Trading of stock index futures is to trade products that will be delivered in a certain future time. To ensure the safe operation of the market, investors have to pay the trading margin in a certain proportion. The margin is designed to ensure the fulfillment of contract by clients, thus reducing the risk of breach of faith on the futures market. Margin is an important mechanism to maintain the normal operation of futures market. A reasonable margin rate can not only help improve the quality of market operation but also effectively prevent the risk of breach of faith on the market, thus fulfilling the market function and the social responsibility at the same time.
First, the margin rate to be exercised in the future shall not be lower than 12%, the minimum margin rate. As the trading margin rate is not fixed, the exchange usually adjusts it after considering the price fluctuation, market liquidity, status quo of spot stock market and possible situation of the market in future. Therefore, the rules can be interpreted as that the margin rate of CSI 300 Stock Index Futures shall not be lower than 12% after listing and trading, and the actual rate will be fixed in a market-oriented way and stands a good chance of being higher than 12%.
Second, compared with those of major stock index futures contracts in the world, the minimum margin rate of CSI 300 Stock Index Futures is not that high. According to the statistics from the World Federation of Exchanges, the most active exchange in stock index futures trading around the world in 2009 was Chicago Mercantile Exchange (CME), followed by the European Derivatives Exchange (Eurex), the National Stock Exchange of India (NSEI), the Osaka Securities Exchange (OSE) and the Korea Exchange (KRX). Among them, the initial margin rates of S&P 500 Index and NASDAQ 100 Index Futures traded on the CME, DJ Euro 50 Index Futures traded on the Eurex, Nifty Index Futures traded on the NSEI, Nikkei 225 Index Futures traded on the OSE, and KOSPI 200 Index Futures traded on the KRX are 12%, 9%, 20%, 4% and 15%, respectively. The CSI 300 Stock Index Futures has only trading margin, without initial or maintenance margin. Therefore, compared with those on overseas markets, the minimum margin rate of CSI 300 Stock Index Futures is not quite high.
Third, the margin rates of stock index futures on emerging markets are generally set at a relatively high level. In the five most active markets for stock index futures, the Indian and Korean markets are emerging markets while the others are all mature markets. Correspondingly, the margin rates of stock index futures in India and Korea are higher than those on mature markets. Generally speaking, the understanding of risks in stock index futures, the investment philosophy and the investment experience of investors from emerging market are not as good as that of their counterparts from mature markets. Besides, the emerging stock markets undergo a greater fluctuation than the mature ones. Consequently, it is natural for the margin rates of stock index futures on emerging markets to grow higher than those on mature markets given the overall market development.
Fourth, the minimum margin rate of CSI 300 Stock Index Futures is lower than that on Indian and Korean markets. The Indian, Korean and Chinese markets are all emerging markets. The market capitalization and trading volume of Shanghai and Shenzhen stock markets are much larger than those in Korea and India. To control risk, maintain stability of capital market, and facilitate steady start-up of stock index futures market, the margin rate of CSI 300 Stock Index Futures adopted in reality is quite likely to go higher than the minimum level.
Fifth, the margin rate required for the investors is usually higher than that stipulated by the exchange. In practice, the rate of margin charged by the futures companies to the investors is several percentage points higher than that stipulated by the exchange.
To sum up, we hold that after listing and trading, the margin rate of CSI 300 Stock Index Futures will be higher than the minimum level, with the actual rate depending on the market performances of Shanghai and Shenzhen stock markets and the futures companies.
