A strict entry threshold and uncertainties over stock index futures trading deterred most investors from opening accounts to trade in the financial tool Monday.

The China Securities Regulatory Commission on Saturday gave final approval for the country's first stock index futures contracts and allowed people to open accounts from yesterday, paving the way for the long-awaited financial derivative to debut as early as March.

"Many investors inquired over the phone about details of the product rather than coming to our branch to open accounts yesterday," said an official at the Shanghai office of Shenyin and Wanguo Futures.

"Having to produce several documents certifying their financial assets and employment also deterred some investors from opening accounts yesterday," he said.

The CSRC imposed strict entry requirements for investors. Investors must have a minimum of 500,000 yuan (US$73,000) to open an account and have to participate in mock trading for at least 10 sessions. They also need to pass a test when opening accounts.

The CSRC has raised the minimum margins for index futures to 12 percent from a previous level of 10 percent to contain risks. Also, an investor can only hold up to 100 futures contracts for any single day, down from 600 as stipulated earlier.

An investor surnamed Lu said he had planned to open an account to trade stock index futures but that it was not an appropriate time.

Investors must realize the risks involved in trading stock index futures, according to Datong Securities Co, as they are futures contracts to buy or sell an index at a preset value on an agreed date. Often used as hedging tools, they allow an investor to bet on the direction of an entire stock index rather than individual shares.

The CSRC has not issued rules for institutional investors, such as securities houses and Qualified Foreign Institutional Investors, about opening accounts.

The stock index futures is based on the CSI 300 index.

(Shanghai Daily February 23, 2010)