Trading on the Taiwan Futures Exchange (TAIFEX) continued its upward trajectory with more than 384 million contracts traded in 2022, recording the second highest annual volume and three consecutive years to trade over 300 million contracts. The increased trading in its core products, strong international participation, and the popularity of the Exchange’s night session were the major driving forces for the impressive growth.
Cyclical variants in the capital market raised up trading needs
Coping to the needs of hedging against post-COVID supply chain disruptions in the year, TAIFEX launched two futures contracts for both the semiconductor and the shipping/transportation sectors, as well as introduced bi-weekly TAIEX Options (TXO) and Mini-TAIEX (MTX) contracts to strengthen investors’ trading strategies execution with enhanced flexibility. Furthermore, trading of the Exchange’s core equity index contracts – TXO, MTX and TAIEX Futures (TX) – remained robust.
With over 200 million contracts traded in 2022, TAIFEX’s flagship TXO continued to be one of the world's most heavily-traded equity index options, while the TX traded more than 43 million contracts. TX’s smaller-sized sibling MTX was one of the TAIFEX's fastest growing products, with volume jumping 12% to nearly 80 million contracts in 2022, and accounted for over one-fifth the overall volume. Meanwhile, TX and MTX were re-granted Commission Certification by the U.S. Commodity Futures Trading Commission (CFTC) allowing eligible brokers to offer and sell to U.S. participants.
The Exchange also remains one of the largest overseas market globally trading U.S. equity index futures. Its Nasdaq-100 Futures saw record-breaking yearly volume surging 67.6% to 1.3 million contracts, while the Dow Jones Index Futures grew 12.4%. Together with S&P 500 Futures, FTSE 100 Futures and TOPIX Futures, the one-stop-shopping of TAIFEX foreign product offerings provide investors with opportunities to execute cross-market trading strategies.
Foreign investor participation increased further alongside enhanced clearing services and expanded international recognition
The trading of TAIFEX products would have been less successful without the availability of the night session and active foreign investor participation. In 2022, nearly half a million contracts were traded overnight, equal to 31% of the average daily trading volume of TAIFEX's regular session.
Another equally critical factor to sustain TAIFEX’s growth is the participation of international investors, which accounted for 31% of its total volume in 2022, a rise of 11 percentage points over a five year span.
The Exchange also made great strides in enhancing its clearing services. In line with international practices, TAIFEX commenced OTC derivatives clearing services for clearing members’ TWD IRS transaction in Q3 to help investors to lower capital requirements and improve capital efficiency. The efforts in clearing business earned recognitions from the U.S. and European regulators. Before end of the year, the CFTC granted a No-Action Relief for allowing TAIFEX to clear proprietary swap transactions for U.S. persons or their affiliates, while the European Securities and Markets Authority recognized the Exchange as a Tier 1 third-country central counterparty. These validations ascertain the Exchange’s capability of facilitating even greater foreign participation.
Looking ahead, TAIFEX will continue to expand its product and service offerings, such as launching flexible TAIEX futures and options to provide participants with more flexibility in contracts customization, and extending clearing services to USD/TWD NDF and TWD IRS for clearing members’ proprietary and client transactions. Leveraging its continuous and strenuous efforts, TAIFEX aims to provide a convenient, accessible and liquid marketplace to help local and overseas investors alike to manage their risks in times of global uncertainty.