However, the institution still relies on strong financial strength to force most speculation. On January 12, 1996, it had set a historical high of 3689 yuan/ton. Subsequently, 9601 contracts gradually declined, and the last trading day ended its mission at 3028 yuan/ton.
The 9601 contract and the 100,000 tonnes of cash had a certain negative impact on the futures market. The most immediate impact was on the subsequent 9603 and 9605 contracts. The heavy pressure of the 100,000 tonnes of cash left the main forces of the 9603 and 9605 contracts unwilling to act, clearly inhibiting the activity of the beans.
9607 contract speculation is lucky
The result of the 9601 contract forcing was a large volume of cash entering the General Union Registered Warehouses. Heavy cash pressures brought the General Union soybean meal trade to a standstill. To get out of this dilemma, the General Union also began to revise the relevant delivery rules while encouraging the digestion of soybean meal inventory from the real estate channel. In April 1996, the General Union published revised provisions on delivery and standard warehouse management, which raised concerns of some agencies regarding the application for and storage in the warehouse.
At the end of May and beginning of June 1996, the main agencies began to write articles on 9607 contracts. As the volume of transactions and holdings grew simultaneously, the 9607 contract quickly became the leading contract floating to the surface, at which time the price fluctuated between 3100-3200 yuan/ton. Due to the high discount and fees at that time, the market was very unwilling to enter the market. Therefore, the participants in the transaction were almost entirely speculators.
At this time, the exchange tried to control the risk and coordinate, but the majority of the prospects were reluctant to compromise and agreed to a price of 4,465 yuan / tonne on the last day of trading. The final empty spot was only 30,000 tons. The use of speculation on the 9607 contract greatly frustrated the motivation of many traders, especially the securitizers of the set.
9708 The inability of the contract
After the 1997 Spring Festival, 9708 contracts created a new low of 2646 yuan/ton. Because the fundamentals were favorable to the majority of the market, some of the main institutions saw this price clearly low, entered the market more, and did not cost anything. The price was pushed up to 3200 yuan/ton, and then used to tightly control the market movement. After the current price hike of 3400 yuan/ton, it again stimulated the interest of spot sellers that had already decreased, after a close-up plan, after a part of the sale period maintenance began a trial sale period, the price situation stopped.
Experience and Lessons
We have learnt a lot from the several forced listings at the Guangdong Joint Futures Exchange.
First, the General Union of Soybeans has been in operation for more than three years, and there is a certain basis. When redesigning the standard soybean contract, the major companies can refer to the success of the General Union of Soybeans, its shortcomings and defects should be avoided or improved as much as possible, and strive to formulate uniform contract terms to provide a truly fair futures variety to the general investor.
Secondly, from the experience of the General Union of Soybeans, when modifying certain terms in the operation of futures contracts, scientific research, repeated arguments, and the principle of fairness must be used to grasp the uniform concentration of the fluctuation, so as not to be biased in one direction by the market, thus triggering a risky event.
Third, the biggest lesson of the CFA is that it is necessary to pay attention to the physical delivery of this link. Multiple push-ups of the CFA, and even multiple risk events in the domestic futures market, are due to the leakage of this link. The quality of the bean is more resilient, the quality requirements are too loose, a large number of cash flows will be registered at the stock exchange, and the huge cash pressure will make large speculative investors stand by, and the lack of speculation will make the market simply unable to be active, and the basic functions of the market will also play out.
Fourth, the focus should be on establishing a reasonable investor structure. The futures market needs not only large houses, but also large, medium and small investors. The latter is the real basis of the futures market. Only by focusing on the cultivation of medium and small investors can the market be stable and active in the long term.
After all, if we summarize and learn from the experience and lessons learned, we believe that soybean contracts will become an undying star in the domestic commodity futures market.
On December 21, 1995, the Hainan Chinese Trading Company announced that the F605 Coffee Futures Contract had been extended from the F605 Contract to the F605 Coffee Futures Contract (the total amount of deliveries was increased from a symbolic one tonne to 10,000 tonnes), and all positions outside the delivery limit were forced to self-balance at the weighted average price of all transactions from the beginning of the month to the last day of the transaction.
Recap of the Coffee F703 incident
After the F605 contract was signed on May 6 with a ceiling price of 4,221 yuan per 100 kilograms, 17,000 tons of coffee were imported from the surrounding countries for delivery. Under real-world pressure, the F607 variety plummeted from 3,340 yuan to 1,814 yuan, and the satirical drama of the vacuuming of the vacuuming of the vacuum was played out. So, the seizure of the warehouse became a unique panorama of the vacuuming of the coffee variety.
At the end of September and beginning of October 1996, after the notice of the Chinese Securities Regulatory Commission and the State Council Securities Commission on the tightening of supervision, the Chinese companies immediately announced the cancellation of the delivery limit from F712 to 500,000 hands. Less than two months later, the F712 was cancelled by both sides, and the F703 was cancelled again. By the last trading day of 1996, many parties were forced to fill the balance sheet of the F703 after the first three months of the year. The balance sheet of the F703 was forced to be filled.
Reflections on the F703 coffee risk
First, the rules of the exchange. It is obvious that the limit delivery system is a coffee variety that relies on the hot-tempered mattress, which is produced from F605 to F703, and the exchange is developing such a delivery system, but does the exchange consider the inherent risks involved in such a system?
Second, regarding small varieties. Basically, China does not have the conditions for the operation of coffee futures. China is not the main producer of coffee, nor is it a place of consumption and intermediate concentration. Hainan, as the largest province in China producing coffee beans, produces about 580 tons of coffee beans annually (statistics from 1996), the country's consumption of coffee, medicinal use is extremely limited, and there are fixed import channels. This fundamentally determines the lack of real consumerism and fixed-term value requirements for coffee futures.
Third, regarding the speculation and manipulation of large companies. Looking back at the trend of F703 and previous coffee delivery months, we find that technical analysis is in a very awkward position in market research. First, the main institution takes a two-way holding, makes unusual transactions on the knock order method, and without taking into account the cost of the ground swing, attracts middle and retail investors into the market, and then calculates the number of their excess holdings, which direction the number takes advantage of the other direction holdings large-scale placement, in an extremely catastrophic way to prevent the middle, the distributor in time to admit losses, the drop in the board and expand the board, several times falling as high as 1,000 points, surprisingly.
Corn as a futures variety has a good foundation. So far, corn futures have been operating successfully in the international futures market for more than 100 years. Five exchanges in the country, including the Dalian Commodity Exchange and the Changchun Joint Futures Exchange, have listed corn, where the corn contract of the Dalian Commodity Exchange has been relatively successful, once becoming the star variety of the futures market. However, in the 1998 futures adjustment, the star variety of corn was not able to be retained, which is a great pity.
The ups and downs of corn futures
In October 1994, the Chinese Securities Regulatory Commission issued a decree suspending the trading of rice futures, investing in large-scale wholesale rice futures, and the funds on the rice futures were in a hurry to find new investment directions, so the once-burned-out corn futures were once again favored by large investors, and a large amount of hot money began to accumulate in the corn market. Due to the tight supply of corn at the time, the stock of the exchange stocks in Dalian accounted for only 50% of the total stock, while in the same period in 1993 it reached 80%, in the middle of the US intellectual property negotiations broke down, China cancelled the plan to import a large amount of corn from the United States, which further weighed the tension in the domestic corn supply.
After the 1995 Spring Festival, as rumored Chinese-American intellectual property negotiations had a new turn, people again saw the hope of restoring imported corn from the United States, the empty heads took advantage of the pressure, and Dalian corn had a short callback. However, because the supply and demand contradictions in the market of corn were still not resolved, the stock corn was still very tight. Therefore, after a brief callback, Dalian corn continued to rise in May, finally picking up the high price of C505 at 1600 yuan/ton.
The C511 contract is being activated by the strong bull market of the C505 contract, which has become the leading contract for corn in Dalian after the C505 contract entered the month of delivery. Due to the high price of corn in Dalian at that time, many people used the hype to raise a wave of strength again. The C511 contract on May 15 created the highest price in the history of corn futures trading at 2,114 yuan/tonne, which was close to 600 yuan/tonne at that time.
On May 13, 1995, the State Council convened a meeting and decided to ship 1 million tons of maize from the northeast in order to offset the rising maize prices in the south. At the same time, a series of measures were taken to regulate the futures market, which allowed the dominance of maize in Dalian to be curbed.
In order to further flatten the price of corn, the government imported a large amount of corn from the United States, a cumulative import of 1864,000 tons in July 1995, while dumping a large amount of inventory into the market, the corn spot price fell sharply, and the futures market price also fell. In early August, the price of the monthly contract period fell to around 1650 yuan/ton.
The hype surrounding the C511 corn contract, especially the repeated serious violations in the corn futures trading at the Langchong Joint Futures Exchange in the surrounding market, raised concerns among management. At the time, the management of the Langchong Joint Futures Exchange was in disarray, resulting in a large number of empty orders flowing into the market, the market order was seriously disrupted, a large number of delivery defaults, triggered major economic disputes, and had adverse effects on society. On July 13, 1995, the Securities and Exchange Commission of China issued a notice requiring domestic futures exchanges to gradually increase corn futures trading to more than 20% within 40 trading days of the notification.
Reflections and Summaries
Corn futures are a thing of the past, and the lessons they have taught us are profound, not only showing the dangers of excessive speculation on the market, but also exposing the many flaws in the domestic futures market at the time, as well as the deviations in the perception of the futures market.
1.多个交易所同时上市同一个品种，而合约设计、交割标准又不统一，各自为政，分割市场，争抢客户，疏于市场管理甚至纵容操纵，使期货价格过度偏离现货价格，导致期货市场功能失灵。
2.市场投资结构不合理，投机力量完全左右了市场走势，市场缺乏套期保值的基础，使得期货市场功能得不到有效地发挥。
3.期货市场本身是一个高风险的市场，期货价格的波动在所难免，期货市场的管理者在采取坚决措施防范风险的同时，还应以积极的态度重视市场的建设，“一管就死”或取消品种都不是最佳效果。
4. At the time, there was a misconception about the futures market that the futures market disrupted the spot market, leading to a spike in spot prices. In fact, the main reason for the sharp rise in the price of corn in 1995 was the lack of supply and demand for corn, which led to a rapid rise in futures prices.
China is a major producer and consumer of maize, and its production, consumption, and import volume have a significant impact on the international maize market. Many industries and enterprises related to maize also need an authoritative futures price to guide production and consumption, and also need the maize futures market to hedge against operational risks. In fact, the early maize futures market in China has already played such a role. In May 1995, the State Department, based on feedback from the futures market, adjusted the depressed maize price of 1 million maize from the Northeast into China, while expanding imports from the United States, further alleviating domestic supply and demand tensions.
January 18, 1999, was a Monday that I fear will be remembered in the history of the world of futures.
On the afternoon of the 18th, the Stock Exchange issued a No. 10 Notice announcing that after the close of trading on January 18, 1999, all holdings in the green bean contracts 9903, 9905 and 9907 would be hedged at the settlement price of the day. This means that all transactions in these contracts would be fully hedged overnight and all cash deliveries would be terminated.
In a decision of such importance, the exchange did not disclose the specific source and level of risk, but merely used a phrase to further defuse the market risk; nor did it disclose the number of members, the number of participants and the results of the voting in the Council meetings. The management of the futures market appears to be both lacking in transparency and lack of regulation compared to the regulated operation of the stock market.
The collapse of the market, the practice of zero sales, caused a lot of small and medium-sized retailers in the area to lose a lot of money, and the empty head of the stock will also suffer because it cannot be delivered. After the market closed, the whole place was desperate and shocked, and then immediately accused of shouting and flooded.
The participants of the futures market are the opposing parties (expected price bulls) and the empty parties (expected price falls), the exchange is a non-profit intermediary because it is responsible for providing the market and regulating the market. According to international practice, only by putting its own interests outside the market can the regulation of the exchange be truly fair. But for many years, although the Chinese futures exchange has been adjusting its position in the market, it has not been in place.
For years, the Chinese futures sector has been like a semi-closed tribe in modern society, parasitizing on the nerve end of the entire economic society. People on the outside, rarely visiting, less people asking what is or isn't there; people on the inside, rarely interacting with the outside society, they are used to all the rules there, written and unwritten, including inside and outside.
But this time it's really different. When the interview began on January 20, many in the industry, including futures brokers who have been avoiding the media in recent years, actively reached out to journalists and demanded exposure. Probably pessimistic, but true, they said: "Oh, this is unprecedented in the history of world futures".
If the market is currently shrouded in a sense of despair, it is not too much. But the losses are secondary, and the people who make futures are not as vulnerable; the most angry people are the rules of the game completely out of balance, and the unbalanced rules of the game, the customers will lose more in the future, and the futures market is bound to die. The market has turned its spear entirely at the exchanges that set the rules of the game.
Translated from the Japanese language by: