The Research On Efficiency Of Chinese Futures Company Margin Setting And Mandatory Liquidation

Margin and mandatory liquidation both are the primary risk control regulation for futures contractmarket. In China, exchange and broker (futures company) jointly make up the two levels riskmanagement system. Analyzing broker’s margin setting and mandatory liquidation will help broker toimprove their making-decision process and mandatory liquidation action. The paper will test and assessbroker’s margin setting and mandatory liquidation to decrease the hole of risk control system, improvemargin setting level, coordinate the risk control action between different futures contracts. The paperusing demonstration testing method, selecting more than30000daily trade data samples of four futurescontracts, according the practical parameter of broker’s margin level for detection, then describing theresult by statistics method, finally assessing the efficiency of broker’s margin setting and mandatoryliquidation. On the basis of broker’s risk control goal, substitute different margin level to test. findingthe qualified region that broker can exercise. quoting all the data included by the qualified region forcomparison and determine the best margin setting for different risk control strategy.The paper’s structure are as followed:Chapter One Introducing the background of margin and mandatory liquidation. Listing all therelated legislation.Chapter Two Collecting related articles and papers to help reader understand the goal and benefitof margin and mandatory liquidation.Chapter Three Analyzing the sample, assessing the efficiency of broker’s margin setting andmandatory liquidation.Chapter Four According the risk control goal to find the margin setting region, comparing theresult of different level. determining the best solutions for different risk control strategy.Chapter Five summarizing the context of Chapter Three and Four. obtain the conclusion andnoting the shortage and limit of this paper. listing the potential research area.Reviewing the result, we can find the current margin setting level and mandatory liquidation arequalified for broker risk control demand, but the procedure has some stretch space. It still need riskcontrol stuff to make a decision by their own experience. The efficiency of mandatory liquidation between different futures contact has significant difference and make the risk control stuff moredifficult to judge. It is necessary to analyze the efficiency of margin and mandatory liquidation forbroker’s risk management.