Rebirth of the Capital Legend

Chapter 254: Long and short confrontation at the million-hand level!

"I really didn't expect..." Godfrey paused and continued, "In just a few days, the long and short positions in the pound exchange rate market have increased so rapidly. It has become the most serious trading variety in the foreign exchange market among all the mainstream currencies with the most accumulated long and short forces."

Gerald responded: "The bears are not dead, and the bulls are not dead. The long and short positions on the pound exchange rate have increased so rapidly recently. Is it mainly because this Su from Huayi Capital called on a number of Chinese institutions and retail investors to enter the market to short and suppress the pound exchange rate in an attempt to rescue his trapped positions?"

"That's true." Godfrey said, "I didn't realize that this young man named Su actually has some influence in China's financial circle.

but……"

Godfrey paused for a moment, then smiled and continued, "No matter how much influence this young man surnamed Su has in China's financial circle, how much money he can attract, and how much support he can get from his teammates, the pound's exchange rate has already risen, and all the major news is positive, especially with the overall trend of major global institutions hunting for Chinese capital entering the market and going long, no matter how the bears struggle, it will only be a desperate struggle.

Moreover, I hope this young man named Su from Huayi Capital.

He can rely on his influence and various personal connections to attract more Chinese investors to short the pound exchange rate.

Because only in this way can we continuously attract long funds to enter the market, continuously accumulate potential long momentum, and take advantage of this opportunity to truly hunt down Chinese-funded institutions and grab huge profits here. "

"Then do we..." Gerald asked, "should we continue to increase our long positions?"

Godfrey spread his hands and responded with a smile: "Why not? Now is the time to press on. According to the current exchange rate of the pound, the loss of the hedge fund managed by the young man named Su, Huayi Capital, is almost at the limit, right?
As long as this amount of funds is forced to unable to hold on, they will take the lead in covering positions on a large scale, or stop loss and close positions and leave the market.

Then, it is bound to lead to an internal stampede of short-selling funds.

This will also lead to extreme upward volatility in the pound exchange rate, allowing us to quickly cover our positions and exit the market after our short positions are blown up.”

Currently, Godfrey is in charge of the 'World' hedge fund.

Through the continuous short squeeze of longs against shorts, the company has made a floating profit of nearly 6000 million US dollars from the pound exchange rate market.

But he was far from being satisfied with this, and he had no intention of reducing his positions or covering his positions.

It's not just Godfrey, it's not just the investment institution 'Huifeng Bank Global Asset Management'.

Investment institutions such as Pacific Capital, Barclays Foreign Exchange Trading Department, Vanguard Capital, UBS International Capital, Nomura Bank Investment Department, Blackstone Global Asset Management Center Foreign Exchange Investment Department, Van Lego Hedge Fund, Hashimoto Asset, Tianhe Capital... these have already tasted the sweetness in the short squeeze of Huayi Capital in the pound exchange rate market, and have no intention of stopping while they are ahead and covering their positions to close their profits.

After all, at this time...

Without in-depth research, you can find that the hedge fund product "Hua Yi Cheng Yuan No. 1" under "Hua Yi Capital" is on the verge of liquidation after suffering a huge loss of nearly 2 million US dollars, or it has reached the moment when it has to stop losses and cut positions.

What's more, the bullish and bearish forces on the market are increasing.

This also means that the subsequent market fluctuations will become more and more violent.

Once the bulls form a crushing situation and the pound exchange rate forms a unilateral trend pattern, then they, as market bulls, will obviously obtain more substantial profits.

Given these factors, various institutions have already tasted the sweetness.

Basically, no one has ever thought of reducing positions, closing positions to cover them, or exiting with profit.

Instead, they choose to continue to increase their long positions, continue to invest funds, force the short forces to enter the market, further suppress the survival space of the "Hua Yi Cheng Yuan No. 1" hedge fund, further force the other party to cut their positions and cover their positions, or directly force the other party to continue to replenish margin until the funds are exhausted, and finally lead to a margin call. This is the practice of many long institutions.

Among them, Pacific Capital is the core bullish force in the pound exchange rate market.

Moreover, near the pound exchange rate of 1.5150, it increased its long positions by US$5000 million, or about 5 lots.

And as major long institutions continue to increase their positions and force a short squeeze.

On Friday, June 6, the pound sterling exchange rate hit a new one-month high at the beginning of the European session, refreshing the exchange rate to 3, just one step away from the 1.5190 mark.

At the same time, the pound sterling exchange rate continues to rise.

The long and short positions in the market continued to soar.

The holdings of both exceeded 100 million lots, and the net long positions have remained above 20 lots, reaching a volume of nearly 140 million lots.

This huge surge in holdings and the continued increase in trading activity in the pound sterling foreign exchange market.

It has not only attracted the attention of major institutions around the world.

Even major exchanges and foreign exchange market makers around the world felt frightened at this time.

"In the pound exchange rate market, both long and short positions have exceeded the 100 million mark." A group of key executives from FXCM International, a well-known foreign exchange market maker, sat together again and held an internal meeting. Among them, Hubert, the manager of the risk control department, pondered for a long time and proposed, "Should we increase the trading margin ratio for the pound? The increase in long and short positions is really too scary. I feel that if it continues like this... the pound exchange rate trend will inevitably change dramatically at some point. If the long or short defense line is completely lost, resulting in a huge amount of short orders in the market, or a huge amount of long orders being blown up in an instant, or covered in an instant, it will inevitably lead to the emergence of another 'Swiss franc black swan'. If this situation suddenly occurs, our company will still suffer huge losses if we do not take precautions in advance."

During the last ‘Swiss franc black swan’ crisis.

Due to the sudden collapse of the Swiss franc exchange rate, it plummeted by more than 7000 points, which directly caused a large number of customer trading accounts within their company to be liquidated within a second.

Afterwards, these trading accounts with huge losses were basically all abandoned by customers.

This resulted in huge losses in clients' accounts, which were forced to be transferred to their company's accounts.

That is to say...

In the second when the 'Swiss Franc Black Swan' occurred.

Their company incurred losses of more than $3 million.

This result almost caused their company to go bankrupt overnight, and it took them a year to slowly recover.

So, now whenever Hubert sees a rapid increase in long and short positions in a certain currency exchange rate market in the foreign exchange market.

I would be extremely nervous and afraid that the "black swan" event would happen again.

"The margin ratio cannot be increased." Faced with Hubert's preventive strategy, the account manager Salina strongly opposed it and said, "In the current foreign exchange market, many global market makers and docking exchanges have not taken any measures to increase the margin ratio of the standard contract for the pound exchange rate.

If our company, for the sake of so-called risk prevention, raises the margin ratio for pound exchange rate trading alone at this time, wouldn’t that mean we are actively giving up customers and driving them to competitors? After last year’s ‘Swiss franc black swan’ incident, our company’s market share has declined a lot. Now that market risks have not yet emerged and the exchange has not proposed to raise the margin ratio for standard contracts for pound exchange rate trading, if we do this unilaterally, we will be courting death.”

"I think what Salina said makes sense," said Sibel, the manager of the trading department. "Before the exchange has clear regulations, if we raise the margin ratio of customer trading accounts individually, it will only increase the transaction costs of customers and will not benefit our company at all. Obviously, we cannot do this.

Of course, there are extreme risks that are very likely to occur in the pound exchange rate market.

We cannot just sit back and do nothing.

I think there can be some improvements in the customer trading rules, such as raising the warning line and the forced liquidation line of the trading account. Also... from now on, the company's trading department and risk control department will monitor the market 24 hours a day.

My gut tells me.

Millions of long and short orders are piled up in the pound exchange rate market.

Once the long and short situation is completely out of balance, extreme fluctuations are bound to occur.

Moreover, for our company, I think we need to pay close attention to the customer trading accounts with particularly large positions in both long and short directions. "

"Okay." Isaac, the president of the company's market business department, nodded and said, "Then let's do as Sibel said. If there is a possibility of extreme risks in the market, I believe that no matter whether it is the exchange or the major market makers in the industry, someone will take measures to increase the trading margin ratio. This measure can only be taken after our peers take it first, and we can follow it, but we cannot take the lead."

"Okay." Hubert nodded helplessly and could only accept this compromise.

"At present, is the status of the affiliated trading account opened by Huayi Capital on our platform still normal?" Isaac asked after a pause.

Salina responded: "It's completely normal. Huayi Capital has added new margin. In comparison... I think the trading accounts of many long-position institutions are more aggressive."

"Before this, no one would have thought that a little-known institution like Huayi Capital could cause such a large-scale long-short confrontation, right?" Sibel said, "I remember the last time such a large amount of long and short positions appeared in the pound exchange rate trading market was several years ago."

"Who could have thought of that?" Salina also sighed.

"But as long as risk control is in place, this is also a good thing for us." After a pause, Salina continued, "The number of customers who have opened accounts with our company has increased significantly compared to March and April."

"Oh, right..." Sibel said, "I summarized the overall long and short positions of all our current customer groups and found that there are nearly 7 net long orders for the British pound exchange rate. I was wondering... should we use funds to hedge the corresponding 7 short orders for the British pound exchange rate in the British pound exchange rate market and use this form of hedging to prevent possible extreme risks?"

"No." Hubert said, "You seem to be guarding against risks by balancing long and short positions, but in fact, for our company itself, it is a complete short exposure position.

If there is a large-scale short-selling liquidation next, or the power to stop loss and close positions.

Faced with extreme upward fluctuations in the pound sterling exchange rate.

Then we will have to bear the huge losses caused by these 7 short orders of the British pound exchange rate. "

"But if the pound exchange rate fluctuates downward and a 'Swiss franc black swan' occurs, the 7-plus net long orders held by our clients will be fully liquidated, and we will most likely have to bear the losses," said Sibel. "For us, this is also a one-way exposure position."

"That's different," Hubert said. "Your method will never work."

"Okay..." Isaac saw that everyone was arguing again, so he interrupted the two of them and said, "Let's just follow the strategy we just talked about. As for the follow-up situation...it depends on how the market will perform next. It's better for us not to participate in this big drama of long and short duel."

After saying that, Isaac stood up and walked out of the office.

And after the internal meeting of FXCM International...

After a brief shock, the pound sterling market exchange rate continued to break free from the pressure of the bears and, with the bulls taking advantage of the opportunity, broke through the 1.5200 mark in one fell swoop.

"Haha, the 1.5200 mark is here. The Chinese short sellers, led by Huayi Capital, shouldn't be able to hold on any longer, right?"

Faced with the continued breakthrough of the pound sterling exchange rate, we won another victory.

In Hong Kong, at Mitsui Yoshitomo Investment Company, the hedge fund trading department, core trader Yamamoto Hisaichi laughed.

"After the pound sterling breaks through the 1.5200 mark, it will most likely continue to accelerate," said hedge fund manager Sato with a smile. "In this battle between long and short positions, the Chinese shorts led by Huayi Capital are destined to suffer a crushing defeat, a huge loss, or even a liquidation."

Having said that, Sato immediately asked Yamamoto Hisaichi to command a group of traders to continue pursuing the pound long positions at high levels.

Expand holding profits by continuously increasing holdings.

Yamamoto nodded and quickly executed Sato's trading instructions.

As the relevant trading instructions were executed, the pound exchange rate broke upward in an almost straight line, reaching the 1.5220 mark.

I saw the profits of the long positions that had just been increased explode.

For a moment, both Yamamoto Kyuichi and Sato showed excitement and excitement on their faces.

"This Chinese capital is so stupid." Yamamoto Kyuichi said sarcastically, "It seems that within three trading days, the short-selling forces led by Huayi Capital will completely collapse and stop losses and close all positions. Haha... Harvesting Chinese capital and destroying this fund's position is really exciting!"

Sato nodded with a smile, a confident look on his face, and said: "Whether it is the financial battlefield or the military battlefield in the past, the Chinese... have never been our opponents. This time they should learn a profound lesson and be more obedient in the future."

However, just when he was full of ambition and arrogance.

Almost in an instant, the pound exchange rate, which had just broken through the 1.5220 point, suddenly plunged more than 20 points with a sharper dive, losing the 5200 point mark, swallowing up all the efforts of the bulls.

"What...what's going on?"

Seeing the increased long positions turn from huge profits to losses in an instant, Yamamoto Hisaichi was stunned for a moment.

Sato was also slightly stunned, his eyes focused on the computer information interface.

Suddenly, an important piece of information was refreshed on the information interface about the British pound exchange rate.

This information shows that after research and discussion by the British cabinet, as well as voting, the proposal of "Brexit referendum" was passed and the procedure of "Brexit referendum" was initiated. It is initially scheduled to be held on the 23rd of this month, and the future destiny of the United Kingdom will be decided by public opinion.

(End of this chapter)