Stock Index Futures

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					Stock Index Futures
1. Can be short selling stock index futures. Stock short selling is a prerequisite must
borrow from the hands of others a certain number of shares. Overseas for short selling
transactions conducted with more stringent conditions, for index futures is not. In fact,
more than half of the index futures are included in the transaction has a short position.
For investors, the most glamorous of short mechanism is that, when the expected
future trends in the stock market overall will show a decline trend, investors can take
the initiative rather than passively waiting for the stock market bottomed out, so
investors in the fall of the stock market also can make a difference.

2. Transaction costs are lower. Relative spot trading, index futures trading is a very
low cost, in a foreign country only about one-tenth of the cost of stock transactions.
Index futures trading costs include: trading commissions, bid-ask spread to cover the
deposit (also called the deposit) the opportunity costs and possible taxes. United
States, a futures exchange (including the complete Jiancang and open transactions)
charges only 30 dollars.

3. A higher leverage ratio. High leverage ratio that is the proportion of bonds lower. In
the UK, the initial margin for a futures trading account, only 2,500 pounds, it can be
the Financial Times 100 species (FTSE-100) index futures trading volume up to
70,000 pounds, leverage ratio of 28:1.

4. The market more liquid. Research has shown that the index futures market liquidity
significantly higher than the spot market. As in 1991, FTSE-100 index futures volume
has already reached 85 billion pounds.

5. Stock index futures, the cash settlement method. Although the futures market is
based on the stock market based on derivatives markets, but delivery of that cash, that
is, gains and losses in the settlement not only on the transfer in kind, in the delivery of
futures contracts, or investors are not buying throw the appropriate stock to meet
contractual obligations, which prevent the delivery of the stock market in a
"crowded market" phenomenon.

6. Generally speaking, the stock index futures market is to focus on macroeconomic
data based trading in the spot market, the company is focused on the status of
individual trading.

Overseas experience shows that the liquidity of stock index futures is better than the
securities market, highly leveraged trades magnify risks, combined with the linkage
with the securities market, trading risks with diversity, breadth and complexity.
Therefore, risk control is the focus of the parties concerned.
What are the risk of stock index futures?

First, the domestic securities and futures investment risk the lack of awareness of
investors. According to China Securities Depository and Clearing Co., Ltd. in April
Monthly statistics, China's securities account now totals more than 74.15
million. 1% of investors to participate in accordance with stock index futures to
calculate, to 74 million, shared equally in accordance with 170 client computing
futures companies, each would have to increase by 4 more than 1000 clients. This is
undoubtedly the growth of stock index futures laid a solid foundation. However, they
expand the capacity of the futures market, futures market, while expanding the scale
of risk. While domestic investors are lack of preparation, lack of risk awareness. They
are used to spot trading securities, futures lack of common sense and awareness of
risk control, stock index futures in the simulation had a lot of investors in the habit of
trading spot month contract, customs warehouse full of transactions, which will bring
the risk of delivery and margin areas.

Second, the stock index futures and commodity futures risk of different risks. The
introduction of stock index futures, futures companies to bear the risk while the
original, will also face some unique risk index futures: The first risk management.
Huge number of customers, by introducing broker (IB) to determine the authenticity
of customer identification difficult; stock market turn customers not to change
thinking, habits of full positions in the futures company will operate a huge risk;
securities customers habits transactions in recent months, as the futures delivery
brings the risk of default. Second, transaction risk. Market volatility, the futures
company to provide additional customer margin difficult. Run from the practice of
foreign stock index futures, stock index futures risk with short-term, unexpected
features, number of customers increases, the risk of intermediate links and increase
the urgency to make margin calls to clients futures company increased the difficulty,
in addition to statements of the service due to links increase the risk of the customer to
confirm the increase in the number of customers forced open when the surge so
difficult operation, with open interest in commodity futures laws and regulations
impose requirements on the specific operation so difficult. Third, technical risks.
Stock index futures large number of customers increased system capacity, easy to
trigger the next single information block, delay or not receive the return of the
phenomenon of turnover, damage to the interests of customers. Fourth, stock index
futures systemic risk. Mainly political and policy aspect of the change, exchanges and
clearing houses emergencies, domestic and international markets caused by
unexpected events.

Futures companies should focus on risk prevention
First of all, to train the initial investors and account management. Domestic futures
companies in the largest 200 employees, however, only 10 operating locations, and a
China Merchants Securities will have 56 business outlets, more than 80 million
customers. In response to a huge number of customer accounts may be the problem, in
addition to increased sales outlets to classify open outdoor time-sharing, but also for
strict IB and brokerage business, the rights and obligations, and strengthen the IB and
customer training. To this end, specific recommendations to formulate a unified China
Futures Association, the account opening documents, and introduced production
processes, reveal the risk of photocopying materials, uniform issued to futures

Second, we must set up the computer system of forced liquidation. The number of
stock index futures clients more risk, the risk of forced liquidation system is the key to
prevention. Strengthen cooperation with the IB margin. Margin design in the customer
credit classification can be established margin classification system, for receiving a
high percentage of active margin clients considered for fee concession.

Third, we must make full use of 保证金存 管 systems to ensure notification
obligations and transaction confirmation statements. Customer inquiries through the
investment requirements of the system query statements, up to a legal point of view.
Provisions from the regulations on the customer inquiry system through investment
inquiries statements, within the specified time without objection as confirmation. Now
modify the "Futures Ordinance" may just make the appropriate

4 hardware and software technology is guaranteed. Banking, securities, futures
transfer of funds between the problem, recommended the early coordination of futures
companies and software providers, banks, IB cooperation. And software vendors, to
develop a large capacity for large-scale trading, clearing, grading and sub-accounts of
the two-level risk control management subsystem, start upgrading software a