The Taiwan Futures Exchange is set to introduce Electronic Sector Index Futures to its after-hours trading session, the latest step in the exchange’s efforts to make its products more accessible to investors in the U.S. and Europe.
A key breakthrough in the history of Taiwan’s financial market came in May 2017, when TAIFEX introduced an after-hours trading session. This session starts after the close of the regular session and runs until 5:00 am the next morning. The extension of trading hours has proved highly popular with both domestic and foreign investors, with overnight trading volume averaging almost 200,000 per session, equivalent to around 20% of the exchange’s average daily trading volume of the regular session.
Based on the success of this initiative, TAIFEX is now expanding the range of products that are available during the after-hours trading session. During the initial phase, the scope was limited to only a few products such as TAIEX Futures and Options-the exchange’s benchmark equity index futures and options. In July, the exchange added Brent crude oil futures and gold products, and later this year the exchange plans to add the Electronic Sector index futures contract. This contract is designed to give investors a way to gain exposure to one of the most important segments of the Taiwanese economy and is particularly attractive to technology investors.
Taiwan technology has become indispensable to companies on both sides of the Pacific
The Electronic Sector Index Futures, commonly known by its ticker symbol TE, tracks Taiwan’s biggest tech firms, including Taiwan Semiconductor Manufacturing, Hon Hai Precision (also known as Foxconn) and Largan Precision. These hardware companies produce semiconductors, camera lens and other electronic components that play a critical and unique role in some of the world’s most valuable technology supply chains — think of the iPhone or anything that has a semiconductor chip.
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As trade tariffs and other events increasingly pressure various parts of these supply chains, foreign investors have become highly active in using the TE contract to hedge their positions. From January to August 2018, foreign investors were responsible for 44.3% of the average trading volume of the TE contract. With the addition of this contract to the after-hours trading session, investors will be able to react to news and announcements at almost any time of the day and night, resulting in more orderly trading flows among the highly intertwined economies of the Pacific.
Trading system upgrades align TAIFEX with the needs of overseas investors
After successfully upgrading its IT system to the fifth-generation in December 2016, which doubled the capacity to 48,000 orders per second and reduced the latency from 800 to 200 microseconds, TAIFEX moved to a new IT center in Banqiao, New Taipei City — an investment that significantly improved security, speed and reliability. The new data center, which hosts Taiwan’s stocks and futures under one roof, has been built to TIA-942 Tier 4 specifications, the highest standard for data center construction, and can withstand strong earthquakes.
TAIFEX’s electronic trading system supports both the global FIX protocol as well as its proprietary Transaction Messaging Protocol (TMP) — in line with the global standards expected by traders. Direct Market Access is also available to foreign investors via participating local brokers.
For more information about the TE contract and the night session, visit www.taifex.com.