What is risk reserve?

Risk reserve refers to the funds set up by the exchange to maintain the normal operation of the futures market and make up for the losses caused by unforeseeable risks of the exchange. When the balance of risk reserve reaches 10 times of the registered capital of the exchange, it may not be withdrawn after the approval of China Securities Regulatory Commission.

The sources of risk reserve include 20% of the transaction fee income (including preferential relief for members) collected by the exchange from management fees, and other income that meets the requirements of national financial policies.

Generally speaking, there are five main methods to extract risk reserve, which are extracted from after-tax profits; Extracted from the executive compensation and dividends distributed by the controlling shareholder; Withdraw funds from issuance or rights issue; Investment income from risk reserve and operating income.