It refers to a transaction that delivers or pays at a pre-agreed price and quantity on the agreed date to resolve the exposure caused by price changes at future delivery.

Futures trading is a financial transaction with futures contracts as the subject matter. It refers to a transaction that delivers or pays at a pre-agreed price and quantity on the agreed date to resolve the exposure caused by price changes at future delivery. According to the subject matter, it can be divided into three categories: commodity futures trading, financial futures trading and credit futures trading. The futures market is sponsored by the commodity exchange, and it is a market entity formed by the public transaction between the buyer and seller of commodity. The commodity futures market includes both a general understanding of the content contained in futures contracts and a special understanding and understanding of risk control activities on future price changes risk exposure.

• 1. What is Futures
• It is a new type of financial tool that can be used to hedge or hedge against risks. Futures trading is to achieve risk control by buying and selling futures contracts. This kind of trading is a typical trading method. However, in actual situations, due to the large number of participants, dense capital, and fast information circulation, the futures market not only causes the price fluctuation range of many commodities, but also has a large number of speculative activities, and its risk is much higher than that of ordinary financial products and stock markets. Therefore, when formulating futures contracts, not only should we consider factors such as large price fluctuations and numerous market participants.
• 1. Futures refer to standardized contracts, which do not require investors to pre-set futures.
• The two parties to the transaction sign a contract for the sale of the subject matter, which is equivalent to entering into a standardized contract for the sale price, delivery date, location and delivery quantity. When market prices fluctuate significantly, standardized contract can effectively control price risks. Standardized contracts are not affected by the subjective will of buyers and sellers, and can effectively avoid disorderly price fluctuations and vicious price competition. Therefore, futures prices are of great significance to both parties when conducting securities transactions in the future. Standardized contracts can also be adjusted according to the constant change of the subject matter price over time, so that they have strong resistance to price shocks. These characteristics make the futures market a multi-variety market and are a very important part of the international futures market.
• 2. By buying and selling futures contracts, customers can control the future buying and selling of certain commodities or financial instruments.
• By buying and selling futures contracts, customers can make decisions about selling certain goods or purchasing certain financial instruments in the future. In futures trading, customers can operate long contracts and short contracts. A long contract requires the customer to hold spot and sell appearing goods in the spot market, while a short contract requires the customer to hold spot and buy spot in the hedging contract. At the same time, there is another difference between long contracts and short contracts, that is, long contracts cannot revoke positions, while short contracts can be revoked. By signing the contract or using it as a certificate of right to guarantee delivery or monthly delivery, customers can obtain all the principal paid for their future sale of futures contracts, and for the forward contract that actually bears risks, customers can do not need to pay the principal. This is also one of the characteristics of futures trading, that is, customers can adjust and make decisions in the future when selling or buying a new or about to buy a certain financial instrument through different contracts and make decisions; while other financial institutions or investors avoid risks through corresponding financial instruments (such as treasury bond futures) or speculative operations in short contracts.
• 3. This control may have adverse effects in some cases.
• For example, due to the long-term large fluctuations in commodity prices, investors may suffer a lot of losses due to market price fluctuations, which will affect their ability to control the future market of the commodity. For example, due to the tight supply and demand relationship of the commodity itself, the futures market prices may rise, but due to the small trading volume, it is impossible to control the spot market in the short term.For example, the futures market is very speculative and trading is very active. If there is an opportunity for a sharp rise in prices, it may cause investors to make profits, and when the price falls, it may cause speculation failure or even losses. For example, since many commodities are undelivered, many people require selling their spots in the futures market in order to avoid risks. But this process is likely to cost investors more or less because they don't know how much they will lose in the near term.
• 2. Market entity
• The market entity of commodity futures is composed of futures exchanges, investors, customers and counterparties. They refer to institutions that mainly focus on spot trading, participate in all aspects of futures market activities, have certain economic strength and business management experience, and engage in futures trading activities. Its role is to create a good social environment for the development of the commodity market - including providing services for commodity futures delivery and creating good conditions to achieve "multiple-win"; maintaining the order of the spot trading market based on commodity futures trading; and also providing value-added services to enterprises through the spot market. Futures exchanges refer to national futures exchanges (referred to as exchanges) that are regulated by the State Council or are established with the approval of the State Council. The exchange shall manage the exchange in accordance with the principles of national regulations such as the financial accounting system independent of administrative agencies and financial institutions. The exchange implements a membership hierarchy system. Members apply to join the exchange according to the prescribed conditions and shall pay membership fees to the exchange after becoming a member; those who exit the exchange without a legitimate reason and fail to meet the conditions are deemed to be automatically withdrawing from the market.
• 1. The exchange is the main body of the futures market, and is independent and irreplaceable.
• Exchange is a non-profit organization established in accordance with the law. Its members are determined by the state and have independent legal person qualifications. Its rights and obligations are stipulated by national laws and administrative regulations. The exchange operates in a membership manner. Membership fees are charged in proportion, that is, after paying the membership fees, trade on the exchange; members are not allowed to buy and sell each other. The exchange conducts transactions mainly in the form of public bidding or bilateral quotation on the specified date and after the closing of the last trading day before the holiday; each lot of trading contract shall be subject to a guaranteed commission based on the ratio of the transaction amount to the total transaction amount. The exchange implements unified standards for members, and implements a system that combines annual assessment and term assessment for members; implements a system that combines annual salary system and membership system for members; implements a hierarchical evaluation system for members, and the membership level is elected by the membership meeting.
• 2. Investors refer to legal person investors participating in futures exchange trading - it must open an account on a stock exchange in China in a real, legal and effective way and credit level, and open a securities account in accordance with the procedures stipulated by China Securities Regulatory Commission .
• Futures Exchange has made strict and specific regulations on the qualification conditions of investors. Investors must be members of the futures exchange and legal person customers that laws and regulations stipulate for their transactions. Unless otherwise provided by laws and regulations, all legal entities entering exchange transactions fall into this category. Other clients with legal person qualifications generally do not participate in market investors who can only participate in trading activities that are members of the futures exchange or legal customers stipulated by law or law. Except for those who have relationships with futures exchanges or whose identity or reputation are unknown, no one shall serve as the object of their trading service.
• 3. Customers refer to units and individuals engaged in futures trading to settle funds and handle warehouse receipts.
• Customers include both individuals and units. Individual refers to customers associated with the futures market, units include enterprises or individuals. Futures trading clients include two units or individuals used for delivery and settlement by enterprises or individuals and commercial banks when conducting futures trading. In addition, there are other companies or individuals associated with the clients.When conducting futures business, commercial banks are based on customers, but they must also be related to the bank when handling business; and individuals who directly establish contact with buyers and sellers are units or individuals whose account name is the name of the unit used when handling business with customers. They are not affected by customers and belong to a settlement unit. Customers' participation in futures product delivery has no impact on commercial banks. Commercial banks have obvious advantages in using customer relationships to manage risks.
• 4. The counterparty refers to the parties involved in the futures market and their entrusted agencies, namely, financial institutions such as futures exchanges, customer registration and other financial institutions, as well as legal persons, other organizations and natural persons.
• In commodity futures trading, various traders may appear due to various reasons such as trading objects and trading hours, but the counterparties are those who are directly engaged in commodity futures trading activities. Each trader in the market includes both buyer and seller, as well as the agency relationship between the two parties . These relationships are established and maintained through a principal-agent relationship. When dealing with a transaction, the counterparty should be the person who shall be held responsible by one party under the agency entrustment by the other party, but shall be liable if it causes losses or other party causes them. If there is a written transaction contract (including a transaction confirmation letter) between the buyer and seller and the counterparty and the counterparty, the agency relationship can be deemed to be valid, but the contractual provisions should still be complied with and pay the contract price to the other party. If the parties do not have a written contract, and the transaction in other forms cannot be considered valid and does not comply with the contractual rules.
• 3. Margin system
• Margin system is the exchange stipulates the amount of margin for customers, and the funds that can be used for futures trading must account for a certain proportion of the value of the futures contract. It is an effective means to prevent excessive speculation from customers, ensure the safe operation of futures contracts, and prevent market risks. Futures companies must charge customers a proportional fee above the contract settlement price and return it within the prescribed time limit. At present, the margin system adopted by my country's futures market is: the settlement price + the exchange charges a handling fee of 5% of the transaction amount. The handling fee is borne by the exchange. Members should determine whether to implement a margin system based on the scale of futures contracts they manage and the spot transactions. Currently, the standard for domestic commodity exchanges to implement a margin system is about 10%.
• 1. Calculation of margin
• Margin is a currency-based risk reserve , which is proportional to the amount of funds of the customer. Generally speaking, the ratio of margin to the value of the purchased contract is called the "margin ratio" or "risk reserve ratio". When calculating the remaining balance using the settlement price plus leverage method used in my country's current futures market, the multiplier method is generally adopted, that is, calculated according to the percentage of the value of the purchased contract. Leverage ratio refers to the number of risk reserves borne by each transaction when a certain transaction unit is the contract value. When calculating the leverage ratio, first calculate the ratio of 's opening balance (assuming that all contracts are not traded) to the opening balance, and then calculate the margin amount of each contract based on the opening balance multiplied by the leverage ratio of 20% of each contract, and then multiplied by the margin ratio of the opening balance to 's margin ratio . The formula for margin calculation is: leverage ratio = risk reserve – margin ratio
• 2. Margin is insufficient
• If the customer's margin is less than or equal to the margin he has paid, the risks generated in the transaction shall be borne by the customer, which will have a certain impact on improving the quality of the transaction. This is because raising margin only requires the margin to be paid, and it will not have much impact on the risks that have occurred. Therefore, for customers, raising margin standards can not only reduce the possibility of being closed or punished, but also effectively control risks. Therefore, raising margin standards is very necessary in actual operations, but this does not mean that the margin system must be completely abolished. In fact, any margin system will take into account the actual situation when designing it. It must give full play to the role of the margin system, and also take into account the needs of risk control and improving market efficiency.Overall, the margin system not only ensures the stable operation of the futures market and prevents excessive speculation, but also prevents risks caused by investors' speculation and risks brought about by improving market efficiency. Therefore, it is one of the more mature and important margin systems in the futures market. The margin system has a long history in my country, but with the continuous development and maturity of the futures market and the continuous development of my country's financial market, it can no longer adapt to the overall requirements of the market and the reality of the continuous development and maturity of the domestic futures market.
• 3, improve margin standard
• 1 The main methods to increase margin are three combinations: raising margin standard, lowering margin standard and improving margin standard. Raising margin standards is to prevent futures companies from manipulating market prices, improving risk prevention capabilities in the spot market, and reducing customer speculation pressure to protect the interests of futures companies. While raising the margin standard, each variety is also required to formulate margin standards. For example, the margin standard for a certain type of brokerage company is 10%. If it is increased to 15%, its settlement price will increase by 20%-30%. In other words, the contract originally required a deposit of 50,000 yuan, but now it only needs to pay 100,000 yuan to control the risks. Improving margin standards can not only reduce the pressure on customers to pay margins, but also enable futures companies to operate better and reduce their revenue costs. After raising the margin standard, it will not cause a significant fluctuation in spot market prices, nor will it affect the profits of futures companies.