The original intention of warehouse limit is to stipulate the transaction scale of members according to their ability to take risks. The exchange usually gives a certain position limit according to a certain proportion according to the amount of margin invested by customers and members, which is the highest position held by members and customers in the transaction. When a customer conducts futures trading, he must open an account with a broker, and at the same time, deposits received.
In order to prevent large households from holding too many positions and manipulating the market, most exchange members manage the customers represented by members, and each customer can only use one trading code. The exchange also has a limit on the total number of positions under each customer code.
In order to prevent the market risk from being excessively concentrated on a few members, the exchanges in many countries stipulate that the unilateral position of a member in a futures contract shall not exceed a certain proportion of the total position of the futures contract (unilateral liquidation), otherwise the exchange will forcibly liquidate the excess position of a member. In addition, according to the distance between the contract and the delivery month, the exchange sets the position limit for members. The closer the contract is to the delivery date, the smaller the position of the member.
Baidu Encyclopedia-Speculative Position Limit System
Baidu Encyclopedia-Warehouse Restriction System