1, the connotation of compulsory liquidation system
Compulsory liquidation refers to the liquidation of positions held by members or customers in accordance with relevant regulations, with the purpose of controlling futures trading risks.
The system of compulsory liquidation refers to that when the trading margin of members or customers is insufficient and not replenished within the specified time, or when the number of positions of members or customers exceeds the specified limit, the exchange or futures brokerage company forcibly liquidates the corresponding positions of members or customers in order to prevent the risk from further expanding.
2. Bitter selling
Forced liquidation is divided into two situations:
First, the exchange forced the liquidation of member positions;
Second, futures companies are forced to close customer positions.
3, the application of compulsory liquidation system
(1) The account transaction margin is insufficient to force liquidation.
(2) The member (customer) is forced to close the position due to violation of the position limit system.
China's futures exchange stipulates that when a member or customer has one of the following circumstances, the exchange and the futures company have the right to forcibly close the position:
(1) The balance of member settlement reserve fund is less than zero, and it has not been replenished within the prescribed time limit;
(2) The positions of clients and trading members engaged in self-operated business exceed their position limits.
(3) Being punished by the exchange for compulsory liquidation due to violation of regulations;
(four) according to the emergency measures of the exchange, it should be forced to close the position;
(5) Other positions should be closed by force.
4. The process of forced liquidation is as follows:
(1) When the risk rate reaches or falls below 100%, the trading system will automatically issue a notice of additional margin;
(2) When the investor's risk rate reaches or falls below 50%, the trading system will automatically close the investor's position.
5. Handling method of forced liquidation
When the balance of the settlement reserve fund of a member is less than zero, there are three kinds of compulsory liquidation that are not replenished within the specified time:
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.