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TAIFEX 2020 and Beyond

2020 has been a year of uncertainty and change. The global pandemic and the constant shifts in the geopolitical landscape have fundamentally altered many parts of the global economy.

Taiwan, among the world’s foremost success stories in handling the coronavirus, has been one of the main beneficiaries, with its manufacturers well-positioned in accommodating soaring global demand for semiconductor and electronic components, etc. While global trades in 2020 shrink by about 10%, Taiwan’s exports – about a third are comprised of electronics – are up by 4.2% year-over-year in the first eleven months, according to Taiwan’s Ministry of Finance.

This is reflected in the economic statistics, with Taiwan being one of the only major economies worldwide to enjoy annual GDP growth in 2020. The growth momentum is expected to continue and help to underpin the economic recovery in 2021.

Demands for hedging Taiwan’s benchmarks are also increasing as investors seek to gain exposure to the economic resiliency and strong return investment flows to Taiwan. In 2020, the trading volumes of TAIFEX’s flagships – Mini-TAIEX Futures (MTX), TAIEX Futures (TX) and TAIEX Options (TXO) – all saw strong growth, up 102.1%, 35.8% and 18.5% year-over-year (YoY), respectively. The Exchange’s annual trading volumes are pushed up over 30% in 2020, reaching 350 million contracts and surpassing the exchange’s previous annual trading record. Behind the growth, volatility is one of the main drivers and further backed by new product development, active night session trading and growing foreign participation.

Regionally-diversified Offerings

2020 was also the year in which TAIFEX realized its potential as the venue for trading Taiwan, US, UK and Japan benchmarks in all time zones – including during night trading session that covers trading hours of the US and European markets. This development plays out in the trading volumes, for example, the number of contracts traded in TAIFEX’s DJIA Futures and S&P 500 Futures increased 21.5% and 16.9% YoY, respectively. Trading volume of the world’s first offshore Nasdaq-100 futures launched in Q4 2019 tripled, averaging about 3,000 contracts on a daily basis. Foreign participation was the cornerstone of this success, which accounted for 26.2% of TAIFEX’s total trading volume, up from 20.7% in 2019, and made up around half of the trading volume of the international equity index futures offered by TAIFEX.

As well, the listings of TIP Taiwan Bio Futures, FTSE4Good TIP Taiwan ESG Index Futures and FTSE® 100 Index Futures this year further enriched Taiwan’s derivatives trading landscape and TAIFEX’s position as an Asian hub for trading equity index futures and thematic strategies.  

Rising Demand for Small Contracts

In 2020, the trading community sees another change in market dynamics as a result of those “Robinhood” apps and COVID lockdowns – the rise of individual traders, the type of market participant which has long been playing a significant role in Taiwan’s derivatives trading.

The exchange industry caters to the retail influx through various means, which TAIFEX addresses it by the offering of appropriately sized futures. As one of the foremost Asian exchanges spearheaded this effort, TAIFEX introduced its first small-sized product – MTX, way back in 2001. The Exchange moved forward with its recent-listings – all three of TAIFEX’s 2020 products were small-sized or “mini” contracts, giving small traders a manageable road to capital efficiency and offering a compelling proposition to investors of all sizes. The record trading volume seen in MTX’s trading this year validates how fast the retail segment expands.

Continuing this theme in 2021, TAIFEX plans to launch more mini sector index futures and mini contracts on single stock futures. With the broadening of its product line-up, TAIFEX continues to commit to bringing greater diversity of products to the market and responding to the evolving needs of its participants, amid the time of uncertainty.