Commentary: Caution: Single-Stock Futures Ahead

They can barely contain their excitement at Chicago's financial exchanges and the nation's brokerage firms that specialize in futures trading. Later this year, they'll be marketing futures contracts on individual stocks. Already they are gleefully counting the potential buyers. "There are about 20-21 million people trading equities out there," crows Joseph Murphy, chief executive officer of Refco Global Futures, a leading New York-based broker that's planning on pushing the newfangled investments. "That's a natural audience for this."

That may be so. But when future contracts on single stocks become available on Dec. 21 for trading by individual investors, most people ought to run, not walk, from them. Promises of speculating on such tony stocks as Microsoft, Merck and Citigroup by putting as little as 20-25% down--compared with the 50% margin now required to buy stocks on credit--will likely prove to be a treacherous siren's song for most individuals. "The vast, vast majority of investors should not be in the futures market," warns John F. Marshall of the securities firm consultancy Marshall, Tucker & Associates. "The empirical evidence going back for decades shows that smaller investors come out losers."