The first, in 1996, was the Velvet 608 Contract, which forced the construction of a new building.
Second, the incident of rice and red beans futures on the Guangdong Joint Futures Exchange
The 309 incident at the Yangzhou Stock Exchange in 2003.
Four, the 602 incident in Suzhou.
5, 1994 Rice futures overbought on the Shanghai Grain and Commodity Exchange
6 The Hainan Palm Oil M506 incident in 1995
7th, 1996 Shanghai Commodity Exchange panel 9607 incident
8th, the series of forced warehouses in Guizhou
9th, the F703 coffee incident at the Hainan Chinese Market
10th, 1995 Corn C511 Riot in Dalian
11th, the green bean contract in Zhejiang shocked the world futures market with the 1.18" event
In the 1996 R608 contract, the R708 incident occurred in the context of an oversupply of the market. The R608 incident was a speculative attempt to exploit the natural disasters in the Southeast Asian rice-producing countries and the domestic rice-producing regions.
In early 1997, on the R703 contract, several reversals in the market led to a rise in the market price, which led to an increase in the inventory of natural rubber in the Hainan Chinese trading post. By the time the R708 forced the market to empty, the registered inventory had reached more than 40,000 tons.
The R708 incident should have been a significant rebound after the stabilization of the Tokyo swap at 110 yen/kg. A large number of domestic speculators wanted to take advantage of the R706 contract to write articles, but due to the main pressure of the airline headed by local wholesalers, coupled with insufficient time, they had to abandon the contract with the help of the real disk to enter the market, plus insufficient time, and initiated a bearish overhang.
In addition, the company has also been showing no signs of weakness, importing large quantities of natural aluminum from the domestic spot market into the warehouse of the Chinese store, claiming to have more than 100,000 tons of spot orders in hand, ready to meet in real time.
The majority of the participants were speculators from Shanghai and the Jiangsu region, who allegedly planned to expand the Shanghai market to attract small and medium-sized retailers. The war escalated again at the end of June and early July, with the two sides forming a confrontation between 11200 and 11400 yuan. On July 4, the majority suddenly had a hard time, and practically washed the dish.
Huge risks have been accumulated in Hainan's stockbrokers and some members. On July 26 and 27, the board of the exchange continued to discuss the R708 issue, and fluctuated between the multi-space houses. Due to no progress in negotiations, on July 30, the exchange issued a statement saying that it would increase the deposit guarantee for the buyers of the R708 in stages, and from the 30th, it would prohibit the opening of new stores in the R708 contract, except for those who have been approved by the board to deliver their secured real stakes that have not yet been built.
From 4 August, with a daily drop-off rate (the first three days 400 per day, the following seven days 20 per day), the R708 case was handled for several months. Meanwhile, hundreds of millions or even billions of dollars worth of economic disputes were heard in court, and the SEC fined a group of futures brokers and market participants the largest penalty ever. The direct result of the R708 case was: nearly 20 seats of multi-party holdings were declared open; more than 20 percent of the 29,864 unilateral holdings on 18 August were in default, amounting to a total of 333 million yuan; more than 200 million yuan were lost in compensation payments in the 4-13 August settlement agreement; the parties were only reluctant to disburse the cash on the basis of hard cash; the discount rate was 13 billion yuan, which is the highest on the market, and the average cash price was $1.6 trillion, which was not sold on the market.
The R708 incident was therefore a serious disruption of the rules of the futures market and a double whammy.
Since its introduction in June 1995, the Guangdong Joint Futures Exchange (GFC) has attracted the active participation of many speculators and spot custodians in a short period of time. The trading was once very active, but a small number of brokers and speculators attempted to manipulate the futures market in order to make a huge profit.
The cause and aftermath of the Miami incident
After the official launch of rice futures trading on the Guangdong Joint Futures Exchange on June 12, 1995, the futures price skyrocketed, of which 9511 and 9601 two contracts, which started from 2640 yuan / ton and 2610 yuan / ton respectively, rose to 3063 yuan / ton and 3220 yuan / ton at the beginning of July, actively invested, and the stock holdings steadily increased. The differences between the two sides are: many parties believe that the main rice producing provinces of Hunan, Hubei and Jiangxi, which were hit by severe floods in the summer of that year, faced a situation of rice production reduction; the second is that there are tax problems in the real rice commodity swap, according to which the combined futures price was estimated to be too low.
In mid-October, members such as the South Province Financial Services General Fund Department, China Colored Metal Materials General Company, Shanghai Mainland Futures Brokerage Company and other members of the Group, mainly based in Guangdong, entered the Guangdong Unified Rice Exchange, using the exchange to announce more than 200 local registration orders, forcibly lifted the 9711 contract, and began to tighten the vacuum, on the 16th, 17th, 18th, and continued to pull three suspensions, by the close of the 18th, the penalty has been increased to 3050 yuan/ton, the stock has increased dramatically by 90,000 hands during the day. This time, the parties began to fight back, and received a positive response from the buyer of the rice stock.
Following the incident, the Securities and Exchange Commission of China (SEC) issued a notice on October 24 to the various futures regulators and futures exchanges to further control the risks of the futures market, crack down on market manipulation, and make several decisions that have a major impact on the market as a whole:
First, futures exchanges must strictly control their total holdings.
Second, the ban on T+0 settlement;
(iii) The collateral for the transaction shall not be used as collateral for the mortgage, except for the collateral position in the portfolio;
(iv) No agency other than a brokerage firm approved by the Securities and Exchange Commission shall act as a secondary agent;
5. An exchange that fails to effectively prevent manipulation through lack of regulatory efforts and causes adverse effects shall be ordered to suspend its operations until its pilot status is revoked.
After the announcement, the reaction of all parties in the market was strong, and the consensus was that the announcement sounded the alarm for those players who are driven by short-term interests, who try to manipulate the market, and who take risks. On the other hand, the question of how to strengthen the regulation, self-discipline and management of the entire market, play the basic functions of futures trading, and promote the healthy development of the market, has been mentioned before many people in the industry.
Summary and reflection on the Riyadh incident
Containment of excessive speculation and prevention risks is essential for the stability of the futures market. It can be seen from the case of the General Union rice: at the time, the main behavior of members and brokerage companies in the futures market in our country was extremely irregular, in addition to the existence of large-scale monopolies, manipulation of the market, serious violations of joint transactions, over-positioning, borrowing and sub-positioning, as well as leakage transactions, some futures brokerage companies were mainly self-employed, these actions caused large investors to suffer huge losses, severely distorted the futures market price, limited the exercise of the collateral functions, increased the difficulty of risk control, and hindered the normal movement of the futures market.
In view of the various issues raised by the case of Tommi, it is necessary to strengthen the research on market risk management countermeasures. Firstly, all levels of the Chinese futures market, including regulators, exchanges, members and large futures investors, need a framework for regulating the market behavior, ensuring their rights and clarifying their obligations through legislation. In addition, to improve the risk management of the futures market, to establish a system of monitoring at the level of government regulators, futures exchanges, brokerage firms and investors, it is crucial for the stability and development of the futures market, which mainly includes dynamic risk monitoring of trading venues, perfect collateral system, daily settlement system, large customer reporting system, maximum stock limit held by members, stock limit system and public information, etc.
Secondly, rice as a large variety in the futures market should be able to fulfill its basic function. Although rice as a large variety that affects the national livelihood, its price fluctuations are determined by the market supply and demand relationship, while being influenced by the national macro-regulated food policy. Those who believe that rice has limited physical resources and unlimited funds speculators try to manipulate the price in the rice futures market to get a huge profit, together to launch aggressive bullishness, and ultimately fail.
Moreover, from the case of the United States of America, it can be seen that the exchange started and active a futures variety, can not rely solely on the capital hype of a few speculative big players, should be committed to the long-term construction of the futures market. At times, a few big players in the market shook hands and shook hands, neglected the design of some futures contracts, seized the rush of some exchanges in the active market, engaged in hand-to-hand trading, to monopolize the market price, its violations damaged the interests of most investors, disrupted the order of the commodity market, brought about a very negative impact, making the commodity market talk about commodity market.
Also, from the entire process of the incident, the risk management and self-discipline of the futures industry is the key to determine the rise and fall of the future. In the case of the Tomi, some member units headed by the Kim Creation Futures Brokerage Company, their own operation is not regulated, the lack of a strict risk management system, to extract excessive profits, in spite of the use of borrowing, division, joint trading, penetration of branches and other serious violations, disrupted the normal trading order, damaged the interests of most investors, affecting the development of the future of the largest variety of Tomi itself.
Over time, the WT309 contract, although it has left our trading screen on September 22, the impact is still there, as if it happened yesterday. In fact, it is a smoke-free war, the scene of which is no less than the battleground of the reprimand of King Gotama, the great horse of Mercedes.
From the beginning of 2003 to the present, the futures market in China has flourished, and trading data from the futures market for the first half of this year published by the China Futures Industry Association show that in the first half of this year alone, the volume of Chinese futures trading reached 12,189,335.000 hands, with a transaction volume of more than 4 trillion yuan, more than the volume of last year. This is also the fastest year of growth in futures trading in the last 6 years. At this rate of growth, the volume of trading this year will hopefully overtake the 10 trillion in the golden period of 1995. This news is really exciting for futures traders.
1) The management is not unaware of the warning signs
The incident did not happen without any signs, as early as July 18, the Zhejiang Commodity Exchange issued a letter about the risk of wheat futures trading tips on July 18, which said: "Given that the WT309 and WS309 contract months are nearing the delivery month and have a large stockpile, it is hoped that all members will remind customers to control the market risks and guide them to actively participate in the long-term contract month's trading. The stockpile at that time was 255,176 people, with a single warehouse holding up to 127,588 people, the number of registered warehouses at that time was only 125,266 people, the futures price was 1495 yuan from the warehouse holding.
2) High futures prices → resulting in a surge in listings → multiple divestitures
The Shanghai Commodity Exchange designated warehouse inventory weekly, showing the number of hard winter wheat stock orders
The variety: Hard winter wheat Unit: Zhang
Dates, quantities, this week, increase and decrease.
This is the first time I've seen this in my life.
July 04, 2003 12210 666 9195
July 11, 2003 12757 547 8400
July 18, 2003 12526 - 231 3085
August 01, 2003 11910 255 4400
15th of August 2003 17276 2365 7745
This is the first time I've seen this in my life.
29th August 2003 22327 1715 7399
This is the first time I've seen this in my life.
This is the first time I've seen this in public.
This is the first time that I've seen this in public.
From the above table, we can see that the number of listings published by the Zhejiang Commodity Exchange on August 28 shows that the number of registered listings for barley was 22,327, an increase of 1,715 from the previous week. From the historical data, the number of listings for barley began to increase significantly since entering August, with a total of 10,417 listings added for the entire month of August. It should be seen that the high wheat futures price was the driving force behind the large number of listings. WT309 From the end of March to mid-August this year, prices have been fluctuating in the 1450-1500 region.
WT309 contract in the falling board of up to 15 consecutive trading days, the brokerage house has issued three bulletin boxes, three bulletin boxes throughout the entire 309 contract process, witnessing the WT309 contract winds all the way through the iron.
1) The August 21 WT309 contract opened the door to the collapse with the provision not to allow the opening of new stores
On August 21, the price of the 309 hard grain period in the diskette again rose above the previous high of 1560. In order to reduce the trading risk, the exchange issued a rule at noon that day not to allow the opening of new positions in the 309 hard grain contract, thus giving the first bar of the day, the price of the afternoon period began to fall, the rest of the hard grain contracts were closed at the falling stop, the 309 hard grain crashed even from the beginning of the day.
2) The fluctuation is immediate, and the fluctuation is played out in such a way that the main shareholders use the loopholes in the trading rules for speculative operations, which is undeniable.
The situation has been exposed to the fact that the mentality of the main shareholder has developed to the point of 25 August, a naked one who wants to use the seventeenth clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of the clause of
3) 7th consecutive day of decline The consultancy firm imposed forced breakeven on the 309 hard grain contract
After seven consecutive days of decline, the brokerage firm imposed a forced liquidation on the September contract for hard wheat. In the notice issued by the brokerage firm on August 28, 2003, No. 70 (Forced liquidation), the brokerage firm clearly stated: in order to reduce the impact of the risk of delivery on the market, in accordance with the provisions of Article 100 of the Trading Rules, it was decided, in accordance with the Council Resolution of August 28, to impose a forced liquidation measure on the WT309 contract after the close of the market on August 29.
Under the influence of this document, on August 29, 22,528 people were in free-float self-clearing, 5,686 futures were transferred to the spot market, and only 865 people were on the one side of the forced clearing of the exchange. So far, the WT309 contract has fallen from a high of 1,560 to 1,332 yuan in seven trading days from August 21 to 29.
4) convening the fifth ad hoc meeting of the Risk Advisory Panel for the resolution of the WT309 contract to determine the "shrinking board" approach to the WT309 contract;
On August 30, in order to further mitigate the risk of WT309 contract delivery, at the proposal of the China Securities and Exchange Commission Futures Ministry, the Zhejiang Commodity Exchange convened the fifth meeting of the Provisional Council. The meeting presented the basic ideas of "regulation in accordance with the law, taking into account the whole picture, smooth transition, and protecting the interests of investors". It also recommended enforced settlement of the virtual warehouse holding of the WT309 contract in accordance with the Council's resolution; contact food enterprises to digest the warehouse list; encourage the use of the cash transfer method of futures; provide quality service when receiving WT309 warehouse for single mortgage; provide support for the sale of warehouse single cash; require a value-added tax invoice when handing over a warehouse, make a false statement about the processing of the law, etc.
After discussion, the meeting finally decided that the WT309 contract entered the delivery month, the drop-off panel adjusted to ± 1% per day; after the closing of the market on the last trading day, a one-time matching delivery was implemented. That is, the main content of the consultation issued by the consultancy on August 31, 2003 No. 71 ((price adjustment, matching delivery)) was notified to the consultancy, for which the WT309 contract entered the delivery month in a "shrinking panel" manner.
WT309 finally retreats from the historical stage to break the slump and smooth the scene
The settlement department of the dealership issued a tip-off letter on 9.19 regarding the delivery of the WT309 contract. The notification letter reads: each member unit, in accordance with the decision of the August 30 Council meeting, WT309 contract on September 22, 2003 to implement a one-time delivery after the close of the market. On September 22, the buyers and sellers can apply for the delivery at the time of the transaction on the seat, according to the principle of the delivery specified in the details of the delivery of the Zhengzhou Commodity Exchange, the one-time delivery matching after the close of the market; on September 23 to receive the delivery notification form, the buyers and sellers prepare the deposit and delivery; on September 24 at 9:00 a.m., the buyer must allocate the amount owed to the account of the transaction, the seller must have the standard deposit with a certificate of deposit to the exchange department.
Red kidney beans are a small grain with high protein, low fat, high nutrient content, and relatively small area of cultivation in the world. China is the world's largest red kidney beans cultivation area and the largest producer, with an annual production of 300,000 to 40,000 tons, a significant part of which is exported to Japan, South Korea and Southeast Asian countries. Japan is the world's largest consumer of red kidney beans, with an annual consumption of about 100,000 to 120,000 tons, while its annual production is only 60,000 to 90,000 tons.
The production of red kidney beans is heavily influenced by natural conditions, climate change, and domestic and foreign market demand, and its price fluctuations are more frequent. Japan introduced the world's first red kidney beans futures trading in the early 1950s. After nearly half a century of modification, supplementation and refinement, the red kidney beans futures trading on the Tokyo Grain Exchange has become the most influential red kidney beans market varieties in the world today.
Since the 1990s, China has also been exploring how to use red bean futures trading for production and distribution services, with eight exchanges including Beijing, Shanghai, Dalian, Changchun, Hainan, and others launching red bean futures trading, with the Tianjin Union Exchange and the Suzhou Stock Exchange being the most active.
Tianjin Red listed soon after the price gradually declined, from 5600 yuan/ton dropped to 3680 yuan/ton of 503 contracts. 507 contracts after the listing due to the ongoing downturn in the spot market, the futures price fell all the way. When its price fell to about 3800 yuan/ton, the multi-headers on the one hand bought a large number of spot items in the spot market, on the other hand, in low absorption, and gradually raised the price. With the entry of market capitalization, from mid-May, 507 contracts were traded, holding large amounts of stock.
In June 1995-1996, the Suzhou Red Bean Futures was later on the list.
The Commodity Exchange of Suzhou officially launched trading in red bean futures on June 1, 1995, with the trademarks of secondary red beans. Due to the downturn in the red bean spot market, Suzhou Red 1995 series of contracts faced enormous real estate pressure at the time of the initial public offering, and warehouse inventories continued to increase, causing the price of the period to remain low, 9511 had created a low price of 1640 yuan/tonne. The decline in the price of the period and the news of a profit reduction in red bean production in 1995 caused a lot of funds to be taken into the market.
On January 8, 1996, the Securities and Exchange Commission of China (SEC) deemed that the contract and trading rules of Suzhou Red Bean were not perfect, requiring all holding contracts to reduce their positions and not to open long-term contracts after 9608. On January 9 and 10, the SEC issued a notice to stop trading in red beans on March 8.
Rice futures trading was once very active and had an important position in the early food futures market due to its developed cash base and large market circulation. After the 1994 Shanghai rice scandal, regulators suspended rice futures trading. To this day, many industry insiders always refer to rice when talking about the resumption and development of large-scale futures trading.
Causes and aftermath
From the first launch of rice futures by the Shanghai Grain and Commodity Exchange on June 30, 1993, until the suspension of trading at the end of October 1994, there were three significant price increases: first, in the fourth quarter of 1993, rice futures rose from 1,400 yuan/ton to 1,660 yuan/ton, driven by a sharp rise in the spot price of rice in the south; second, after the 1994 Spring Festival, due to a sharp increase in the purchase price of grain from 1,900 yuan/ton to 2,200 yuan/ton, influenced by the state; and third, from late June to late August 1994, due to the psychological effect of the expected production reduction in the Northeast drought disaster in Nanchang, futures prices rose from 2050 yuan/ton to 2,300 yuan/ton.
By the beginning of July, the Shanghai Grain Commodity Exchange rice futures trading appeared in a multi-vacuum stand-off situation. The air side believes: the state is conducting macro-control, strengthen the management of food, stabilize the food price policy will lead to a fall in rice prices; while many parties believe: since entering the summer, the domestic grain-producing areas have experienced drought and shortages of food, and at that time the spot price of Shanghai rice has reached 2000 yuan/ton, very close to the futures price.
On July 5, the exchange made a technical decision to close the market and introduced a position restriction measure.
On 13 July, the Shanghai Food Exchange (SFO) issued a set of measures to address the issue of rice futures trading on the Shanghai Grain and Commodity Exchange (SGC), including: holding a general meeting of the members, requiring both parties to reduce their existing stockholdings by 1/3 by 14 July; no further increase in the stockholding after the reduction of stockholdings by the above members; temporarily not allowing new customers to trade rice futures; reducing the December rice levy from 15% to 1%; strengthening internal management of the exchange; etc.
In the meantime, both sides of the overbought stock fell sharply, with prices falling significantly, with the 9412 and 9503 contracts falling from 2250 yuan/tonne and 2280 yuan/tonne respectively to the lowest of 2180 yuan/tonne and 2208 yuan/tonne.
Who knows, in August, due to the severity of the disaster in the North and South and the high limit of the price of rice in the period of the Shanghai Food Exchange, several parties launched a new offensive, and after the recovery of the lost land, the contract of 9503 rose from a low of more than 100 yuan / tonne to about 2400 yuan / tonne in early September.
On 3 September, the National Accounting Commission and other relevant authorities held a joint meeting in Beijing to work on stabilizing the food market and stabilizing the price of grain.
On 6 September, the State Council leadership at the National Meeting on Strengthening Food Price Management, stressed that curbing inflation is the focus of current work. Influenced by policy, the Shanghai rice season price response has declined, the price has fallen to a four-day standstill, and the transaction has reached a record low.
On the morning of September 13, the Shanghai Food Exchange issued an announcement that the rice contract price was reduced to 10 yuan and the maximum price was removed. The interest rate was stimulated, and the rice futures price continued to rise by 10 yuan in the following trading days. At this time, the market rumored that the government would suspend rice futures trading.
By October 22, the State Council Office had forwarded a request to the Securities Commission to suspend the trading of rice and soybean oil futures and to further strengthen the management of the futures market. Rumors were confirmed that rice trading had gone silent after closing at 9,412 contracts at 5,990 hands, or 2541 yuan/ton.
Summary and reflection on the Shanghai Rice Incident
From the point of view of the stock exchange, the functioning of the futures market was still very unregulated. From the point of view of the exchange, the existing rules system could not be strictly enforced, and those who violated the rules could not be punished or incited by the perpetrators could not be processed in a timely manner; the series of documents and measures introduced when the market risks were difficult to reflect fairness and scientificity; the number of members of the Shanghai Food Exchange was small, and the membership structure was unreasonable. From the point of view of the brokerage company, its unregulation was manifested in three aspects: first, there was a partial pursuit of developing the number of clients and the amount of transactions; second, the separation of the self-employed and agents in the trading process; third, some of the major clients in the brokerage company were merchant, manipulated the market, and made a profit.
The rise in the price of rice is not a problem of the variety itself. The price of rice, as a commodity for the national economy, is inevitably affected by macroeconomic policies, but its price is fundamentally determined by the market supply and demand relationship. The view that the rise in the price of rice futures led to a sharp rise in spot prices is one-sided.
As a commodity food crop, rice futures trading has attracted many producers and operators, allowing the long-term price of rice to be more fully embodied. In addition, rice has a strong circulation, high price volatility, and objectively large-scale collateral demand. Due to the size of the rice futures market, there are many investors, and the price is reasonable. From the correlation analysis of rice futures prices, spot prices, it can be seen that the two are compatible, which is also favorable for grain production, storage and processing enterprises and other companies engaged in collateral trading.
3. In view of the entire process of the Shanghai rice incident, the lack of continuity, fairness and scientificity of the rules of the exchange system has undermined the confidence of investors in participation and hampered the normal operation of the market. When the Shanghai rice exchange was located, the rice futures price rose sharply, some specific measures were introduced, including a limited period of time for both sides to reduce the stock, new customers were temporarily not allowed to trade rice futures, etc., and then set the maximum limit for the rice futures price to bring the price back to a certain level in the short term. However, in mid-September 1994, when the Shanghai rice futures price policy was affected by the collapse, the exchange again removed the maximum price limit and lowered the price ceiling for rice futures contracts to 10 yuan, causing the rice futures price to rise again in a rapid way.
Another lesson to be drawn from the rice market is that either a one-sided denial of the functioning of the futures market or a subjective exaggeration of the functioning of the commodity futures market will affect the healthy development of a futures variety itself and even risk its demise, while undermining the confidence of all parties in the futures market, which is detrimental to the long-term construction and stable development of the Chinese futures market. It is clear that with the activation of rice futures trading, the market capacity is growing, and the price movements are largely driven by market supply contradictions, except for short-term policy-influenced callbacks.
Palm oil, as a large variety introduced early in the domestic futures market, was once the subject of much hype in the futures market, attracting a large number of speculators and futures custodians to participate in the market. However, due to excessive speculation and lack of regulation on the M506 contract, investor confidence was severely damaged, leading to the palm oil variety becoming less and less involved in the aftermath of this event, until it finally withdrew from the futures market.
The causes and aftermath of the M506 incident
This is a typical case of the species' eventual extinction due to excessive speculation and lack of regulation.
1, The early domestic and international palm oil market was characterized by a decline in global vegetable oil production due to an imbalance in supply and demand, while demand continued to be strong, leading to a steady rise in palm oil prices. However, by 1995, the domestic and international palm oil market had changed significantly, and palm oil prices gradually began to decline after reaching their peak.
2 M506 contract overhang: In the first quarter of 1995, the price of Hainan palm oil futures has been above 9300 yuan/tonne, but on the M506 contract, the market speculators still want to use their financial strength to raise the price.
The trend and final outcome of the M506 contract market: After March 1995, the fierce competition for more space led to a sharp increase in the volume of transactions and holdings on M506 contracts, reaching an all-time high of 47,944 on March 28. At the same time, the relevant authorities issued a notice that futures regulatory work must be closely focused on curbing inflation, curbing excessive speculation, increasing regulatory intensity and promoting healthy futures markets. The country's macroeconomic regulatory policy is to prevent a sharp rise in commodity prices, and the importance of grain oil prices is also understandable. This sent a two-fold signal to speculators in the futures market, and at the same time, the M506 is about to compete for empty cigarette butts.
In April 2005, the futures price fell from a high of over 9500 to a low of 7500; and at that time, the Hainan Chinese traders imposed a cap on the total liberalization of palm oil contracts, allowing the market to seek prices in an absolutely free movement. Many of the heads in the previous period of price plummeting in losses, at this time there is the power to pay back. This also gave the airlines the opportunity to take advantage of the profit chips in their hands to continue to hit the low price, falling to 7200 levels in the M506 near the cash month.
Reflections on the M506 incident
Palm oil has been subjected to a series of explosive hype, speculation, risks, and bleak trades until it has completely withdrawn from the futures market. Many lessons and lessons can be drawn from both the contract design of the variety and the strength of market regulation.
1., Variety design is unreasonable, lack of spot production basis. Palm oil is a commodity in the world, both in terms of production and consumption. Its production and export account for the first in the world of vegetable oil. But in our country, only Hainan Island has a very limited capacity to grow palm oil, process and refine it, and the demand is basically entirely dependent on imports. Our consumption is mainly dependent on imports from Southeast Asia, and palm oil in Southeast Asian countries as an important export product, due to the large changes in industrial policy in recent years, but also influenced by international demand, natural disasters, production, inventories, etc.
In the international market, after 1995, the price of palm oil fell in a straight line, and the futures market was far higher than the international market price due to the intervention of speculative multi-headed funds. Many importers even speculate and take advantage of the loose delivery system of the exchange, importing a lot of palm oil from abroad at a low price, quickly register in inventory, and sell a large number of inventories directly on the futures market. They see the palm oil futures market in Hainan as the most convenient way to sell goods, creating a heavy cash pressure.
3) Excessive speculation was also a major cause of the M506 incident. In 1995, when the domestic futures market was at its peak, the market's unregulated operation created a group of mad speculators. They operated in an irrational manner, completely detached from the basic laws of the futures market, believing that money was a factor in the market price on the left and right, completely ignoring the fundamental trend of the palm oil spot market, blindly chasing more, attempting to win and obtain profits by raising the price, forcing the head in the air.
4. the future exchanges lack of regulation and improper handling of events. When M506 went from a high above 9500 to around 7500 in a continuous falling way, the exchange did not take positive discounting measures to coordinate the sharp contradictions between the two sides of the over-the-counter, but instead took a comprehensive relaxation of the palm oil contract slump limit, leaving the market completely out of control. From the point of view of the law of return to market value, this is not good, but for a market with a large number of holdings in the process of collapse, without confidence support, this emergency measure is too rash and rash. This directly led to the continued price decline, causing many market speculators to lose miserably and without any water, severely hitting the confidence of investors, thus completely losing the support of investors, and the market becomes dead, and the palm oil market in the South Sea is an environment that is gradually disappearing.
The M506 incident not only had a major negative impact on the trend of the palm oil market in Hainan, but also had a serious impact on the domestic futures market as a whole.
On June 13, 1996, the Shanghai Commodity Exchange, in order to control the risks of the 9607 contract, decided to impose a mandatory agreement settlement on the contract, and to remove the cards in advance, without carrying out a physical delivery. The final empty head settled at 44.20 yuan / piece, and the majority at 45.20 yuan / piece. People who have not experienced this are not immune to doubt.
The causes and aftermath of the incident
In 1994/95, the domestic futures market became the biggest hot spot, with a lot of hot money gaining, and 9507 contracts even reached a peak, with the futures price starting at 40 yuan/chapter and rising to 62 yuan/chapter. The high prices of the companies excited both wholesalers and importers. A large number of wholesale outlets registered warehouses, and a large number of Indonesian wholesalers flooded into the already surplus domestic market, which snowballed the already depressed wholesalers market.
The 9607 contract was launched in this relatively calm environment. On December 10, 1995, the Shanghai Commodity Exchange launched the 9607 and 9609 contracts. Since the main capital was concentrated on the 9607 and the 9603 and 9605 since its launch on March 7, 1996, the 9607 contract was subject to a cold call, and the price gradually fell from the 45 yuan/chan at the time of its launch. On March 7, rumors spread that the domestic 9607 could be used for delivery from about 9607 began.
By 31 May, the market suddenly rumored that the airline had a large amount of cash on its balance sheet, and the airline also took advantage of the collateral position to collect only 5% of the collateral to arbitrarily suppress it. The 9607 contract fell all the way after the opening of 43.80 yuan/day, slipped quickly to the bottom of the balance sheet under the pressure of the retailers' balance sheet, the balance of two months was finally broken, but the airline did not panic, and the stock volume remained at over 600,000 hands; the next day, the airline continued to hold a large amount of securities with 55% of the collateral.
当期价运行至39元/张的低价区时，入市接现货的买方套期保值者骤然增加，多方新生力量的加入，使得空方主力的命运顿时变得坎坷起来。恰在此时，上商所于6月6日宣布取消持仓限制，发布了《对交易保证金按持仓量实施分段管理办法的通知》。市场对此反应极为强烈，一致解释此为利多因素，于是多头主力借机发力。面对买方套保者及多头投机势力双重夹击，一时间，空头趋于崩溃，忙于斩仓，多头当仁不让，9607合约于6月7日探低至38.40元/张后迅速被多头推上停板40.8元/张，此后连续三天，天天无量涨停，空头连砍仓的机会都没有，市场风险顿增。
The deadly side of the empty 9607 contract was its large and fairly concentrated holdings, which were known at the time to be concentrated mainly in the hands of six members, with a maximum of over 590,000 unilateral holdings, and the risk of their enormity was conceivable. Faced with the 9607 contract that was stagnant day by day and the slope in the immediate air, the exchange had to intervene in order to control the risk. On June 13, the exchange deliberately stopped trading 9607 contracts, implemented a deal breakdown, and withdrew 9607 contracts before the deal, and did not implement a physical sale.
The result of the 9607 event was that the trading venues eased to some extent the contradiction of the sharp deterioration of the over-volume and effectively controlled the risk, but after this folding, the coupling period market was like a big disease, the mood was bad, the trading volume and the holding volume were shrinking.
It can be said that the 9607 event was the watershed event for the domestic cladding period market, as a turnaround, cladding futures bid farewell to the heyday of cladding and moved to the path of silence. Therefore, it is not wrong to blame the 9607 event as the culprit that caused the cladding period market to go silent.
Reflections and Summaries
The 9607 incident, although it has become history, is a profound lesson for us. Not only does it show us the dangers of excessive speculation on the market, but it also reveals the flaws in domestic covalent board futures:
1. The use of total holdings limitation method does not play a role in curbing excessive speculation, but instead the main institutions use the advantageous conditions of holding limitation to deliberately manipulate the market.
2. unreasonable distribution of the market. The two exchanges are located in the same area, close to each other, and the market is easy to form between them. The two exchanges are competing for market share, creating barriers in the market by artificial administrative means, which exacerbates the contradiction between administrative interference and free competition in the market.
3, theoretical price of the import board and the long-term deviation from the actual price, preventing the real hedgers from entering the market, the futures of the cluster board lost the basis on which it was based and became a pure speculative variety, which is bound to fail sooner or later.
The lessons learned from the 9607 incident are also quite profound. In the 9607 incident, the exchange has been very passive and negative in its risk control. The holdings of 9607 contracts have remained high above the holding limit line, and the holdings of some member units have been very concentrated, which is enough to trigger risk factors that do not attract sufficient attention from the exchange, leading to the occurrence of risk accidents.
A few tips for cotton covenants
Despite the many ups and downs of the futures market, it is fortunate that the futures market has been restructured and retained. In order to reduce the risk of similar events and to ensure that the futures contract continues to develop in a stable manner over the long term, I make a few suggestions:
1. When trading on futures contracts, proactive precautions should be taken to prevent the occurrence of risky incidents in the event of abnormal price fluctuations in a contract;
2, adjust the variety structure. With the rapid development of the domestic aluminum foil industry, the status of imported aluminum foil has undergone a fundamental change, from a dominant to a subordinate position, the futures contracts originally designed on the basis of imported plates are no longer in line with the needs of market development, if not timely change the indices of aluminum foil futures contracts, the entry of domestic aluminum foil into the quoted market, aluminum foil futures contracts will be difficult to have long-term development;
3, re-positioning the price of the coupling board, completely correcting the long-standing situation of the futures inversion, to give the real couponists the opportunity to enter the futures market, only then the coupling board futures market can truly perform its basic function, and the coupling board contract will be vital;
A few years of trading history proves that the cluster board is a good futures variety, although there was silence during this period, but as long as the industry is actively involved, cluster board futures will eventually rise again.
From the launch of the standard futures contract on August 21, 1995 to the restructuring of the futures exchange in 1998, the Guangdong JSE conducted three years of trading. During these three years, the JSE conducted three forced bids in a shorter period of time.
9601 Contract forcing
The timing of the introduction of the Guoyuan soybean contract was good, when the country suspended the trade of futures varieties such as government bonds, sugar and oil, and a large amount of foreign capital was looking for new directions, and the Guoyuan contract was the focus of these funds once it was launched. In early November 1995, the gold rush led to the introduction of Guoyuan's most active variety of rice to Shenzhen, which naturally became a hot spot for the pursuit of the huge funds deposited in Guoyuan at that time.
The first contract was 9511, which was priced from the initial 2100 yuan/ton to 3100 yuan/ton at the time of the auction, an increase of up to 50%, which to some extent stimulated the thinking of the main agencies. The 9601 contract is on the way to a leverage in this environment.
In late October and early November 1995, the main force began to absorb chips in the area of 2350-2450 yuan/ton, with the increasing activity of transactions and the continuous expansion of holdings, the majority of players were very dynamic, and the price quickly climbed to 2700 yuan/ton. At this time, the speculative atmosphere was very thick, and 9601 contracts were traded, even breaking through 80,000 hands. In the face of a multi-headed offensive, the main force began to retreat.