Understanding the various stakeholders in the futures market

Author: The Little Dream, Created: 2017-05-03 12:34:29, Updated: 2017-05-03 12:38:36

Understanding the various stakeholders in the futures market

The simple answer is: to understand what the futures market is, or to understand the various stakeholders in the futures market (the types of people who are willing to transfer risk to you). Once you have a clear understanding of these issues, it is not an exaggeration to say that you will easily exceed 50% of the market participants.

  • I'm not going to say that.

    Yes, that's the way it is. There are a lot of players in the real market who have not been systematically trained, who can learn without a teacher, and who have a different mentality than a tiger hole, who have a tiger hole, who have grown up in the practice of yoga. Of course, the result is cruel: many people still do not enter the futures market after losing almost all of their capital in a short time, even if they do not talk about progress, but only repeat losses.

    This has also created the spread of hedge funds in the society, with ten out of nine hedge funds losing money and so on.

    But what I'm saying is that unnecessary losses are really not necessary or meaningful. The correct investment logic should be this: when you trade a financial asset, you should first understand the market by various means, how it works, the profitability logic, the investment risks, etc. Then enter the market with a cautious mindset and wait until the time is right to decide whether to hold or sell a position.

    So let's start talking about how the futures market works and the various stakeholders who are playing the game!

  • Category 1: Futures exchanges and futures companies

    Commodity exchanges and futures firms can be broadly grouped together because of their close ties to each other. The vast majority of futures exchanges and futures firms collect revenue by charging a transaction fee for each futures transaction.

    The reality is that the exchange fee is fixed (it can be said that it is legal, except the exchange itself decides to adjust, futures companies have no right to adjust the exchange fee standard), the additional fees charged by futures companies can be adjusted, and the trend in recent years has been decreasing year by year. Through some data, we can look at the medium-term jointly published data: the average monthly collateral size of the futures market in 2015 is 3689.76 billion yuan, and the total futures company's monthly fee revenue in 2015 is 12299 million yuan.

    We know that the loss of the futures account is made up of the loss of the trading position and the loss of the transaction fee. So the conclusion is: futures exchanges and futures companies withdraw funds from the market at a rate of 10% of the total market capitalization per year, which is basically a horse-powered pump. The funds withdrawn (the transaction fee) reflect the loss of the futures account, and the simple conclusion is that if the profit and loss of normal trading are flat, by the end of the year each account will still have an average loss of at least 10% or more.

  • The above shows that the futures market is a typical negative market, and there are some phenomena that can be interpreted together.

    For example:

    • First, futures firms hire marketers to develop the financial capacity of people who don't understand futures to trade in the futures market. I think everyone understands that the only way to get the participants to trade is to contribute to the transaction fees and increase the company's profits.

    • 2. Futures firms will organize research and analysis teams to write research reports on futures varieties, which are also intended to provide investors with trading power for futures trading;

    • 3. The remuneration system of futures marketers is linked to transaction fees, which objectively means that the purpose of the futures marketers is to develop clients only in the hope that customers will trade more to generate more transaction fees, thereby increasing wage income.

      High-powered forewarning comes: futures exchanges and futures firms are neutral because they are different from investors' interests and demands (the former are based on fee-for-service, the latter are based on the expectation of profits from the market), deciding that they and investors are not in the same boat, responsible for the profits of the investor's account. The result is often that unreasonable investors, under the guidance of the futures company, expect to catch a wave of trends once and for all, but in fact fall into a bad situation of double loss of trading and fee-for-service, becoming the "white pepper" of the market.

  • The second category: Chain Investors: Chain investors are the cornerstone of the futures market.

    The original intention of the government to set up futures trading is to transfer the price volatility risk of the futures varieties related to the industrial chain. Industrial chain investors are the godfathers of futures prices, why, because they have the stock in hand and can participate in the deal. Industrial chain investors have a natural information advantage, very familiar with the spot market of futures varieties, they are not either collateralized or speculative trading has a greater profit margin, their counterparts are the vast majority of ordinary investors.

    Forward-looking ability: The reason for the continued presence of industrial chain investors in the futures market is their full mastery of the information and their accumulated experience. The spot market is a bit of a breeze, they are like fingers; changes in government policy, they are often quick to learn; and large-scale industrial enterprises are often equipped with manipulators with trading advantages.

  • Third category: institutional investors and those who are praised in the market

    They can be categorized as a group because they are all long-standing sandbox players with obvious operational advantages. They have their own clear trading philosophy, trading systems, wind-up mechanisms, etc. They are significantly superior to the average investor, both in terms of capital size and trading strategies, and they can even use the funds and operational advantages to artificially create some technical indicators in the short term, which are seen by the speculators, and use them to induce speculators to fall into the trap.

  • The fourth category: the remaining are the mainstream investors.

    Large-scale ordinary investors have two very obvious weaknesses, one of which is a lack of information advantage, and the other of which is a lack of operational advantage. This is precisely what the second and third groups have. The second group can use information asymmetry to blow up your positions, and the third group can use trading technology to cause sharp market fluctuations and disrupt your state of mind, thus making you make the mistake of taking money out of your account step by step.

    Ok, the main players in the futures market have all been told, and it's a cruel fact. I think a lot of people who are already in a loss will be sober after watching this and know who put their money in their pockets.

    A very realistic question is: What should you do when you read the article and still go into the market in a frenzy and expect to make a profit?

    The answer is: jump out of the fourth category and into the second or third category. Not shouting in your heart: jump! jump over, the flea flea is just a natural result of development, but its process is full of hardship. There are only two goals, either to gain a stronger information advantage than others, or to have an operational advantage over others.

Translated by I know Lsir


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