An individual investor is applying for stock index futures trading account Monday at a futures brokerage firm in Shanghai.
Few investors established index futures accounts Monday, the first day they were allowed to do so. Individual investors hesitated on concerns over trading risks, while institutional investors haven’t taken action yet because they need time to prepare the necessary documents, according to futures brokers.
"Not many investors came to futures brokerage firms on the first day open for account applications," the China Financial Futures Exchange (CFFEX) said in an email statement Monday without disclosing the exact number of accounts opened.
"Today, five customers opened the accounts (index futures) through our firm," said Guan Lianfeng, the deputy general manager of Customer Service at the headquarters of Galaxy Futures.
"All of them are already our customers trading on commodity futures, and passed the knowledge test with a minimum score of 80," she said. Guan added that it took one hour to review the qualifications of each applicant, which could done through their trading record and capital status in the information systems of the brokerage firm.
"Passing the futures knowledge test takes about half an hour," Guan said.
New customers with unproven records must provide certifications on capital abundance, personal credit and trading records, as well as personal background information including age and level of education to the brokers in order to attain a minimum score of 70 out of 100. They must also pass a knowledge test delivered by the CFFEX via the brokerage firms.
Over 100 inquiries had been received Monday but only 20-30 customers expressed an intent to open an account at all of Guan Tong Futures Brokerage’s business outlets, said Zeng Yihong, the company’s R&D manager. The firm has 10 outlets nationwide.
"I am interested in it but I won’t go for it, at least for now, because the risk is more than I can take," said a man who refused to give his name trading stocks in a room for investors with assets of over 1 million yuan ($146,412.88) at Haitong Securities in Beijing.
Trading stocks is safer than trading on futures, he said. "The fall of stock prices leads to asset shrinkage but at least you still have the equities and ownership of the listed company invested. But in the (index) futures trading, a few points change in the index, and you are totally kicked out and penniless."
The new futures tracks the index of 300 heavily-weighted stocks listed on the Shanghai and Shenzhen stock exchanges with 300 yuan ($43.92) for each point, or 970,002 yuan ($142,020.79) per contract for the 3233.34 points the index closed at Monday.
The reason institutional investors were a no-show yesterday was due to the time needed to prepare, said Guan of Galaxy Futures.
About seven or eight institutional investors had expressed intentions of having an account, but needed time to prepare documents required by the eligibility rules set by the CFFEX, she said. Institutional investors such as fund companies must at least convene a board meeting in order to decide to participate in the index futures trading, Guan said.
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