Wen Fan: The crude oil treasure incident undoubtedly sounds the alarm in the market design and risk control. At the same time, as a customer asset manager, the asset management industry's understanding of trust obligations should also have some in -depth thinking.

The recent incident of bank crude oil treasures in China has attracted widespread market attention.

The main dispute between the incident is the treatment of negative oil prices.Investors paid a certain principal to buy products, and finally, they even owed bank margins under the premise of losing principal.This phenomenon is indeed beyond the perception of ordinary people.As the online paragraph says: Originally thought that the investment failed would only turn money into waste paper, but I did not expect that it could become an IOU.

To better understand this problem, the author wants to start with the concept of Fiducial Duty, which is very important in the asset management industry.Its main meaning is that the manager of customer assets should diligently responsibilities in order to maximize the interests of customers.The connotation includes both the understanding of the investment product itself, the understanding of the attributes of the customer itself, and the final understanding of the best transaction method of the product.

From the perspective of understanding of investment products, the author believes that the essence of crude oil treasures is to linked outer disk futures, and banks set up their own virtual trading disks.Investors can conduct long and short transactions in banks. Banks as product designers and as municipal merchants can hedge the overall net or clean position of the investor's overall overall.Therefore, in this incident, banks have dual attributes: the first floor is investors who are relative to crude oil treasures. The bank is a city merchant, responsible for providing product liquidity and a series of futures -related warehouses.The price of the market is referred to or linked to the external disk futures price.The second layer is compared to the bank itself. Through its own brokers, a long or short position (depending on the overall direction of crude oil treasure customers) is established through its own brokers, and a series of relocation transactions are conducted.At this time, the bank itself is the participant of the outer trading.

It should be clear that under the current regulatory system of China, banks do not allow them to exist as brokers as domestic customers.Therefore, the two attributes of banks should be separated strictly.

But no matter how packaging is packaged, the futures attributes of crude oil treasure are unavoidable, which brings out the problem of understanding of the attributes of the investor.

Judging from the information I know, the bank's risk pricing of the product is medium and does not belong to the highest risk -like products.However, futures investment itself has high requirements for investors.Taking the qualifications of Chinese crude oil futures transactions, in addition to having certain requirements for personal assets and trading experience, it is also necessary to complete the futures knowledge test and reach a certain score before they can conduct futures transactions.In contrast, crude oil treasures are relatively low in purchasing (1 barrel of buying), and risk settings are also neutral. Therefore, the part of this part is not matched, and it may indeed lays hidden dangers for subsequent disputes.

The last thing to say is the understanding of the best way of transaction, and it is also the biggest part of the incident.20%of the clauses of crude oil treasures are forced to close their positions, but it seems that it has not been implemented in actual operation.The bank's explanation is that the transaction after 10 o'clock that night does not involve the operation of the position.The author's understanding of this is: According to the customer's agreement, the crude oil treasure promises to move the customer in accordance with the closing price of the day before the futures contract expires.Therefore, in general, in order to avoid operating risks, the author speculates that banks may use the algorithm of TAS (Trading at Settlement) for transactions.

This type of EOD algorithm trading is characterized by concentrated transactions during the closing period. The purpose is to approach the closing price of the day as the average transaction price as much as possible.The advantage of using this transaction method is that the operation of the compliance department after the operation and other departments' challenges for the transaction method can be affected after the incident.Because the operation process is completely electronic, it does not involve any individual's judgment on the market direction.And from the perspective of effect, most transaction volume concentrated in the tail disk can also ensure the closer closing price of the maximum.At this time, the bank's closing price at the second -level attribute, that is, the real trading, is as much as possible. Therefore, the transaction cost brought by the transaction cost brought by the closing price of the market in the first layer of virtual disk can be reduced toThe lowest is also reduced the risk of conflict between the two attributes.

However, in normal circumstances, reasonable operations may bring unexpected consequences under extreme circumstances.Because the TAS algorithm is similar to Sell at Market without the liquidity of the opponent, it may have a great impact on the market price in a short time.Especially the rules were modified before the exchange, allowing the negative oil price to exist.The subsequent result may be that the real trading of the second-level transaction of the bank is all transactions at a price of about -37, which brings huge losses to the bank's account on the exchange.

At this time, the two attributes of the bank conflicts. Among the first attributes of the bank, the bank has the obligation to fall to 20%for a forced liquidation.However, in the real trading of the second attribute, in order to achieve the closing price as much as possible, the transaction algorithm adopted by the bank may directly cause the transaction near a lower price.In extreme cases, if the investor margin is reflected at this price, the remaining deposit of the investors may be less than 20%of the original investment amount.

And this is especially true at negative prices.In the classic textbooks, the risks faced by the shortcomings are unlimited, and the risks of multiple people are limited.But in this case, there is an important prerequisite that the lowest price is 0.In the case where the price may be negative, there is an infinite risk.In terms of product design of crude oil treasures, because the product is 100%margin trading method and does not have leverage itself, in the case of oil prices, no matter what level of oil price falls, the total value of the positioning of many parties is equal to the value of the account margin.Only the empty side needs to add a deposit when the price rises too much.However, when the transaction price is negative, even if there are 100%margin, there will be insufficient situation.

Therefore, what I must say is that the exchanges are modified by the important node modification rules for only one week away from the exchanges, and the practice of allowing negative prices to appear is also questionable.

The first is whether the previous fuse mechanism is reflected in the negative fusion mechanism during the transaction of negative oil prices?Does the exchanges take into account the impact of the calculation method of a decline from -1 to -10?At the same time, do you consider the impact of a large market price selling order on the overall price system impact?The author believes that these issues are discussing in the future.A very simple mathematical problem: when the price falls from a number of range from 0 to 1 to negative, if the original price, the lower the price (closer to 0), the decline is close to endingThere may be some adjustments on the top.Therefore, in the design and proposal of negative prices, the author believes that the exchange should not simply issue a notice to members to be issued on the week before the month of the contract expires, but should arrange more tests and the improvement of subsequent mechanisms.

Enlightenment and reflection

The crude oil treasure incident is undoubtedly a painful lesson.But on this basis, the bank recovers investors because of the settlement negative price. The author believes that it confuses the relationship between the bank itself and the second attribute in this product.EssenceFrom the perspective of investors, investors purchased only the bank as a virtual disk for the city, so the biggest loss of investors should be the loss of the market virtual disk (first) in the bank, instead of being brought to the joint to bring to the connection to the joint to bring to it to the joint to bring to the joint to bring to the joint to bring to the joint bring to the joint.Losses (second) in real trading of banks in the bank (second).

Since the virtual disk contract between investors and banks mentioned that investors will be closed when the security deposit falls to 20%, so it is relatively fair that investors bear the loss of 80%of their investment amount.This is also the obligation of banks as the first attribute to perform.As for the leaps caused by banks caused by the bank's negative settlement price, the essence is that the bank as a loss in the transaction as a bank futures market participant, and the bank's own risk control should be controlled by it.The bank recovers investors on the losses in the second attribute. The author believes that there is also room for discussion.

Today, with the continuous deepening of financial opening, the crude oil treasure incident has undoubtedly sounded the alarm in the market design and risk control.Similarly, as a manager of customer assets, the industry's understanding of Fiducial Duty should also have some in -depth thinking.

(The author is the investment manager of the Bond Fund of Asset Management Co., Ltd., and serves as the person in charge of the fixed income team. This article only represents the author's point of view. Edit mailbox: [email protected])