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Futures block trading to hit the road in Q4.

Taipei, July 7, 2011 (CENS) -- Block trading of futures and options is expected to hit the road in the fourth quarter this year, a move which will attract more institutional investors to engage in Taiwan's futures/options market.

Taiwan Futures Exchange has reportedly rendered a proposal for the inauguration of the trading practice to the Securities and Futures Bureau (SFB), under the Financial Supervisory Commission (FSC), for approval, in response to the request of local futures firms in recent years.

Li Chi-hsien, director general of SFB, stated yesterday (July 6), that the SFB doesn't oppose after-hour block trading in principle but has to take into account a number of related factors, including the effect on normal trading session and the need of trial trading for popular targets initially.

According to the "measures governing block trading," formulated by Taiwan Futures Exchange, the proposed block trading will be limited initially to a number of Taiwanese stocks futures with active trading, as well as small-cap Taiwanese stocks futures and Taiex index options. The minimum trading amount will be 200 contracts for futures products and 400 contracts for options products.

Market insiders pointed out that the lack of block trading system has caused inconvenience for traders or institutional investors in need of large-scale trading or extension of massive positions.

Presently, futures trading is capped at 100 contracts per transaction. As a result, traders with, say, 1,000 contracts of open interest must undertake 10 transactions to extend their position, a highly inconvenient practice. Meanwhile, in case of wild market fluctuation, block trading enables traders with large positions to greatly increase the efficiency of their trading.

An official of Taiwan Futures Exchange also noted that the institution of block trading conforms to international practice, as such trading is available on most foreign futures markets.
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Author:Liu, Philip
Publication:The Taiwan Economic News
Article Type:Brief article
Geographic Code:9TAIW
Date:Jul 7, 2011
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