A futures contract is a legal agreement in which the buyer and seller agree to trade a specific commodity or asset at a predetermined price at a future time.

By buying or selling a futures contract, you agree to buy or sell a certain amount of a commodity or financial instrument at a specific time and a specific price, with the exact delivery time determined by your trading contract. It is important to note that Tiger Securities does not currently support physical delivery, so for physical contracts, you need to close your position before the first notice day or the last trading day (whichever comes first). For non-physical contracts, positions need to be closed before the last trading day.

Futures trading has its unique advantages and risks.

In terms of advantages, futures trading can achieve the effect of risk diversification because the futures market includes various commodities and assets, such as gold, crude oil, stock indices, etc., which allows investors to make diversified investments. Secondly, futures trading has a leveraging effect, as investors only need to deposit a portion of the margin in advance to trade the full amount, thus enhancing the efficiency of capital utilization. In addition, futures trading allows for anticipation management, locking in future prices in advance and countering the risk of market fluctuations. Finally, futures trading allows investors to go long or short, with the possibility of making a profit regardless of the market trend.

However, futures trading also involves risks. Market risk can be caused by global economic conditions, policy changes, supply and demand, and other factors that cause price fluctuations, which may result in investment losses. Although leverage can magnify returns, in the event of an unfavorable market movement, investors may quickly lose the capital invested and may even incur additional debt.

Margin requirements vary depending on the specific futures contract you are trading and the exchange on which the contract is traded. You must confirm the margin requirements for each contract before you start trading.

Every futures contract has a specific expiry date and once it expires it cannot be traded. It usually takes a few months from the time of listing to the time of going off the market, and to observe the price movement of a contract over a longer period, the concept of a "master-linked contract" has been developed. The term "master" refers to the most actively traded contract, while the term "linked" can be interpreted as "connecting" the most active contracts of each period over time. A master-linked contract cannot be traded by itself; when you trade a master-linked contract, you are trading the most actively traded contract at the moment. If you are trading a master-linked contract, you should also be aware of the impact of the Expiry Month Change.

Contracts with cash settlement: You need to close your position on or before the last trading day, otherwise you may face the situation of forced liquidation by the system.

Physical delivery contracts: Magic Compass Holding does not support physical settlement, for this type of contract, you need to close your position on or before the first notice day or the last trading day.

Futures trading involves a high level of risk and investors should consider it according to their risk tolerance. You are advised to conduct thorough research and considerations before entering into futures trading.

CME Group Circular on the Regulation of Improper/Illegal Trading Conduct (CME RULE 575)

Dear Clients:

CME Group issued Rule 575 regarding improper trading conduct on September 15, 2014. The main contents are outlined below for investors’ reference to help prevent any violations of these rules during trading.

The so-called improper trading behaviors generally refer to:

A. Illegal buying and selling activities For example: wash trading

B. Deliberate or reckless trade conduct in the “closing phase” that manipulates prices “Close-out session” refers to the trading period during which the product’s settlement price is determined; the specific time varies by product. In addition, “close-out session” also refers to the final closing phase for those cash-settled products.

C. “Spoofing” trades “Spoofing” refers to deliberately placing orders at prices close to the best ask or best bid and rapidly cancelling them before execution. These intentionally false orders manipulate the top five levels of the order book, luring other market participants who see a queue of large orders to follow and buy or sell, thereby pushing the market price in a direction favorable to the spoofer or causing an order that the spoofer genuinely wants filled to be executed; the spoofer then quickly cancels the large orders or executes opposite trades to profit, ultimately manipulating the market price for personal gain.

The specific form is: first place an order, then within a very short time place a large opposite-side order to induce traders who see the large queued order to trade immediately, so that your initial order will be executed.

An example of a typical spoofing trade "Spoofing":

Step 1: First place an original buy order for 10 lots of crude oil 1605 at a price of 36.82; Step 2: Four seconds later, place an opposing sell order for 100 lots at a price of 36.83; Step 3: The originally placed buy order for 10 lots is immediately executed at 36.82; Step 4, within one second, a sell order of 100 contracts at 36.83 was canceled.

Currently "spoofing" trades are a key violation that the CFTC is focusing on investigating and prosecuting.

Recently there have been some enforcement cases in Europe and the U.S.; in addition to fines and trading bans, some have faced criminal charges. The CFTC's most recent large penalty was $2.69 million.

[Related topic: WASHINGTON, April 5 (Reuters) -Federal Court Orders UAE Residents Heet Khara and Nasim Salim to Pay Combined Civil Monetary Penalties of $2.69Million for Spoofing in the Gold and Silver Futures Markets]

Rule 575 is briefly set out as follows:

All orders must be entered into the exchange for genuine, purely trading purposes, and all non-trading information must be legally true and credible.

A. No person shall intentionally place, or cause to be placed, orders whose sole purpose is cancellation or modification to avoid execution. B. No person shall intentionally send, or cause to be sent, trading or non‑trading information that misleads other traders. C. It is prohibited for any person to deliberately send or cause trading messages or non-trading messages that overload, delay, or interrupt the exchange’s or other traders’ systems. D. It is prohibited for any person to deliberately or recklessly send or cause trading messages or non-trading messages that maliciously disrupt executions or order processing.

Note: Trading messages refer to information that may lead to a trade, such as order placement information. Non-trading messages refer to information submitted to the exchange that will not lead to a trade, such as inquiries to the exchange.

The above rules apply to open outcry and electronic trading, and apply to all market phases (e.g., pre-opening period, trading session, and close).

https://www.cmegroup.com/cn-s/market-regulation/mrans.html