The arrival of a major client with an investment exceeding 2 billion US dollars naturally drew the full attention of Sharp Pixley’s management.
After all, clients with such a high investment amount are truly rare, and since this one was from overseas, they had to be treated with even greater caution.
If the partnership went smoothly, it would serve as a living advertisement, bringing numerous benefits to the company.
However, this involved a massive sum of 8 billion US dollars. Although the forced liquidation system kept risks relatively low, that didn’t mean there were no risks at all.
Take a long position as an example: suppose the originally set forced liquidation price was 10, but the price suddenly plummeted by half, instantly breaching the warning level. In that case, the liquidation price they set would be completely ineffective.
In such a scenario, not only would the investor lose their entire investment, but the brokerage firm would also suffer severe consequences; a single trade could potentially plunge the company into an abyss from which there is no return.
For this very reason, they conduct rigorous due diligence on high-net-worth clients with such massive margin positions.
If their qualifications are insufficient, they will absolutely refuse to do business with them.
However, this particular client was a major investor with over 2 billion in capital. As long as there was even the slightest chance, neither Billy himself nor the senior management at Sharp Pixley would let it slip away.
Consequently, the company’s executives immediately convened a meeting to discuss the matter.
After some discussion, they decided to first review the financing application submitted by Li Yi and his team, focusing primarily on verifying the team’s identities and other qualifications.
However, when they saw the company behind this team, the executives at Sharp Pixley all breathed a sigh of relief.
The Far East Stock Exchange!
One of Hong Kong’s four major exchanges, backed by the renowned Li family of Hong Kong. Moreover, the young man leading the delegation was not only the brother of Li Futao—founder and major shareholder of the Far East Exchange—but his only son, Li Yunbao, and his trusted assistant had also arrived.
More importantly, the $2 billion in funds the team was managing had already been transferred here through official channels and was ready for immediate use, backed by a certificate from Morgan Bank.
Since Li Yi and his team had prepared so thoroughly, the relevant departments at Sharp Pixley, after a rigorous review, immediately issued a top-tier evaluation.
After reviewing the internal evaluation results, the company’s executives immediately approved the partnership.
Subsequently, Sharp Pixley dispatched a senior vice president to formally sign the financing cooperation agreement with Li Yi.
Under this agreement, the Far East Securities Exchange would use $2 billion as margin to borrow $10 billion worth of gold futures contracts from Sharp Pixley Corporation at 5x leverage. The annual interest rate was set at 6%, calculated on a daily basis.
After signing the agreement, Li Yi’s team promptly transferred the funds to the designated account, and all that remained was to wait for Sharp-Pixley’s futures contracts to be settled.
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Sharp Pixley’s capabilities were beyond question; within a single night, the $10 billion worth of gold futures contracts had already been secured.
The reason for this speed wasn’t that Sharp Pixley actually held $10 billion worth of gold on hand, but rather because they specialized in this field, and their capabilities spoke for themselves.
Of course, what matters even more is that this is New York, home to the world’s largest gold futures trading market. In this massive market, an average of 30,000 trades are executed daily, with a trading volume of approximately 70 tons of gold.
Moreover, most investors do not seek actual physical delivery of gold upon contract expiration; instead, they profit primarily through buying and selling contracts. The market only needs to maintain a certain level of inventory to handle the rare instances where a few individuals accumulate massive contracts and demand physical gold.
For example, last year, the New York and Chicago gold markets recorded a total of 800 tons in accounts, but actual inventory was only 79.3 tons. Although this was less than one-tenth of the recorded amount, it was sufficient to meet market demand.
Precisely because the volume of gold futures trading in New York is so massive, the gold price in the New York market is sometimes a more valuable reference than the pricing in the London or Zurich gold markets.
On the morning of November 7, after receiving a call from Billy, the investment manager at Sharp Pixley, and learning that they had already arranged all the gold futures contracts, Li Yi immediately took Li Yunbao, Lan Xinyi, and others, along with George’s team, and drove straight to Wall Street!
In the VIP lounge at Sharp Pixley, Li Yi met Billy again.
Compared to yesterday, the Billy before him appeared more efficient and serious, as he and his team were now working for Li Yi.
After signing the cooperation agreement yesterday, Li Yi had designated Billy and his team as the execution team for this transaction—a right he held as the client.
In other words, including Billy and his team, Li Yi now had three teams at his disposal: the Hong Kong Island team led by Lan Xinyi and Cai Bingyan, the George team from Green Brothers, and the Billy team from Sharp Pixley.
Lan Xinyi and her team are primarily there to learn; their main tasks involve serving Li Yi personally and liaising with local teams.
George and his team, on the other hand, were brought in by Li Yi to provide consulting services and oversee the Sharp-Pixley team, while Billy and his team are the ones actually responsible for the financial operations.
The reason for hiring two local teams to assist them wasn’t because they had money to burn or to make a show of it; it was mainly because Li Yi didn’t trust these foreigners.
After all, they were launching a surprise attack on someone else’s turf, and with such a massive sum of money in their hands, they couldn’t afford to be careless!
Most importantly, neither Li Yi himself nor Lan Xinyi, Cai Bingyan, and the others were particularly familiar with the local trading rules.
Futures trading is an extremely high-risk investment; one misstep could truly lead to financial ruin, especially with gold futures.
It’s important to note that global gold pricing is currently dominated by the markets in the U.S. and Europe.
After all, international gold prices are primarily determined by gold contracts from two major exchanges: the New York Mercantile Exchange’s gold futures and the London Bullion Market Association’s (LBMA) spot gold prices.
Among these, the New York Mercantile Exchange (NYMEX) holds the strongest influence over global gold pricing.
As for spot gold trading volumes at exchanges in other regions, while they are not insignificant, their influence on pricing is virtually nonexistent and can be disregarded.
Under these circumstances, Li Yi’s decision to invest in gold futures here—whether going long or short—carries significant risks.
With such a large sum of capital entering the market, if it attracts the attention of financial giants specializing in short-squeezes, the consequences would be unimaginable.
For this very reason, when selecting a broker, Li Yi chose only those with a good reputation, rather than those offering high leverage or low financing costs.
He certainly didn’t want to lose his life savings over a lollipop!
He also hired two teams so they could keep each other in check and ensure the investment was executed successfully.
Once he confirmed that all funds were in place, Li Yi immediately issued the order to open a position.
Opening a position is a critical step in short-selling futures and a key process in futures trading.
When opening a position, investors must determine which futures contracts to buy or sell based on their analysis, then submit a quote on the futures market to complete the transaction.
At the same time, during the opening process, they must determine the investment amount based on their risk tolerance and reasonably control the trading volume to avoid exceeding their risk tolerance.
In fact, this was similar to his previous short position on the Hang Seng Index—the same formula, the same strategy: first sell the borrowed futures contracts, then wait for international gold prices to drop before buying them back at a lower price to return to the broker.
However, when Billy, George, and the others heard Li Yi’s closing price, they were all stunned…
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