The Great Shandong Garlic Futures Collapse

High interest loans! Garlic futures trading! Virtual money! Margins raised from 20% to 50%! Price limits moved from 5% to 18%! Trading halt and ¥280 million in margin gone in an instant! Total losses nearing ¥400 million!

Global financial markets had been eerily calm for weeks, but this placid condition has been shattered by the great Shandong garlic crash. For more than a month, the August garlic contract on a Shandong electronic exchange had held between 2,700 and 2,800 yuan per ton. Bear raids were not unheard of, but all had been successfully repulsed. While bears were held at bay, the price on the exchange was abnormally low. The spot price for garlic was 3,200 yuan and other exchanges in Shandong province were already above 3,000 yuan per ton on the August contract.

In June, bulls poured into the market once they spotted the undervalued garlic contract. Even though the bulls grew their position to 60,000 tons, the price still wouldn't budge. Many exited in June, but by mid-July there were still 20,000 tons of open interest. Who was the giant short behind the scenes, keeping a lid on garlic prices no matter how many bulls showed up? None other than the general manager of the exchange using virtual money against the paying traders! Following margin hikes from 20% to 50% and the widening of the trading band from 5% to 18%, on July 15, garlic opened 18% limit down. The market shut. Hundreds of millions in customer funds vanished in an instant.

This isn't the first case of a collapse in Shandong province either, in the past few years there have been several cases involving thousands of people and hundreds of millions of yuan in damages. Right now, another exchange (Qingdao Jinzhifa) is also in trouble. It's bank account should have hundreds of millions in client margin, but there's only ¥27 in the account. 青岛金智发多日不能正常出金 涉交易商资金近4亿. According to sources, Jinzhifa obtained its capital via high interest loans.


"Shandong Agricultural electronic disk is now nearly 300 million hunted Bureau margin was missing

  Laiwu Economic Herald reporter Wang Yanfeng reports

  Trading plunged 18 percent, almost all long warehouse explosion; nearly 3 billion of customer deposits were missing, remaining 1,200 million; Meanwhile, actual controllers lost contact, was suspected escaped and fled.

  This is (called "Shandong Agricultural" below) in Shandong agricultural electronic trading market staged a "hunting bureau."

  "This is simply robbery!" Investors Chen said angrily. He invested more than 40 million in the electronic disk, is now already a minute left, actually owes more than 3000 yuan.

  Notably, "Shandong Agricultural" is known as the Shandong Provincial Department of Commerce's commodities electronic trading venues. Economic Herald reporter learned that, "Shandong agricultural products" by the Shandong e-commerce Limited (hereinafter referred to as "Shandong business") operations, which have some relationship with the Shandong Provincial Department of Commerce.

  Shandong agricultural products, "Hunt Office" has once again exposed the industry's ills: the organizers free to manipulate the market, there is no security to speak of margin regulation.

  Disk: long annihilated

  At 8:50 on the 15th Xu, then there is less than 10 minutes, "Shandong agricultural products" is about to open. Just at this time, a blockbuster announcement "turned out": "Shandong agricultural products" will be corrective, July 15, 2014 for all contracts last market trading day, the day up 18% decline in adjusted.

  18% Price Change What is the concept? The market had price limit is 5% margin ratio of 20%. In the 14th, the market is the main contract fell more than 2 percent, some investors have appeared insufficient margin. If the 15th fell by 18 percent, almost all the bulls will burst positions, some investors even a "down due to" phenomenon.

  Sure. Opened at 9:01 on the 15th, the main market contract "garlic 08" and "garlic 12" straight away daily limit of 18%.

  In all investors, Qu Hong from the Northeast is the most tragic one. In several minutes before the accident, he also scored funding.

  Before the 14th, Qu Hong holds 11 million yuan on the bull. 14, "Shandong Agricultural" garlic contract fell, he believes the opportunity comes, then into 80,000 yuan of funds to the account in order to increase the position and guard positions. Before the 15th day of the opening, 8:00 more than 30 points, the composer once again flood into account 14,200 yuan.

  9:00, opening up, Qu Hong-open the disk, shocked: how nursing positions funding all gone? The previous day was still a breakeven account, now shows a loss of 14 million yuan, most are forced to liquidate positions.

  The proportion of flood losses are not the greatest composer. For many investors, because the previous trading day has dropped more than 2 percent, the 15th fell 18% again, 20% of the deposit has been zero.


  From the spot of the "casino"

  Just before approaching the opening day of the announcement is the last trading day, the price limit of 5% to 18%, the organizers have been very obvious signs of market manipulation. But this is not the worst offender.

  "Shandong agricultural products," the most obvious signs of being manipulated is that its disk prices have been completely out of stock.

  Qu flood came in May of this year, Shandong Province, Jinxiang, its original purpose is to store garlic. But he was surprised to find that garlic "Shandong agricultural products" is so cheap:. "In the 14th, the spot price has 3200 yuan / ton, the price of electronic trading in August contracts was 2,721 yuan / ton, I figured, the price is so low, When the garlic is stored on the Well. "

  Qu flood can never imagined, has been much lower than the spot price, after he entered again be plunged 18 percent. So he figured, if the price has been below the spot, he positions to the delivery date.

  But in fact, "Shandong Agricultural" spot delivery has been minimal.

  Departure from the current price of spot delivery poor, in this case, "Shandong agricultural products" has been reduced to a spot market from "Casino." Even more difficult to accept that such a "casino", places where transactions are not sure where.

  14 evening, because the question of departure from the current prices and organizers casual announcement, more than 30 investors rushed to the "Shandong Agricultural" location Laiwu City, the local public security bureau. Day morning, investors came in Laiwu City Urban Planning Exhibition Hall, here is the "Shandong Agricultural" trading places.

  15, "Shandong agricultural products," the door closed, empty. And in this case, "Shandong agricultural products" still announced and opened on time at 9:00.

  More surprising is that less than half an hour after the 9:00 opening, "Shandong agricultural products" stopped the disc; 11:30, various types of trading venues is time to stop plate lunch, "Shandong agricultural products" has opened up and started a large-scale forced liquidation; until 15:00, the time the disc is stopped, "Shandong Agricultural" still in the transaction; until 16:22, Herald reporter also saw an investor is forced flat warehouse transactions.

  Market place has been empty, why the disk can continue trading? 15 afternoon, dozens of investors in Laiwu City Public Security Bureau police station north Xiaoyi asked investigators, police officers reluctantly replied: "They may be somewhere else ......"

  Follow-up: money, people have gone?

  In the "Shandong agricultural products" announcement will raise the proportion to 18% margin on the occasion, there is more bad news. Have access to investors through personal relationships, financial investors have gone missing on the margin account.

  The last time the "Shandong Agricultural" Investors margin account balance is released in July 10, when the display has two accounts, of which ICBC account balances 288 million yuan, the Agricultural Bank ( 601,288 , stock it ) account balance 10.77 million yuan. To July 15 morning, the investor inquiries to the Industrial and Commercial Bank account balance, leaving only $ 9 million.

  Investors fear there is another thing: "Shandong agricultural products," the person in charge have lost contact. Prior to "Shandong Agricultural" in contact with investors, including senior chairman Liutian Lin, Supervisor Dou Wei, Trader people 李志胜. But from the beginning the evening of 14, lost contact with all these people. Herald reporter from the 15th to the 16th repeatedly dial the phone a few people are unable to get through.

  Lost contact with the person in charge, the margin was missing, is it escaped and fled?

  15 afternoon, investors' concerns in Laiwu City Public Security Bureau police station north Xiaoyi confirmed, investigators face the presence of dozens of investors admitted: account balance ICBC "Shandong agricultural products," the remaining 900 million yuan, the Agricultural Bank remaining account balance of more than 300 million. Moreover, funds are not transferred out of the past two days, but had already transferred one after another, the public security organs can only be individually survey of capital flows .

  When investors have called for the immediate control of the "Shandong agricultural products" related personnel, the investigators also acknowledged unable to contact Wei Dou, etc., and Liutian Lin may have been "double."

  Department of Commerce: individual behavior

  "Shandong Agricultural" The number of people involved, one important reason is that it has been the name of the Shandong Provincial Department of Commerce's company banner to attract business. "We believe that the Department of Commerce." Many investors said so.

  16, 2009, more than 50 investors came to Shandong Provincial Department of Commerce. Relevant person in charge explained to the investors, "Shandong Agricultural" in matters related to the Department of Commerce is a private act related personnel.

  Public information, "Shandong Agricultural" operated by Shandong provider. Herald reporter noted that the username "Shandong Agricultural" Investors margin account also for Shandong providers. The registered address of Shandong's Jinan City, 4th Floor, 6th Avenue Yang, Shandong Provincial Department of Commerce is the same office building.

  Meanwhile, Shandong's chairman had to 刘天林, but investors do not know 刘天林 in March this year, the company has ceased to be the chairman, the new chairman of WEI Chao. Public information, Liutian Lin served as director of the Shandong Provincial Department of Commerce Service Center, WEI Chao has been rated excellent Communists Shandong Provincial Department of Commerce in 2010.

  From the shareholder structure, Shandong's ultimate control by the International Federation of Shandong Province Economic and Trade.

  Shandong enterprise information publicity system display, Shandong providers registered capital of 16 million yuan, the largest shareholder of Shandong International Business Co., Ltd., holding 51%. Shandong International Business Co., Ltd. Legal representative Liutian Lin, from Qingdao International Exhibition Co., Ltd. Luen Fung holding 66.64% stake. Qingdao International Exhibition Co., Ltd. is the abundance of state-owned enterprises, the largest shareholder of Shandong International Economic and Trade Association, holding 80%.

  Shandong International Economic and Trade Federation influential, it is the system by the Shandong Provincial Foreign Economic and Trade associations, co-sponsored enterprises established in the Ministry of Commerce, former Minister had attended its opening ceremony. However, access to the Herald reporter whether the unit was not anchored in the Shandong Provincial Department of Commerce.

  16, 2009, the Shandong Provincial Department of Commerce, responsible person to face the visiting investors admit Liutian Lin, WEI Chao indeed Commerce Department staff, but they have other reasons to be "double", which is a private act in Shandong's behavior .

  In Shandong's senior ranks, sinus Wei has also been claimed to investors who are Department of Commerce. Shandong Provincial Department of Commerce staff on the 16th liberating Dou Wei is denied the Department of Commerce staff and contacted the same day sinus Wei. Dou Wei claimed in Hong Kong, on the 17th back to Jinan.

  Herald reporter learned that, Dou Wei is an important figure in the business in Shandong, and the equity ratio of 47% ranked the second largest shareholder. As of press time, had not returned from abroad Wei Dou message. Herald reporters repeatedly call his cell phone, but did not turn.

  Appeal: Margin third party custody

  "Shandong Agricultural" This incident has caused great shock in the industry. "Although there are many previous cases of market manipulation, but as 'Shandong Agricultural' so crazy, so naked, has never had." Shandong certain commodities trading places for people to Herald reporters such emotion.

  Herald reporter learned that the country intends to explore the development in recent years and more between futures and spot commodity trading market between. Then, "Shandong Agricultural" incident which occurred this revelation can bring to decision-makers?

  According to the National rectify commodities trading places "No. 38", Shandong (excluding Qingdao) retained the 10 electronic commodities trading market, the column "Shandong agricultural products" is not in the retained.

  Then say, "Shandong agricultural products" is not only a violation of "No. 38", customer deposits were missing and so are more likely to alleged crimes.

  Currently, the industry is "No. 38" controversial. If strict accordance with the "No. 38" rectification, most commodities trading venues will be difficult to survive. Because of this, standardized contracts, electronic transactions brokered model still prevails.

  But the situation "Shandong agricultural products," far more than violation of "No. 38" so simple. "There are two very deadly, one is suspected of participating in self dealing, market manipulation; another customer margin is going, where the flow is not already flowing overseas??" Above a Shandong commodity trading places for people that this only two points should be the focus of regulatory authorities.

  Industry experts, the Securities and Futures Beijing Technology and Business University , Institute director Hu Yu Yue told the Herald reporter, standardized contracts, and other electronic matching of these advanced trading patterns should not be banned, but should be widely promoted. But at the same time to increase the supervision and crack down on those market manipulation, misappropriation of clients in criminal acts, clean out the black sheep of the industry.

  China joint commodities trading market circulation Branch Secretary Zhou Xu, the 17th to the Herald reporter also analyze current industry urgent need to establish a multi-tiered regulatory system, to further clarify the trade rules. For deposits and other monitoring points, he appealed to the securities and futures industry study, "to establish a third-party financial supervision system to ensure the safety of customer funds."

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