An Overview of the Taiwan Futures Market

Foreign Investment Status

 Buy Sell Contracts

Growth Rate (%)

1998 0 0 NA1999 774 826 1,600 02000 13,823 19,428 33,251 19782001 42,995 45,885 88,880 1672002 132,184 113,931 246,115 1772003 1,183,549 802,973 1,986,522 707

(Jan - Nov) 04 2997583 2409842 5,407,425 172(Annualize 04) 3,270,091 2,628,919 5,899,009 197

Factors of Success

• Communicate to understand the requirements of investors.

• Feedback by actions

Action 1 - Relax of Open Position Value

• Open position Value for FINI had been increased from 30% to 100%. It is based on the aggregate market value of related shares of Taiwan Index Futures held by such FINI sub-account as of the previous business day.

Action 2 - Product developments

• Taiwan Index Option

• Taiwan Single Stock Option

• TSEC Taiwan 50 Index …..etc

Action 3 – Decrease of Investment Cost

• The transaction tax on Taiwan Futures products had been decreased 50% from 0.5 per 1000 (each side) to 0.25 per 1000 (each side).

Action 4 – Advertising and Bench Marking

• Provide Training to local and overseas investors.

• Built up communication channels with foreign investors – through Foreign Investment Banks and Custodian Banks

• Bench Mark with Overseas Futures Exchanges

Possible Further Developments (More Request from Investors)

Requirement 1 - Cost

• Eliminate transaction Tax• Simplify regulatory reporting / reporting

procedures to decrease the operating cost of custodian banks = decrease transaction cost of investors.

e.g. (transaction fee USD10-20, administration fee USD1000-2000, custodian fee base on contract value)

Requirement 2 - Price Fluctuation Limit

• The 7% fluctuation limit may not be able to meet the market requirements. 10 – 15% fluctuations would be more appropriate.

Requirement 3 – from Hedging to Trading

• Allow Foreign investors to trade Taiwan Futures / Options not just limited to hedge purpose

Action 4 – Diversify of Hedging Tools

• Stock Borrowing and Lending

Requirement 5 - Foreign Business Co-operations (Market

Maker and Products Issuer)• Built up business relationship with foreign

exchanges and foreign futures brokers to launch more new products and allow foreign brokers to be Marker Makers.

e.g.

SIMEX – MSCI – Taiwan Index

HKEX – Nasdaq – US Stock Index

Requirement 6 - Trading and Settlement Practice

• Allow position rollover for Trading

• Allow Give in / Give Up for settlements

Why further Open Futures Market

• The growth rate of Taiwan Futures Market is a well prove

• Put birds in your own pocket