Page 34 - Taiwan Futures Exchange 2019 Annual Report

30 2019 Taiwan Futures Exchange Futures Index, the TIP TAIFEX TAIEX Covered Call OTM 5% Total Return Index, and the TIP TAIFEX Smart Multi-factor 30 Market Neutral Index. By integrating cash- and futures-market data, they provide market participants with additional trading tools, and are expected to further boost futures market trading volumes once new products are launched. In the area of new and amended rules, TAIFEX extended the Dynamic Price Banding Mechanism first launched in 2018 by including TAIEX Options and foreign equity index futures on 27 May 2019 and 1 October 2019, respectively. Also on 27 May, we lowered the maximum number of contracts per market order to 10 for the regular session and five for the after-hours session. On 1 October, we made it easier for investors to strategically trade and hedge gold products by adding Gold Futures, NT Dollar Gold Futures, and Gold Options to the block trading mechanism. In the area of clearing rules, on 29 March TAIFEX increased the period used to calculate the risk coefficient of margins from one day to two days, and incorporated business cycle determinants into the calculation, to improve coverage of exposures. On 9 July, we amended the default waterfall scheme for handling a default by a Taiwan futures market clearing member, and took responsibility for final settlement of contracts. On 1 October, we adjusted how margins are calculated for combination positions that involve short calls and puts, introducing "C-value" to the combination position margin calculation. In addition, following the amendments to the Futures Trading Act on 16 January created a legal basis for centralized clearing of OTC derivatives that will increase the safety, efficiency, and transparency of trading OTC derivatives, and brought our market surveillance into better alignment with international systems. On 24 June, TAIFEX's regulator designated TAIFEX as the clearing house for the centralized trading of OTC derivatives. Acting on our regulator's instructions, we immediately began planning the establishment of Taiwan's centralized clearing mechanism for OTC derivatives. In the area of institutional business promotions, TAIFEX partnered with the Life Insurance Association and investment trust companies to organize multiple large forums. We also conducted institutional visits and institutional training classes, coordinated with FCMs to organize promotional events, and arranged the Fifth Annual Diamond Awards, to encourage institutions to use futures and options to trade and hedge. Over the last three years, 302 new institutional investors, including major banks, have participated in our market. In 2019, the institutional share of average daily volumes in our FX, foreign-equity-index, and commodities products grew by 148%, 71%, and 81%, respectively, from 2018's levels. The Taiwan futures market pursued slow and steady development in 2019, with TAIFEX continuing to develop new products and rules, and to further refine these products and rules to bring them into closer alignment with international norms. We anticipate that our establishment of a centralized clearing mechanism for OTC derivatives will satisfy the needs of market participants and enhance our international competitiveness, invigorating the Taiwan futures market and propelling it into a new era. The major developments of 2019 were as follows.