Futures risk education

Risk Prevention of Futures Brokerage Companies

As the direct participant and intermediary of futures trading, the impact of futures brokerage companies on futures trading risks is at the core. The risk of the exchange (clearing house) is the risk that occurs when the futures brokerage company loses heavily and cannot replace the customer to perform the contract. The customer's position explosion is not only the customer's risk, but also the risk of the futures brokerage company.

1、 Main risk sources of futures brokerage companies

1. Manage risk. It mainly refers to the possible losses caused by improper management of futures brokerage companies. For example, when a futures brokerage company trades for a client without a client's entrustment or starts trading before the client's account opening funds are in place, it will cause risks and losses.

2. Predict risks. When the personnel of futures brokerage companies make predictions, due to the complex price changes, there are often deviations, resulting in losses to customers, loss of customer trust, and shrinking transactions of futures brokerage companies.

3. Business operation risk. The business operation proficiency of futures brokerage companies directly affects the company's performance. Important business operation means include how to advise customers to make reasonable risk diversification investment, how to accurately and quickly assist customers to place orders, how to develop effective trading plans, etc. For brokers, business operation risks always exist.

4. Customer credit risk. When a futures brokerage company conducts transactions on behalf of a client, if the client fails or fails to perform, the futures brokerage company will perform on behalf of the client. Any credit crisis of the client will affect the performance of the futures brokerage company. Therefore, it is important to understand the credit status of the client's funds. There are two situations of customer credit risk: one is that the customer cannot perform the contract due to major events such as the change of legal representative, ownership change, deterioration of business conditions and the occurrence of force majeure; Second, the futures market has undergone major changes and the price has changed dramatically, making customers unable to bear and perform.

5. The risk of vicious competition in the economic industry. Futures brokerage companies have great operational risks. In order to win more customers, futures brokerage companies often compete to lower commission rates, reduce fees, improve service quality, etc. The competition between futures brokerage companies often reduces the average profit margin of the industry, and also makes a large number of improperly operated futures brokerage companies bankrupt.

2、 Internal risk monitoring mechanism of futures brokerage companies

1. Control customer credit risk

(1) Make a detailed investigation on the source of clients' funds to ensure that clients have enough funds to engage in transactions, and reject those clients who are poor in credit and do not meet the investment requirements. Futures companies should provide customers with necessary training, strengthen their risk awareness, improve their trading skills, and reduce the possibility of substantial losses.

(2) Check and ratify the position limit according to the customer's credit status. In order to control trading risks, futures brokerage companies generally charge customers a certain proportion on the basis of the margin ratio specified by the exchange. Otherwise, the risk is great and there is no room for manoeuvre. Therefore, many futures brokerage companies have stipulated maximum position limits for customers to control their trading scale and prevent risks.

2. Strictly implement the margin and additional margin system

The margin is the guarantee that the customer performs the contract. The margin standard of the futures brokerage company is generally higher than the margin collection standard of the exchange. The customer must add margin within the specified time limit to ensure that there is no debt every day. When the customer cannot add in full amount in time, the compulsory position closing will be implemented. The handling of customers' in transit funds is also an important part of risk control. Due to the restrictions of the bank settlement system, there will be refunds or bad checks in some cases. Therefore, the customer's in transit funds cannot be used to open new positions generally, but only as additional margin; When the market price fluctuates violently, funds in transit cannot be used as the basis for not being forced to close positions.

3. Strict management

It is strictly prohibited to use illegal means to disrupt normal transactions for personal gain; For financial supervision, we must adhere to the authenticity of finance and settlement, and adhere to the comprehensive supervision of customers and their own fund operation in the whole process of futures trading.

4. Strengthen the management of employees and improve business operation ability.

Futures brokerage companies should strengthen personnel training, improve the quality of employees, improve the post responsibility system and post management rules of brokers and other staff inside and outside the market, strengthen professional ethics education and business training of brokers, and enhance market competitiveness.