The main trading system of financial futures
(1, 2 is hardware guarantee, 3-6 is market supervision and risk control means)
1. Centralized trading system
Financial futures are centralized transactions on futures exchanges or stock exchanges.
Futures exchanges generally implement membership system. The commission agent is usually a futures brokerage company.
2. Standardized futures contracts and hedging mechanisms
Futures contracts have unified provisions on the variety, trading unit, minimum price change, daily price limit, contract month, trading time, last trading day, delivery date, delivery place and delivery method of basic financial instruments. Except for some contract varieties, the only variable is the transaction price of basic financial instruments.
3. Margin and its leverage
The main purpose of setting up margin is to stop the loss of traders in time and prevent the occurrence of refusal to pay.
The deposit paid by both parties at the time of transaction is called initial deposit.
The margin level is set by the exchange or clearing house. Generally, the initial margin ratio is 5% ~ 10% of the futures contract value, but there are cases as low as 1% or as high as 18%.
The margin account must be kept at the lowest level, which is called maintenance margin, which is a certain proportion (75%) of the initial margin.
4. Clearing houses and debt-free settlement systems
Clearing house is a clearing house specializing in futures trading, usually attached to the exchange, but established as an independent company.
All futures transactions must be conducted by clearing institutions through clearing members, not directly by both parties to the transaction.
Clearing houses implement a debt-free daily settlement system, also known as the day-to-day mark-to-market system. The average transaction price of each futures contract in the last 1 minute or several minutes before the closing of the trading day is taken as the settlement price of the day, and compared with the price at the time of each transaction, so as to calculate the floating profit and loss of each clearing house member account and carry out market clearing. Because the daily mark-to-market system takes 1 trading day as the longest settlement cycle, the trading positions of all accounts are calculated according to different maturity dates, and all trading gains and losses are required to be settled in time, so as to adjust the margin accounts in time and control market risks.
5. Limited warehouse system
The position limit system is a system for the exchange to prevent excessive concentration of market risks, market manipulation and limit the number of positions held by traders.
6. Extended family reporting system
So that the exchange can examine whether there is excessive speculation and market manipulation in large households.
The declaration limit for large households stipulated by the exchange is less than the warehouse limit.
If a member or customer fails to close his position within the time specified by the exchange, the ownership of the transaction will force him to close his position.
Warehouse restriction system and large household reporting system are effective mechanisms to reduce market risks, prevent human manipulation and provide an open, fair and just market environment.
7. Daily price fluctuation limit and circuit breaker rules.