Policies and regulations of non hedge trading and usd twd denominated products
Download
1 / 32

Policies and Regulations of Non-Hedge Trading and USD/TWD Denominated Products - PowerPoint PPT Presentation


  • 92 Views
  • Uploaded on

Policies and Regulations of Non-Hedge Trading and USD/TWD Denominated Products. Contents. Brief on TAIFEX Foreign Futures Enterprises Application Procedure Status quo and proposed Changes ID system Omnibus account Trading and settlement of omnibus account

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about ' Policies and Regulations of Non-Hedge Trading and USD/TWD Denominated Products' - malik-rojas


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
Policies and regulations of non hedge trading and usd twd denominated products

Policies and Regulationsof Non-Hedge Trading andUSD/TWD Denominated Products


Contents
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 foreign investors

  • Account Structure and Forex Regulation


Brief on taifex
Brief on TAIFEX

  • The development of Taiwan Futures Market

  • Market structure

  • Clearing procedure

  • TAIFEX products

  • Market updates


The development of taiwan futures market
The development of Taiwan Futures Market

  • 1997.03 Futures Trading Law was promulgated

  • 1997.9.9 The Taiwan Futures Exchange (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 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


Market structure
Market Structure

Financial Supervisory Commission / Securities & Futures Bureau

TAIFEX

CNFA (Chinese National Futures Association)

Settlement Banks

Individual Clearing Member

General Clearing Member

Settlement Banks

FCM

FCM

FCM

Fund transfer

CPO

IB

IB

CPO

CPO

Fund transfer

CTA

Customers


Clearing procedures
Clearing procedures

FSC/SFB

Position Management

TAIFEX

Settlement/Clearing

Trading report

Deal-done report

Discretionary operation

FCMs

Clearing Member

Submit tickets to

Settlement request

CTA

CPO

IB

Margin deposit

/ orders

Deal-done report

Customers


Taifex products
TAIFEX Products

Futures

  • TAIEX Futures

  • TE Futures

  • TF Futures

  • Mini-TAIEX Futures

  • TSEC Taiwan 50 Futures

  • Government Bond Futures

  • Commercial Paper Interest Rate Futures

    Options

  • TAIEX Options

  • Finance Sector Index Options

  • Electronic Sector Index Options

  • Equity Options

Equity Index Futures

Interest Rate Futures



The number of trading accounts
The number of trading accounts

Total trading accounts is up to 1,100,257, including 1,094,344 of individual and 5,913 of institutional investors.



Worldwide ranking
Worldwide Ranking

57

47

44

38

35

26

20

18

Data Resource: Futures Industry Association


5

TAIEX Options (TXO)

The world' s top 10 index options-TXO ranked No. 5 in the category.

Data: Trade Data Global Service.


Derivatives exchange of the year 2004
Derivatives Exchange of the Year 2004

TAIFEX awarded by Asia Risk on Oct 14, 2004

  • The best practices and innovation in

    derivatives and risk management in

    Asia-Pacific.

  • Innovative and well-infrastructure in

    derivatives market, commodity as well

    as information of the year.


Foreign futures enterprises application procedure
Foreign Futures Enterprises Application Procedure

  • Overview of Establishment Criteria for Futures Enterprises (p.14-1)

    • FCM

    • Concurrent futures business operator

    • IB

  • Flowchart of Application for Establishment of FCMs (p.14-2)


Status quo
Status Quo

  • Legal basis

    • Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals (Article 4-2)

    • Guidelines 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 options 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 required 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.


Proposed changes
Proposed Changes

  • Legal basis

    • Futures Trading Law.

  • Trading purpose

    • Trading purpose is not restricted.

  • Investment limits 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 shall be separated into two different accounts for securities and futures markets, respectively.


Proposed change cont
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 foreign investors (including corporations and individuals).


Proposed methodology for non hedging trading by foreign investors
Proposed methodology for non-hedging trading by foreign investors

The omnibus account agreement

should indicate the party who

is obliged to file details of positions held by individual clients

TAIFEX

FCM3

FCM2

FCM1

Foreign FCM 2

Foreign FCM 1

Foreign investor

Foreign investor

(Omnibus acct 2)

(Omnibus acct 1)

(Direct acct B)

(Direct acct A)

Foreign investor

Foreign investor

(individual acct)

(individual acct)

Foreign FCM and foreign

Investors shall obtain

an ID before opening an account

through the custodian banks.



Id system
ID System investors

  • 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 futures 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. 。


Qualifications of a foreign investor to open a futures trading account
Qualifications of a foreign investor to open a futures 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 Taiwan’s regulatory authority.

    • Its home office or branch in Taiwan is free of disciplinary action 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 three years.


Restrictions on account opening
Restrictions on account opening trading account

  • 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 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.


Procedure for opening direct account
Procedure for opening direct account trading account

Step1:obtain an ID

Step2:overseas Chinese and foreign investors account

opening procedure



Trading and settlement of omnibus account
Trading and settlement of omnibus account trading 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 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 designated position offset to reduce margin payment.


Position limit of direct account
Position limit of direct account trading 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 exemption 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.


Position limit of omnibus account
Position limit of omnibus account trading account

  • Position limit

    • Omnibus account 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.


Account structure and forex regulation
Account Structure and Forex Regulation trading account

  • Margin account

    • TAIFEX, clearing members, FCM and local traders open both a NTD margin account and a 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, Payment and Transaction of Foreign Exchange.


Margin system
Margin System trading account


Futures margin trading account

Daily Trading position

Settlement position

USD

(

FCM places

order

(buy/sell)

Check immediately

whether margin

Reject order

No

deposit is sufficient

TAIFEX matches trade

Automatic offset of long/short

positions in the same account (netting)

Member

FCM

VISIO CORPORATION

Mark-to-market

Margin short

$

USD margin call

Member

FCM

Daily account settlement

Margin

VISIO CORPORATION

$

equity short

Deposit margin

Member

Settlement upon expiry

FCM

Gain/loss of open

VISIO CORPORATION

Settlement upon expiry

$

positions

(Settlement netting)

Payment upon expiry

Loss

:

Remit in funds

Gain

:

Remit out funds

【FIG.1】 Margin and Trading Flow Process for Overseas Chinese and foreign investors

)

Client’s position

Client

VISIO CORPORATION

$

Deposit margin

FCM’s

margin account

Clearing member’s

margin account

TAIFEX

Margin account

【 Description】

Overseas Chinese and foreign investors pay margin in USD for trading of US-denominated products.


3 trading account

【Fig.

】 Futures Margin Payment Scheme

NTD and USD

Denominated commodities

TAIFEX

USD

NTD

futures margin account

futures margin account

USD

NTD

Clearing member

USD

NTD

futures margin account

futures margin account

USD

NTD

FCM

USD

NTD

futures margin account

futures margin account

USD

USD

NTD

Investor

Local and onshore

Foreign investors

Offshore foreign investor

Local and onshore

Foreign investors

【Description

A. Principles

Offshore foreign investors will deposit and withdraw margins for USD and NTD denominated commodities in USD.

1.

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, offshore 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.


Contact us

Trading trading account:

Wen-Lin Chou

E-mail: [email protected]

TEL:886-2-23695678 ext.126

Annie Hsu

E-mail: [email protected]

TEL:886-2-23695678 ext.118

Maggie M.Y. Chien

E-mail: [email protected]

TEL:886-2-23695678 ext.116

Clearing:

Jean Yang

TEL:886-2-23695678 ext.170

Simon Chen

E-mail: [email protected]

TEL:886-2-23695678 ext.171

Business Development:

Ben Yen

E-mail: [email protected]

TEL:886-2-23695678 ext.240

Rita Tsai

E-mail: [email protected]

TEL:886-2-23695678 ext.249

Contact Us

Visit Our web site at : WWW.TAIFEX.COM.TW


ad