Chairman Jan-yau HSU from Taiwan Stock Exchange (TWSE) shares his viewpoints for the year ahead.
Looking ahead to 2018, what are the most important regional and global trends shaping your exchange or CCP?
Fintech development proceeded apace in 2017, with many countries increasing their awareness of fintech’s impact and seeking to promote real-world applications in the finance industry. As internet technologies and electronic trading continues to grow, fintech is the biggest trend facing exchanges around the world. In order to prepare and respond to this global trend, the Taiwan Stock Exchange (TWSE) has completed its state-of-the-art Information Centre with co-location services, whose shorter data transmission times and more efficient trading network serves as a dependable foundation for peripheral agencies and securities firms to enhance their fintech development.
The rapid growth in passive investing, with more than $4.6 trillion in assets managed by ETFs worldwide, presents an excellent opportunity for global investors. With over a hundred ETF products in Taiwan and the possible launch of ETNs in the pipeline, the TWSE aims to expand our line of passive investing products and meet our investors’ diverse trading strategies.
Lastly, as the trend of forging mergers and cooperative alliances among international exchanges continues and spreads, the TWSE works tirelessly to promote awareness and visibility of Taiwan’s capital market through our participation in global organisations and forums. Furthermore, the TWSE seeks to explore opportunities for collaboration with exchanges in Europe, the Americas, and Asia. Thus, we enhance interaction with other exchanges, provide more diverse products linking to other markets, and attract investors to Taiwan’s capital market.
Are there any significant regulatory changes on the horizon that may impact the way you do business?
The government’s recent views on regulation lean towards deregulation, liberation and encouraging innovation. The TWSE appreciates the recent efforts of the Financial Supervisory Commission (FSC), Taiwan’s regulatory agency, in enacting policies that foster a friendly trading environment and prosperous market. These policies, including tax cuts on day trading and dividends, create more reasonable transaction costs that spur trading. In the future, the FSC may also ease listing requirements to enable easier fundraising.
Taiwan is poised to become the first country in the world to enshrine a regulatory sandbox mechanism into national law.
The FSC has also loosened regulations and business restrictions to prepare the industry for the age of fintech. One such measure is the establishment of the regulatory sandbox, the 'Financial Technology Innovation and Experiment Act', which has passed preliminary assessment in the Finance Committee in the Legislative Yuan. As a result, Taiwan is poised to become the first country in the world to enshrine a regulatory sandbox mechanism into national law.
In order to maximise the effects of this environment of openness and innovation, the TWSE works to revitalise the market by attracting investors and encouraging outstanding enterprises to list. We also seek to improve services through fintech applications, such as real-time, automated, customised and value-added services for our customers.
What are your key strategic priorities for the coming year?
The TWSE’s main policies for the future will focus on boosting investments and enabling easier fundraising for enterprises:
• Establish efficient market mechanisms: Specific measures include establishing facilities to provide co-location services, preparing to launch continuous trading, plans for a system of and relevant measures for securities market makers, and a working analysis of the impact of inclusion of China A-shares in the MSCI Emerging Markets Index on the Taiwanese market.
• Cross-border collaboration: The TWSE has established working relationships with exchanges in the US, Japan, Korea, and Malaysia, and will engage in cross-market promotion and cross-listing of ETF products.
• Product development: In response to market needs, the TWSE is conducting feasibility studies and developing new financial products, including new types of ETFs, warrants, and other investment products.
• Securities/Futures Market IT Integration: With the completion of TWSE’s First Data Centre, the servers for the TWSE, Taipei Exchange and Taiwan Futures Exchange will be integrated under the same roof, providing a standardised information framework for Taiwan’s capital market.
• Enhancing corporate governance: The TWSE has integrated the resources of peripheral agencies and private organisations to implement and promote various corporate governance measures in accordance with the FSC’s Corporate Governance Roadmap.
How do you feel the social role of financial market infrastructures is changing?
With the rapid development of fintech, the TWSE recognises that the social roles of financial market infrastructures will undergo a paradigm shift:
• Shift to self-regulation: Many recent fintech applications in cryptocurrency payment, P2P lending and ICOs exist beyond the reach of current regulatory environments. Fintech operators should propose self-governing principles and work together with the authorities to amend relevant regulations. Furthermore, the authorities should keep track of the latest development, and conduct timely assessment of regulatory urgency and necessity to prevent market bubbles and fraud.
• Enhance public participation: Developments in fintech and algorithmic trading have given the advantage to institutional investors with considerable resources, while retail investors are largely shut out. As technology improves, financial market participants have a shared social responsibility to prioritise financial inclusion, give the general public a level playing field, and share the fruits of market development.
At the TWSE, our role is to provide more diverse products and services while lowering the threshold for market participation, such as simplifying procedures for opening a trading account and introducing dollar-cost averaging for ETFs and odd-lot trading. We will continue to ensure a fair and competitive market through enhanced information disclosure and transparency.