1、1,Policies and Regulations of Non-Hedge Trading and USD/TWD Denominated Products,2,Contents,Brief on TAIFEX Foreign Futures Enterprises Application Procedure Status quo and proposed Changes ID system Omnibus account Trading and settlement of omnibus account Position limits for overseas Chinese and f
2、oreign investors Account Structure and Forex Regulation,3,Brief on TAIFEX,The development of Taiwan Futures Market Market structure Clearing procedure TAIFEX products Market updates,4,The development of Taiwan Futures Market,1997.03 Futures Trading Law was promulgated 1997.9.9 The Taiwan Futures Exc
3、hange (TAIFEX) was established 1998.7.21 1st equity futures contract (TAIEX Futures) was launched 2001.12.24 1st options contract (TAIEX Options) was launched 2002.11 Futures Advisory business was opened 2003.12 Managed Futures business was opened 2004.1.2 1st bond futures contract Gov. Bond Futures
4、 was launched 2004.5.31 30-day CP Interest Rate Futures was launched 2004.10.14 Award the “ Derivatives Exchange of the Year 2004“ by Asia Risk 2005.3.28 Electronic Sector & Finance Sector Index Options were launched,5,Market Structure,Financial Supervisory Commission / Securities & Futures Bureau,T
5、AIFEX,Individual Clearing Member,General Clearing Member,FCM,FCM,IB,Settlement Banks,Fund transfer,Settlement Banks,Fund transfer,Customers,IB,CPO,FCM,CPO,CPO,CTA,CNFA (Chinese National Futures Association),6,Clearing procedures,FSC/SFB,Trading report,TAIFEX,FCMs,Margin deposit / orders,Position Man
6、agement,Settlement/Clearing,Submit tickets to,Clearing Member,Deal-done report,Deal-done report,Settlement request,CTA,CPO,IB,Discretionary operation,Customers,7,TAIFEX Products,Futures TAIEX Futures TE Futures TF Futures Mini-TAIEX Futures TSEC Taiwan 50 Futures Government Bond Futures Commercial P
7、aper Interest Rate Futures Options TAIEX Options Finance Sector Index Options Electronic Sector Index Options Equity Options,Equity Index Futures,Interest Rate Futures,8,Market Growth,9,The number of trading accounts,Total trading accounts is up to 1,100,257, including 1,094,344 of individual and 5,
8、913 of institutional investors.,10,Trading behavior,11,57,47,44,38,26,35,20,Data Resource: Futures Industry Association,18,Worldwide Ranking,12,TAIEX Options (TXO),The world s top 10 index options-TXO ranked No. 5 in the category.,Data: Trade Data Global Service.,13,Derivatives Exchange of the Year
9、2004,TAIFEX awarded by Asia Risk on Oct 14, 2004,The best practices and innovation inderivatives and risk management inAsia-Pacific. Innovative and well-infrastructure inderivatives market, commodity as wellas information of the year.,14,Foreign Futures Enterprises Application Procedure,Overview of
10、Establishment Criteria for Futures Enterprises (p.14-1) FCM Concurrent futures business operator IB Flowchart of Application for Establishment of FCMs (p.14-2),15,Status Quo,Legal basis Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals (Article 4-2) Guidelines
11、for Futures Trading by Overseas Chinese and Foreign Nationals Trading purpose Only for the purpose of hedging a position on domestic securities. Only hedge account is allowed to be opened. Investment limits and restrictions Long hedge: The aggregate market value of long positions on futures and opti
12、ons shall not be more than the combined holding of NTD cash and cash equivalent. Short hedge: The aggregate market value of short positions on futures and options shall not be more than the total market value of securities holdings. Investment limit: The aggregate amount of the initial margins requi
13、red for futures contract, premiums required for buying of options, combined with the investment in money market instruments shall not be more than 30% of inwardly remitted funds.,16,Proposed Changes,Legal basis Futures Trading Law. Trading purpose Trading purpose is not restricted. Investment limits
14、 and restrictions Position limit: According to rules governing position limits for various products. Foreign institutional investors (the same as local institutional investors) may apply for exemption of position limit. Fund regulation: Margin deposit/withdrawal in US Dollar only. Offshore Funds sha
15、ll be separated into two different accounts for securities and futures markets, respectively.,17,Proposed Change-cont.,Side-effect after change: Foreign investors may trade futures products for non-hedge purpose through an direct account or an omnibus account. The benefiaries: overseas Chinese and f
16、oreign investors (including corporations and individuals).,18,Proposed methodology for non-hedging trading by foreign investors,TAIFEX,FCM2,FCM1,Foreign investor,(Direct acct A),Foreign investor,(Direct acct B),FCM3,Foreign investor,(individual acct),Foreign FCM 2,（,(Omnibus acct 2),、,Foreign FCM an
17、d foreign,Investors shall obtain,an ID before opening an accountthrough the custodian banks.,The omnibus account agreement,，,should indicate the party who,is obliged to file details of positions held by individual clients,Foreign investor,(individual acct),Foreign FCM 1,(Omnibus acct 1),19,Proposed
18、targets of futures market relief,20,ID System,Single ID:Single ID system will apply to foreign investors who trade in the futures market. A foreign investor that has already had an ID issued by Taiwan Stock Exchange Corporation (TSEC) for investment in domestic securities can use the same ID for fut
19、ures trading and vice versa. Every foreign investor must obtain an ID before trading futures. The ID may be applied through a local FCM or securities firm for onshore foreign investors, and through a custodian bank for offshore foreign investors. 。,21,Qualifications of a foreign investor to open a f
20、utures trading account,Direct account The requirements are the same as the prevailing regulations. Omnibus account eligible offshore foreign FCM A clearing member of a foreign futures exchange sanctioned by Taiwans regulatory authority. Its home office or branch in Taiwan is free of disciplinary act
21、ion imposed by securities or futures authorities or self-regulatory organization to suspend its securities or futures brokerage practice in the past year. Free of incident of violating futures or securities trading agreement signed with the futures exchanges in home country or Taiwan in the past thr
22、ee years.,22,Restrictions on account opening,Direct account Foreign investors may open more than one futures account with a local FCM, or with several local FCMs. Omnibus account An offshore foreign FCM may open more than one omnibus account with a local FCM; an offshore foreign FCM may also open an
23、 omnibus account with different local FCMs on account of its trading strategy or clientele attributes. Only TAIFEX clearing member may accept the opening of omnibus account by foreign FCMs.,23,Procedure for opening direct account,Step1:obtain an ID,Step2:overseas Chinese and foreign investors accoun
24、t opening procedure,24,Procedure for opening omnibus account,25,Trading and settlement of omnibus account,Foreign FCMs are not required to disclose trading information and identities of individual clients behind the omnibus account to local FCMs. The omnibus account can be treated and processed as a
25、 single account for trading and settlement purpose. Trading: Local FCM will treat each omnibus account as a trader and place orders by each the omnibus account. Individual clients under an omnibus account may apply for position offset, designated options combination for strategic purpose, and design
26、ated position offset to reduce margin payment.,26,Position limit of direct account,Position limit is regulated according to the prevailing ID system. Position limits are the same as those for local individuals and corporations. Exemption of position limit Institutional investors may apply for exempt
27、ion of position limit. The extent of relaxation will be regulated by rules to be prescribed. Actions in case of over-limit: Same as those for local investors where the FCM will be notified to stop accepting new orders from the account.,27,Position limit of omnibus account,Position limit Omnibus acco
28、unt is not subject to position limit. Individual clients under the omnibus account will be assigned an ID and subject to position limits for regular accounts.,28,Account Structure and Forex Regulation,Margin account TAIFEX, clearing members, FCM and local traders open both a NTD margin account and a
29、 USD margin account, while offshore foreign investors only need to open a foreign currency account. Margin payment【Overseas Chinese and foreign investors】 Deposit and withdraw margin in USD only. Forex regulation Pursuant to Regulations Governing Foreign Exchange and Rules for Declaring Receipt, Pay
30、ment and Transaction of Foreign Exchange.,29,Margin System,30,),【 Description】,Overseas Chinese and foreign investors pay margin in USD for trading of US-denominated products.,$,VISIO CORPORATION,Deposit margin,FCMs,margin account,Clearing members,margin account,TAIFEX,Margin account,Client,Clients
31、position,【FIG.1】 Margin and Trading Flow Process for Overseas Chinese and foreign investors,31,【Fig.,3,】 Futures Margin Payment Scheme,NTD and USD,Denominated commodities,【Description,】,A. Principles,1.,Offshore foreign investors will deposit and withdraw margins for USD and NTD denominated commodit
32、ies in USD.,2.,Local and onshore investors will deposit margins for USD-denominated commodities in USD, or in NTD,through a FCM who will exchange it into USD ; local and onshore foreign investors will pay margin in NTD for NTD denominated commodities.,B. Advantages,To engage in futures trading, offs
33、hore foreign investors will remit the funds in and out in USD, which helps lower the risk of NTD exchange rate fluctuation and does not impact the foreign exchange market.,NTD,futures margin account,NTD,futures margin account,NTD,futures margin account,Local and onshore Foreign investors,NTD,NTD,NTD,TAIFEX,FCM,Clearing member,Investor,USD,futures margin account,USD,futures margin account,USD,futures margin account,Offshore foreign investor,Local and onshore Foreign investors,USD,USD,USD,USD,32,Contact Us,Visit Our web site at : WWW.TAIFEX.COM.TW,
