Measures encourage June start for stock trades
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.