Taiwanese Derivatives Market

by Hua Zhang, November 6, 2012
Other
Asia-Pacific

Abstract

Taiwan’s financial services industry is facing many challenges, such as low growth in accounts and trading volumes, global competition, new technology, and investment outflow. Taiwanese regulators deregulated to drive the derivatives market, including increasing the derivatives investment quota, allowing advanced trading and overseas investment.

Competition is fierce in the Taiwanese financial market, and many financial institutions tried many methods to profit, including more investment in derivatives, high risk products, and overseas markets. The current trading value for Taiwan’s stock index futures is approximately 22% of the trading value of the spot market, lower than developed areas, and regulators believe financial transformation will drive the growth. In a new report, Taiwanese Derivatives Market, Celent examines the derivatives-related regulations, market participants, and trading platforms.

Retail and proprietary trading firms account for major trading on exchange, and banks are major players on OTC. The major trends include: hedge funds may be founded locally; Taiwanese financial institutions are expanding in overseas markets; overseas expansion drives the growth of foreign exchange and interest rate derivatives trading; and the infrastructure of Taiwan Futures Exchange is not advanced, and most of the traders are retail, so high frequency trading will not be widely adopted in the near future.

“Proprietary firms, pension funds, asset managers, and mutual funds will increase overseas derivatives trading,” says Hua Zhang, analyst with Celent’s Asian Financial Services Group and author of the report. “There are some major drivers: internationalization of risk management is more important than before; deregulation will mean that more pension funds will be allowed to invest in overseas markets and derivatives markets.”

The report describes the regulatory framework, taxation framework, market participants and trading platforms, and Celent’s recommendation to financial payment institutions.

This 24-page report contains 11 figures and 14 tables.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is part of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America (Boston)
Tylor Tourville
ttourville@celent.com
Tel.: +1 617 424 3284

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)208 870 7875

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81.3.3500.3023

Table of Contents

Executive Summary

1

Economic Profile

2

Regulatory and Taxation Environment Is Conducive to Financial Services

3

Market Participants

5

 

Retail and Proprietary Account for Major Trading on Exchange, Banks Are Major Players on OTC

5

 

Hedge Funds

7

 

Asset Managers

7

 

Banks

8

 

Brokers

9

 

Pension Funds

10

 

Proprietary Trading

11

 

Corporate

13

 

Retail

14

Trading Platform

16

 

Taiwan Tick Size

16

 

DMA

17

Conclusion

18

Leveraging Celent’s Expertise

19

 

Support for Financial Institutions

19

 

Support for Vendors

19

Related Celent Research

20

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