate manner when the market faces major risks that it cannot resist.
The moderate intervention of the government mainly includes policy guidance, revision of laws and regulations, and investment in the market to save the market. In this regard, we can learn from the experience of the Hong Kong government's intervention in the stock index futures market in the 1987 stock market crash and the 1998 financial defense war in August.
1987 10 19 Hong Kong stock index futures fell sharply due to the global stock market crash. After four days of suspension, the Hong Kong Futures Exchange opened down 33%. Many members failed to perform their duties and there was a large-scale breach of contract. Hong Kong Futures Clearing Company's HK$ 22.5 million was useless, and the exchange almost went bankrupt. In order to ensure the stability of the financial market, the Hong Kong government stepped in to rescue the market.
1997-98 during the Asian financial crisis, Hong Kong's linked exchange rate system was under great pressure. Some overseas funds attacked the Hong Kong dollar, Hong Kong stock market and futures market with the intention of pretending to attack the linked exchange rate. In essence, they make huge profits by shorting stock index futures. When the stock market fell unilaterally, which may cause the stock market to crash, the Hong Kong government intervened decisively in the market and repelled the attack of international speculators. Its operation method is to stop international speculators in the stock index futures market, buy blue chips in the spot market, and take many measures to strengthen the financial market order, so that the plan of international speculators to make huge profits fails.
Thirdly, controllable risk management of stock index futures.
Controllable risk refers to the risk that can be controlled or managed through the measures taken by the relevant subjects in the futures market. Controllable risk is the focus of risk management in stock index futures market.
(A) the types and causes of controllable risks
Controllable risks can be divided into futures exchange risks, futures brokerage company risks and investor risks. The root causes of this risk mainly include: mistakes and omissions in the rules of the exchange, failures in computer trading or communication systems, vicious and major violations by members or customers, poor management of brokerage companies, and mistakes in investors' investment decisions.
(B) controllable risk management
The controllable risk management of stock index futures can be divided into macro-market risk management and micro-market risk management (futures exchanges, brokers and investors). The risk management of futures exchange is the key.
1, Macro Market Risk Management
Macro-market risk management mainly refers to the establishment of strict regulations and supervision system for stock index futures. Specifically including:
(1) legislative management
Legislative management means that the state regulates the organization and operation mechanism of the futures market by formulating and promulgating laws, regulations and rules on futures trading. The central point of legislative management is to follow the principles of openness, fairness, justice, honesty and credibility, prohibit the occurrence of illegal acts such as fraud, insider trading and market manipulation, fundamentally regulate the behavior of various subjects in the futures market and guard against market risks. The introduction of stock index futures puts forward higher requirements for government regulators in macro-risk supervision. It is necessary to supplement, modify and improve the existing relevant laws, regulations and rules, and at the same time, it is necessary to supplement and introduce some regulations on the management of financial derivatives market. Only in this way can we lay a good foundation for the smooth operation of China's stock index futures.
(2) Administration
Administrative management refers to the management implemented by government authorities through the performance of their duties. Administrative management regulates the organization and operation mechanism of the futures market according to laws and regulations to ensure the normal operation of the futures market. China Securities Regulatory Commission is the regulatory department of China's securities and futures industry, and exercises direct administrative power over the stock index futures market. It plays an important role in risk management. Specifically including:
① Risk supervision of the exchange
The risk supervision of the exchange mainly includes institutional supervision, rule review, supervision and inspection of risk management measures and direct supervision and inspection of the exchange. When the market is abnormal, the Exchange may decide to take a series of emergency measures according to the authority and procedures stipulated in its articles of association, and must immediately report to the China Securities Regulatory Commission. China Securities Regulatory Commission can also take necessary risk disposal measures according to specific market conditions. The use of risk reserve shall comply with the provisions of the China Securities Regulatory Commission and shall not be misappropriated without authorization.
② Supervision of futures brokerage companies
China Securities Regulatory Commission has the right to approve the establishment of futures brokerage companies. For unqualified futures brokerage companies, the China Securities Regulatory Commission has the right to order them to suspend business for rectification or revoke their futures brokerage business licenses. China Securities Regulatory Commission conducts annual examination on futures brokerage companies. At the same time, you can carry out daily inspections of brokerage companies at any time, or you can conduct special inspections from time to time. The contents include: the implementation of the deposit system, risk management and internal control system. When a futures brokerage company has or may have a customer margin refund crisis, the CSRC has the right to decide to make special treatment for the brokerage company.
③ Supervision of futures investors.
China Securities Regulatory Commission has the right to investigate and deal with illegal transactions, fraud, market manipulation and insider trading. Investors who seriously violate the rules can be declared as "market-forbidden".
④ Management of futures practitioners
China Securities Regulatory Commission's supervision of futures practitioners is reflected in the fact that the practitioners must pass the examination of China Securities Regulatory Commission, obtain the qualification and pass the annual examination of the Commission. The CSRC has the right to publicly declare employees who seriously violate the rules as "prohibited from entering the market" and revoke their qualifications. If the case constitutes a crime, it shall be handed over to judicial organs and criminal responsibility shall be investigated according to law.
2. Micro market risk management
① Investors' own risk control
Investors can control their own risks mainly from the following aspects: first, strengthen the analysis of various market factors, improve their ability to judge and predict, and reduce trading risks through flexible trading means; Two. Control the proportion of capital positions and avoid the risk of forced liquidation; Three. Fully grasp the knowledge and skills of various futures trading, formulate correct investment strategies, and control risks within their own tolerable range; Four. Standardize your trading behavior, improve your risk awareness and psychological endurance, and keep a cool head; 5. On the basis of full communication and understanding, choose a brokerage company with standardized operation and carefully check the specific situation of each transaction and its own trading funds in time; When the interests of intransitive verbs are infringed unfairly, investors can complain to the China Securities Regulatory Commission and other relevant institutions, and ask for investigation and handling of related events and problems.
② Risk management of brokerage companies
The risk management of futures brokerage companies should manage the risk of stock index futures market from the following four aspects.
First, customer management. The management of customers includes: examining customer qualifications, sources of funds and credit status; Strengthen the risk awareness and law-abiding education for customers; Strictly implement the customer margin management system; Improve customers' futures knowledge and trading skills.
Two. Staff management
The management of employees by securities firms includes: improving the futures knowledge level and practical skills of employees; Strengthen internal supervision and strengthen employee professional ethics education.
Three. Management of settlement and risk management systems and measures
Brokerage companies must establish and improve internal settlement and risk management systems in accordance with the provisions of the Exchange and the China Securities Regulatory Commission. Strictly control the risks of customers.
Four. Self-monitoring and inspection
Brokers should not only accept the supervision and inspection of the CSRC and the Exchange, but also set up internal auditors to form a strict internal control system, so as to find problems in time and avoid major risk accidents.
③ Risk management of the exchange.
The exchange is the organizer of the stock index futures market and the guarantor of the performance of the stock index futures contract. The risk management of the exchange is to establish and improve a set of risk management system based on the unique operation mode of futures trading; Secondly, establish real-time risk monitoring technology; Finally, it is to ensure the effective implementation of risk monitoring system and technology.
Four, the exchange stock index futures market risk prevention and control.
As the direct manager and risk taker of the transaction, the risk management of the exchange has become the core of the whole market risk management. In the futures market, the characteristics of customers participating in futures trading are: customers entrust futures brokerage companies, and brokerage companies trade futures contracts on the exchange in their own names. That is, the legal relationship between the brokerage company and the customer is not a general principal-agent relationship, but a disciplinary relationship. According to this feature, the settlement and risk management of futures exchanges are generally divided into two levels, one is the settlement and risk management of members by exchanges, and the other is the settlement and risk management of members (futures brokerage companies) to their customers. The advantage of doing this is to spread the risk of the whole market, and at the same time, to implement the responsibility of risk management to each member, so as to make risk control more timely and targeted, and at the same time strengthen management.
(a) the risk management system of the exchange
1. Membership approval system
Members applying for stock index futures trading qualifications must go through strict qualification examination and approval by the Exchange.
2. Margin system
Margin is the financial guarantee for participants in stock index futures trading to fulfill their contractual responsibilities, and it is the core system of futures trading settlement. Margin is divided into trading margin and settlement reserve. Trading deposit refers to the funds that members guarantee the performance of the contract in the special settlement account of the exchange, which is the deposit that the contract has been occupied; Settlement reserve refers to the funds prepared in advance by members in the special settlement account of the exchange for transaction settlement, which is the deposit not occupied by the contract. The exchange may set different deposit collection standards according to different stages of contract expiration. Under abnormal circumstances, according to the risk status of the market, the transaction ownership will increase the overall margin level of the market, or adjust the margin level of risk-related members or customers separately.
3. Daily debt-free settlement system
Daily debt-free settlement, also known as "mark-to-market day by day", refers to the futures exchange's settlement of all contract profits and losses, trading deposits, handling fees, taxes and other expenses at the settlement price of the day after the daily trading, and the implementation of net transfer of receivables and payables. Daily debt-free settlement makes the position price of futures contract holders become the settlement price of the day, and at the same time, the trading margin is calculated and paid according to the settlement price. This can ensure that the trading margin collected by the exchange can completely control the risk of price fluctuation within one day.
4. Price limit system
The price limit board is the daily maximum price fluctuation limit of stock index futures contracts stipulated by the exchange. The setting of the price limit board can effectively slow down or restrain the huge impact of some unexpected events and excessive speculation on the stock index futures market, and slow down the price fluctuation of each trading day. When the market is facing drastic fluctuations, the implementation of price limit can buy time for market managers, grasp the situation and buffer risks. At the same time, it also gives traders a chance to think rationally and judge, so as to avoid market overreaction.
5. Limited warehouse system
Limited position refers to the maximum amount of contract positions that members or customers can hold as stipulated by the exchange. The general principles for setting trading limits of stock index futures are as follows:
(1) The position limits of members, institutional investors and individual investors shall be determined separately;
(2) The position limit is calculated based on the total position rather than the net position, and the positions of the same customer are calculated uniformly.
The position limit system can prevent the stock index futures trading from being manipulated, and at the same time, it can prevent the market risk from being excessively concentrated on a few investors, so that they can't bear huge risk losses and eventually spread the risk to the whole market.
6. Extended family reporting system
Large account report means that when a member or customer holds a certain number of positions stipulated by the exchange, the member should report his funds and positions to the exchange, and the customer should also report his various situations to the exchange through his agent members. The large household reporting system is closely related to the warehouse restriction system and can be used together. The stock index futures market is changing rapidly, and the large position declaration system allows the exchange to find the signs of risks before the risk accumulation, so that the transaction has enough time to pay attention to and control the development of the situation.
7. Compulsory liquidation system
When a member or customer fails to pay the deposit on time, the settlement reserve is insufficient, the position exceeds the limit, or the relevant regulations of the Exchange are violated, or the Exchange takes emergency measures according to its legal procedures, the trading ownership will enforce the compulsory liquidation of the relevant member or customer. The implementation of compulsory liquidation can stop the expansion and spread of risks in time and control the risks to a minimum.
8. Inspection system
The implementation of various rules and regulations of risk management requires the exchange to implement a strict inspection system. The object of inspection is generally members, but in some cases, the exchange can also cooperate with the members of relevant securities firms to inspect the trading status of customers that the exchange and market regulators think it necessary to check in detail. The content of audit is roughly divided into two parts: transaction audit and financial audit. The main purpose of business inspection is to find out the violations of rules and regulations of members or customers, such as borrowing positions, dividing positions, exceeding positions, manipulating market prices with huge funds and positions, distorting market prices, etc. At the same time, the purpose of trading business inspection is to supervise members and protect the legitimate rights and interests of customers from infringement. The focus of financial audit is on members. The contents of financial audit include: submission of financial report, financial inspection, credit rating of brokerage members, etc. The inspection of members should be combined with regular and irregular inspections.
9. Risk reserve system
The establishment of exchange risk reserve is to provide financial guarantee for maintaining the normal operation of the futures market and make up for the losses caused by unforeseen risks. The sources of risk reserve are: ① according to a certain proportion of the transaction fee income charged to members, it is extracted from the exchange management fee; (two) other income in line with the provisions of the national financial policy; ③ Government-related capital injection. Risk reserves must be accounted for separately and stored in special accounts, and shall not be used for other purposes except to make up for risk losses. The use of risk reserve shall follow the prescribed legal procedures, be approved by the board of directors of the Exchange, and be reported to the China Securities Regulatory Commission for the record, and be carried out in accordance with the prescribed purposes and procedures.
(B) an effective tool for risk prevention-real-time risk early warning system
For the stock index futures market, risk management should focus on prevention. China Futures Exchange has developed an effective risk monitoring and early warning system on the basis of practice in the pilot operation of commodity futures for many years, and achieved good results in the application of commodity futures market. The risk management of stock index futures also needs a similar real-time risk monitoring and early warning system.
1. Basic functions of real-time risk early warning system
(1) Through the analysis of individual indicators and the judgment of comprehensive indicators, the overall market risk is comprehensively measured. The function of single index is to reflect the abnormal factors in funds, positions and prices intuitively and in real time. The function of comprehensive index is to comprehensively analyze each single index and judge the overall impact of each single index on the market and the risk status of the whole market according to its weight in the market. When a single index or comprehensive index exceeds the warning line set by the system at all levels, the corresponding early warning signal will be issued to reflect the market risk in real time.
(2) Quickly find out the root of the risk through a comprehensive inquiry system. When a single indicator is in an abnormal state or a comprehensive indicator sends out an early warning signal, we can find the key to the problem through various query and tracking tools, find the root of the risk in time, and lay the foundation for taking effective risk prevention and control measures.
(3) Have the comprehensive handling ability of multiple contracts. When multiple contracts in the market are in linkage or reverse movement, the system should be able to comprehensively handle the situation of members participating in multiple contracts and judge the risk degree from the perspective of members as a whole.
2. Composition of real-time risk early warning system
Real-time risk monitoring and early warning system mainly includes two parts: index system and statistical query system. Indicator system ***7 individual indicators, query system * *14 monitoring items. The indicators of the indicator system have the following characteristics:
(1) Real-time tracking and monitoring. Once the index value of each index under normal market conditions is accepted by the system, the system can immediately compare the index value of the current market with the index value accepted by the system.
(2) intuition. For dynamically monitored index values, the system will track and record them (including current values and historical values) and display them on the display together with the indicator lights in the form of dynamic curves.
(3) The early warning function is combined with the inquiry function. In each early warning indicator window, there is a menu of statistical query items closely related to the indicator. Whether the indicator alarms or not, you can make necessary statistical inquiry by selecting this item.
The statistical query system is a real-time risk monitoring method that matches the risk early warning indicators, and relevant statistical query items can be selected manually when necessary. The query system is directly connected with the database, which can make statistics of intra-day and after-hours data at any time as needed, make comparative analysis of real-time and historical data, and display the statistical analysis results in the required format.
The function of statistical query is to make risk analysis with the help of risk monitoring indicators in the transaction process. Its objectives are: to judge the trend of large households and the comparison of financial strength in the early stage of risk-free or risk evolution, and to grasp the market trend; In the case of high risk, judge the possible large-scale joint manipulation of the market or other illegal acts, find the source of risk and the focus of deterioration, list high-risk members and customers, and provide basis for risk control.
3. Application of real-time risk early warning system in domestic futures market
China's futures industry has a short history, and there have been many problems before. Most of these problems are caused by the imperfect market risk control system or the failure to strictly implement the risk control system. In view of the above situation, after summing up practical experience, China Futures Exchange, together with relevant experts and scholars, has developed a computer-controlled real-time risk monitoring and early warning system suitable for China commodity futures market through a lot of efforts and repeated experiments. After more than a year of market application, it has achieved gratifying results and become an indispensable tool for monitoring and preventing risks in China's commodity futures market. In the future, it is necessary to develop a similar real-time early warning system for stock index futures trading risks to prevent market risks.
(3) Abnormal market conditions and handling of violations.
The establishment of the system and the application of monitoring means are to prevent the market risk of stock index futures. If a major risk event occurs in the market, the Exchange will take measures to deal with abnormal market conditions to resolve the risks. Dealing with market anomalies can be divided into emergency measures to deal with individual members and the whole market.
1. Handling of abnormal trading behavior of individual members
Dealing with the abnormal trading behavior of individual members includes: ① requiring risk-related members to report their own or customers' trading situation, sources of funds and trading intentions; (2) emergency inspection; (3) controlling gold extraction; (4) Establish stricter warehouse restrictions; ⑤ Stop opening new positions; ⑥ If a member's position accounts for too much market share, it can charge additional risk margin to the member; ⑦ Forced liquidation, etc. The Exchange will punish individual members for their illegal trading according to the relevant provisions of the Measures for Handling Violations formulated by the Exchange.
2. Investigate and deal with abnormal market conditions
In the process of stock index futures trading, the main market anomalies are as follows: (1) due to force majeure factors such as earthquakes and disasters or computer system failures, the trading cannot be carried out normally; (2) the current price is seriously deviated; (3) continuous one-way price limit; ④ Some or a large number of members have a settlement crisis.
When the first kind of market emergency occurs, the owner of the transaction shall take measures to delay the opening of the market and suspend the transaction; In case of other emergencies, in addition to delaying the opening of the market and suspending trading, the exchange can also take measures such as increasing the margin ratio, closing the position according to the rules within a time limit, forcibly closing the position, and restricting the withdrawal of funds. Specifically, when the spot price deviates seriously or the market fluctuates violently, the ownership of the transaction will increase the risk margin for market participants. When there is a continuous one-way price limit in the market, the ownership of the transaction will be closed according to the rules and certain principles to release the risk.
When a large member has a settlement crisis, in addition to the above measures, the exchange must use risk funds to fill the capital vacancy when necessary, and quickly restore the normal trading settlement order in the market. In this case, the procedure for the use of funds is:
First, use the settlement reserve of members;
Second, use the assets of all members;
Third, use the risk reserve of the exchange;
Fourth, use the assets of the exchange.
After the exchange replaces the performance, it will recover the funds owed by the defaulting members through legal means. The handling of abnormal trading situation is the last guarantee for futures exchanges to control the market risk of stock index futures.
In short, as long as a strict risk system is established, advanced real-time risk monitoring technology is adopted, and supervision and coordination between relevant departments and markets are strengthened, stock index futures market risks can be prevented and controlled.
Shanghai Futures Exchange (www.shfe.com.cn)