Page 41 - Taiwan Futures Exchange 2019 Annual Report

(2) Other new rules In the area of trading rules, acting in consideration of the fact that excessively large market orders can cause large and abnormal price fluctuations, on 27 May 2019 TAIFEX lowered the maximum quantity of market orders to 10 contracts during the regular session and five contracts during the after-hours session. The maximum quantity of limit orders and market with protection orders remained unchanged. Also on 27 May, TAIFEX reduced the threshold for block trading, cutting it to 100 contracts from 200 for TAIEX Futures and Mini-TAIEX Futures, and to 200 contracts from 400 for TAIEX Options. TAIFEX also reduced the tick size of TAIEX Option block trades to 0.1 points. In addition, on 1 October TAIFEX added Gold Futures, NT Dollar Gold Futures and Gold Options to the block-trading mechanism to better meet the strategic trading and hedging needs of traders. In the area of clearing rules, on 11 February 2019 we began publishing liquidity data for all futures and options products to provide market participants with references to use in weighing the liquidity risks of the products they trade. On 15 February, we implemented measures to manage the concentration of clearing members' positions in low-liquidity options series, utilizing a reporting process and increased margin levels to improve the management of potential liquidity risks for clearing members whose holdings of low-liquidity options series reach a given threshold. On 29 March, TAIFEX increased the period used in calculating the risk coefficient of margins from one day to two days, and incorporated business cycle determinants into the calculation, to increase traders' margins to cover exposures. On 9 July, we amended the default waterfall scheme for handling a default by a futures market clearing member, and assumed responsibility for the final settlement of contracts, to bring our market's financial safeguards into better alignment with international standards. On 1 October, we adjusted how margins are calculated for combination positions involving short calls and puts, introducing “C-value” to the combination position margin calculation and adjusting it based on market conditions, in order to materially improve coverage of exposures for these kinds of combinations, and to remind traders of the risks of holding short combination positions. On 2 December, TAIFEX amended risk- management measures related to the concentration of clearing member positions, using clearing members' open position value-at-risk to weigh their concentration risk, detect their single-sided position risk, and improve risk controls. In addition, TAIFEX acted in support of the addition to the Futures Trading Act of a legal basis for establishing centralized clearing of OTC derivatives, and on the instructions of our regulator, by continuing to plan matters related to the establishment of a centralized clearing mechanism for OTC derivatives. This mechanism will strengthen Taiwan's financial infrastructure and spur the further development of its financial markets. 37