"Great minds think alike."
Su Yi smiled and extended his hand to Frederick again, saying,
"Then I hope we can cooperate happily in the British pound exchange rate market and make a fortune."
Frederick also shook Su Yi's hand again, saying,
"Mr. Su's insight, courage, and spirit are truly admirable. I am very fortunate not to be standing opposite Mr. Su at this moment, but rather as a friend with shared interests; otherwise, the consequences might be unpredictable."
Su Yi continued with a smile:
"I'm just standing in what I believe is... the right direction for the market, based on my own understanding. I also feel very lucky to have such a pleasant conversation with Mr. Frederick."
"Then I wish Lady Luck stands on our side,"
Frederick said, raising his glass.
Su Yi smiled and clinked glasses with him, saying,
"Lady Luck always rewards the brave, and the truth is often held by the minority. I believe we will cooperate very happily."
Frederick nodded slightly, deeply agreeing with Su Yi's words.
Following this, after several rounds of drinks, the two discussed some experiences and insights on market trading.
Later on...
The deeper the conversation went, the more Frederick discovered that although Su Yi was young, his market trading experience and insights were profound; he was indeed a genius in financial trading.
Similarly, as his understanding of Su Yi deepened, regarding the future of their cooperation and the subsequent direction of this long-short battle in the British pound exchange rate, Frederick's confidence grew stronger.
After that, around eight in the evening, after a pleasant conversation, the two left the restaurant and went their separate ways.
As luck would have it, as Su Yi and Frederick were leaving, they happened to run into Sato, the head manager of the main hedge fund at 'Mitsui Sumitomo Investment Company', Godfrey, manager of 'Huifeng Huanyu Hedge Fund', and Gu Chijiang of 'Tianhe Capital'.
"Huh, isn't that Mr. Frederick, the hedge fund manager of 'Aberdeen Asset Evolution No. 1'?"
Sato said in surprise, seeing Frederick who had just disappeared from the restaurant entrance.
"Who is that young man next to Mr. Frederick?"
Gu Chijiang of 'Tianhe Capital' also had a flicker of doubt in his eyes.
"He doesn't look much like an internal executive of the 'Aberdeen Asset' group, does he?"
"That young man is Su Yi from 'Huayi Capital', who's been making waves recently,"
Godfrey said.
"I saw this kid at the gala hosted by our institution last time. He behaved quite arrogantly back then, far from the current predicament of his main positions being trapped in the British pound exchange rate market, with his entire main fund deeply caught in a short squeeze, and his holdings continuously incurring substantial losses."
"It's him?"
Sato narrowed his eyes.
"He is indeed very young!"
Gu Chijiang chuckled and said,
"In the financial market, youth is not an asset, but rather a disadvantage, because being young inevitably means insufficient market investment and trading experience, susceptibility to emotional influence, and being aggressive and underestimating investment risks in market trend judgments.
Judging by Mr. Su's current trading operations in the British pound exchange rate market, he has basically committed all these trading mistakes common to young people. Therefore, the earlier praise for this young man from many insiders and outsiders now seems... somewhat ridiculous."
"Looking at his recent operations in the British pound exchange rate market, he indeed doesn't seem like an experienced, mature investor,"
Sato responded, his doubts not dissipating but intensifying.
He paused, then continued,
"But why would this person be mixed up with Mr. Frederick?"
For Sato, he believed that Su Yi, this young man, and 'Huayi Capital' with its limited capital, were insignificant and could not determine the actual direction of the market.
However, Frederick's standing in his mind was completely different.
Leaving aside 'Aberdeen Asset' as one of the top twenty large asset management institutions globally with strong capital, the 'Evolution No. 1' hedge fund alone, managed by Frederick, has a fund size of tens of billions of US dollars.
What's more, Frederick's earth-shattering short-selling battle during the 'Swiss Franc Black Swan' event truly shocked numerous institutions and asset managers in the global asset management industry.
Furthermore...
Sato knew that currently in the British pound exchange rate market, the 'Evolution No. 1' hedge fund, managed by Frederick, also held a considerably large volume of short positions.
If the other party was truly determined to short the British pound exchange rate, and really got involved with 'Huayi Capital', which initiated this long-short battle in the British pound exchange rate market, then as their counterparty, Sato inevitably felt a bit uneasy.
After all, at the current stage, the fund products he managed had already established a large number of long positions in the British pound exchange rate.
If they couldn't forcefully squeeze the shorts later on, forcing 'Huayi Capital', this major short player, to cover positions and stop losses, then once the bullish sentiment in the market receded, his massive long positions would be in jeopardy.
"It is a bit strange,"
Godfrey said after a moment of thought.
"However, the current upward trend of the British pound exchange rate has formed, and the bullish sentiment in the market is intensifying, with previous short sellers continuously covering positions and stopping losses to exit.
In such a situation, even if 'Aberdeen Asset' and 'Huayi Capital', these two major short institutions, were to unite, they would not be able to change the market trend, so there is no need to worry."
Gu Chijiang nodded slightly and responded,
"Mr. Godfrey is right. In the current British pound exchange rate market, the overall direction of the pound's exchange rate is set, and it cannot be changed by individual ability or the capital strength of a single institution. On the contrary, in the current situation, I actually hope they can unite and continue to invest more capital to cover their positions.
Only when the short positions held by these two major short institutions grow larger and larger, will it be conducive to the high explosive potential for a short-term surge in the British pound exchange rate after a subsequent extreme short squeeze."
"Mr. Gu, one should not underestimate Mr. Frederick of 'Aberdeen Asset',"
Due to national culture and personal character, Sato was relatively more cautious than the two in terms of investment and trading.
He paused and said,
"If the main hedge fund 'Evolution No. 1' managed by Frederick truly goes all out to short the British pound exchange rate, it might not be easy for us to force the shorts to surrender in a short time."
"I am not underestimating them,"
Gu Chijiang said.
"I just believe that with the continuous repurchase influence of the Bank of England, the British pound exchange rate will only go up; there is simply no room or impetus for it to fall. This does not change with human will, nor will the trend change due to the intervention of a certain institution."
"Mr. Gu is right,"
Godfrey said with a smile.
"I don't deny that Mr. Frederick is an outstanding hedge fund manager and an experienced foreign exchange financial market trader, but I believe that in this historically low range of the British pound exchange rate, the upward momentum is far stronger than the downward momentum."
Sato said,
"Although I am also bullish... I think it's better for us to be cautious."
"When did Mr. Sato become so hesitant?"
Godfrey chuckled.
Sato cleared his throat and said,
"This is not being hesitant; it's just that I believe it's always necessary for us to respect the market and maintain a sense of awe towards it."
Godfrey said,
"You're not wrong to say that. However, I can tell Mr. Sato, according to internal information our institution has obtained, that in the next phase, the Bank of England will continue to conduct market operations, further selling US dollars and buying back British pounds to stabilize the British pound market exchange rate."
"Really?"
Gu Chijiang said excitedly.
If the Bank of England were to further sell its dollar reserves and buy British pounds, thereby further stabilizing the British pound exchange rate, then with the Bank of England providing a floor and the support of this massive long institution, it could be foreseen that the British pound exchange rate would continue to soar for some time, further pressuring short-position institutions in the market.
Godfrey said with a smile,
"Of course it's true."
Sato heard the internal information revealed by Godfrey, and seeing his confident expression, thought of 'Huifeng Bank's' background as a giant in the British banking and asset management industries.
After a brief pause, he unequivocally believed Godfrey's words.
He said with a smile,
"No wonder the 'Huanyu' hedge fund managed by Mr. Godfrey is still aggressively increasing its long positions in the British pound exchange rate. So, Mr. Godfrey saw the cards long ago!"
Godfrey said,
"This isn't exactly seeing the cards. The Bank of England's monetary policy direction is just one important factor guiding the pound's strength. The underlying logic determining the sustained rise and continuous breakthroughs of the pound exchange rate is still the Federal Reserve's consistently dovish remarks and the recent recovery of economic data from the UK."
Sato nodded slightly and said,
"It seems this battle for the British pound exchange rate will be Mr. Frederick's 'Waterloo' for 'Aberdeen Asset'."
"If Mr. Frederick, swayed by Mr. Su of 'Huayi Capital', continues to increase his short positions in the British pound exchange rate..."
Godfrey chuckled and said,
"then what awaits Mr. Frederick might be more than just a 'Waterloo' in his career. His actions are destined to bring huge losses to the 'Aberdeen Asset' group and harm the reputation and credibility of its asset management business."
Meanwhile, as Sato and Godfrey continued their conversation...
Gu Chijiang's mind was also surging and churning at this moment, contemplating further increasing his long positions.
After all, in his perception, with the advantage of insider information, the concerted efforts of so many globally renowned asset management institutions, and the passionate and aggressive retail long investors assisting, he didn't believe the British pound exchange rate could fall significantly further.
He firmly believed this was a massive speculative opportunity.
It was a huge opportunity for him to make a name for himself in Hong Kong's financial circles and double his assets.
Under the influence of major long and short institutions, whether secretly forming alliances, exchanging information, aggressively increasing positions, or enticing retail investors to aggressively pursue positions, as market trading hours further progressed, in the British pound exchange rate market, both long and short positions simultaneously re-entered a growth phase.
"My goodness, in the British pound exchange rate market, the total number of long positions has exceeded 1.8 million lots, and short positions have also reached a new annual high."
Facing the increasingly fierce confrontation between longs and shorts in the British pound exchange rate market, during the European trading session on June 9th, Hubert, the Risk Control Department Manager at 'FXCM International' headquarters, Market Risk Control Management Department, was so nervous that his entire being was tense.
Recently, in the British pound exchange rate market, both long and short sides have been continuously investing resources.
This extremely high market activity and terrifying volume of long and short positions made him tremble with fear, dreading that the 'Swiss Franc Black Swan' event would repeat itself.
He remembered when the 'Swiss Franc Black Swan' event erupted.
The total long and short positions in the entire Swiss franc exchange rate market were less than half of what they were in the current British pound exchange rate market.
In other words...
Under this volume of long and short positions, if either the longs or the shorts were to experience an instantaneous collapse and defeat under the stimulus of extreme news, then the resulting fluctuation in the British pound exchange rate could exceed the Swiss franc's fluctuation during the original 'Swiss Franc Black Swan' event.
And once such a thing happened, it would not only be a huge blow to countless investors and speculators in the forex trading market, but also a catastrophic blow to their company as a market maker.
"It's not just the increase in long and short position volumes,"
Angus, a risk control market monitor in the Risk Control Department, said.
"Net long positions are also hitting new highs, fast approaching 650,000 lots, Minister... The probability of extreme volatility occurring in the British pound exchange rate market is increasing. I think our company should now limit the number of British pound exchange rate positions clients can open on our trading platform, and even restrict clients from opening standard two-way long and short contract orders for the British pound exchange rate."
"I think so too,"
Hubert said, his brows furrowed, feeling the danger drawing closer.
"No matter what, I must report this to President Isaac."
Hubert, who had paced back and forth in his office several times, gritted his teeth and made up his mind.
"Those idiots in the trading and client departments are truly short-sighted. If they continue like this, when extreme market conditions arrive, the company will instantly go bankrupt. This cannot continue, absolutely cannot continue..."
Saying this, Hubert hastily left his office and went to President Isaac's office.
After Isaac finished listening to Hubert's report, his brows also furrowed tightly for a moment.
This time, however, he no longer felt that Hubert was fear-mongering as he had before.
Instead, after a brief moment of contemplation, he promptly convened an internal meeting with all executive members of the company's Market Operations Department.
Afterward, following a two-hour internal meeting, Isaac, based on everyone's opinions and also to avoid repeating the mistakes of the 'Swiss Franc Black Swan' event at the time, proposed to the group to reduce the opening leverage ratio in the British pound exchange rate market and increase margin requirements.
And then...
On Friday, June 10th, when the British pound exchange rate further fluctuated upwards, breaking through the 1.5370 mark, 'FXCM International' sent an important email to all clients regarding the reduction of British pound exchange rate leverage and the increase in trading margin.
According to the email content, 'FXCM International' adjusted the trading leverage ratio for the British pound exchange rate from the common 100 times to a maximum of 20 times, and also raised the forced liquidation line and the minimum stop-loss line.
After 'FXCM International' imposed trading restrictions on the British pound exchange rate market, major market makers globally soon realized that an unprecedentedly fierce long-short battle was imminent in the British pound exchange rate market, with extreme volatility similar to the previous 'Swiss Franc Black Swan' event highly likely to occur.
Thus, overnight, all market maker institutions and all investment bank trading institutions worldwide all imposed leverage ratio limits for opening positions in the British pound exchange rate market, and also increased the margin ratio and forced liquidation line standards for investors trading this underlying asset.
(End of Chapter)