Mea­sures en­cour­age June start for stock trades

The China Post - - TAIWAN BUSINESS -

The Tai­wan Stock Ex­change ( TWSE, ) said Wed­nes­day that sev­eral new mea­sures de­vised to spur higher trad­ing vol­ume are sched­uled to kick off in June.

The mea­sure ex­pected to have the big­gest im­pact will be rais­ing max­i­mum daily up­ward and down­ward stock price fluc­tu­a­tions to 10 per­cent from the cur­rent 7 per­cent, which has been in place for 25 years.

It will take ef­fect on June 1, said TWSE Pres­i­dent Michael Lin when he sum­ma­rized the new trad­ing mea­sures to vis­it­ing mem­bers of the Leg­is­la­ture’s Fi­nance Com­mit­tee on Wed­nes­day.

Lin said the wider daily price fluc­tu­a­tions will not only ap­ply to the spot mar­ket but also to prices on the fu­tures and op­tions mar­ket.

The wider daily fluc­tu­a­tions have long been urged by many an­a­lysts who con­tend it would help align the prac­tices of Tai­wan’s eq­uity mar­ket with global mar­kets by elim­i­nat­ing trad­ing re­stric­tions.

China lim­its daily stock price fluc­tu­a­tions to 10 per­cent, South Korea to 30 per­cent, and Ja­pan to be­tween 14 and 30 per­cent. Sin­ga­pore and Hong Kong do not im­pose any lim­its on daily price changes.

Rec­og­niz­ing that the new mea­sure could in­crease the risks faced by in­vestors trad­ing on mar­gin when share prices come un­der heavy pres­sure, the stock mar­ket will adopt an­other rule to off­set the po­ten­tial risks.

The amount of eq­uity re­quired by in­vestors to main­tain their mar­gin trad­ing ac­counts — known as the col­lat­eral main­te­nance ra­tio — will be in­creased on May 4 to 130 per­cent of the amount an in­vestor bor­rows on mar­gin, from the cur- rent 120 per­cent.

An­other new mea­sure will be to in­clude war­rants and ex­change traded funds ( ETFs) among those in­stru­ments for which day trad­ing is al­lowed, also start­ing from June 1. Day trad­ing al­lows in­vestors to buy and sell the same stock in a sin­gle trad­ing ses­sion.

To re­duce con­cerns over the pos­si­ble risks as­so­ci­ated with the wider daily share price fluc­tu­a­tions, the Tai­wan Fu­tures Ex­change has sched­uled eight seminars to brief in­vestors on the new sys­tem. The seminars will run from April 20 to May 8.

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