1. Dr. Foo-shiung Ho President of Taiwan Futures Exchange
The Actualities and Prospective Development of the Futures Market in Taiwan
Dr. Foo-shiung Ho
President of Taiwan Futures Exchange
Good afternoon ladies and gentlemen. My name is Foo-Shiung Ho, president of Taiwan Futures Exchange, the TAIFEX.
I will spend about 5 minutes to briefly introduce TAIFEX and its listed products, and hopefully the information will be useful for you to understand more about Taiwan’s futures and options markets.
I believe you’ve all got a copy of TAIFEX pamphlet with you. You may find a series of information about TAIFEX market from this pamphlet. Therefore, due to time limit, I would only give you a brief introduction of the market, our products, and the past market performance.
Association of Futures Markets
Budapest, Hungary
March 5th 2004

2. Organizational Structure
Company Introduction
Organizational Structure
Shareholders’ Meeting
Supervisors
Board of Directors
Chairman
Disciplinary
Committee
Clearing
Committee
Trading
Committee
President
EVPs
General
Auditor
The Futures Trading Law was enacted on March 4, 1997 and became effective 3 months later.
Taiwan Futures Exchange was then established in the same year and launched its first product, the TAIEX futures, on July 21, 1998.
TAIFEX is the first and only futures exchange in Taiwan. The exchange is organized as a company limited by shares but with the spirit of membership exchange. Representatives of futures firms not only present in our Board but also are majority members of our Trading, Clearing, and Disciplinary Committees. This arrangement makes self-regulatory functions in an incorporated exchange possible.
The shareholders of TAIFEX come from four relevant industries, i.e. securities, futures, banking, and securities & futures related institutes, such as Taiwan Stock Exchange. Each shareholder shall not possess over 5 % of the paid-in capital unless otherwise approved by the SFC.
The highest executive body of the TAIFEX is the Board of Directors.
The management and staff team is formed by six departments. An independent internal auditor team is responsible for the compliance of the exchange. We have currently a total of 123 employees.
The clearing function is owned by the exchange as a department whose financial and accounting is independent from the trading business. The clearing department is the CCP of all trades executed by clearing members and hence constitutes the cornerstone of the Exchange’s financial integrity.
We have now 12 Individual Clearing Members and 22 General Clearing Members as of today. (13 GCMs and 22 ICMs when our market started trading)
Secretary General
Administration
Information
Technology
Trading
Clearing
Compliance
Internal
Audit
Business
Development

3. Market Structure TAIFEX CTA CPO Customers Securities & Futures
Commission
(FTL 1997)
TAIFEX
Position limit
Settlement
Banks
Trade
Confirmation
Trade
Registration
Place Order
Clearing &
Settlement
Non-Clearing
Member FCMs
Clearing Member FCMs
Clearing
Arrangement
CTA
CPO
As an approved exchange for futures trading, the TAIFEX functions under the Futures Trading Law 1997, and the supervision of the Securities & Futures Commission (SFC), Ministry of Finance.
The SFC oversees the operations of the securities and futures market in Taiwan.
The TAIFEX, as the first and only local futures exchange, we have contracted FCMs, Clearing Members, and 6 Settlement Banks help us to carry out the relevant trading and clearing operations.
At the bottom of our market, we have our market participants, they may be institutional or individual, and they could be hedgers, speculators or arbitrageurs, and they may come from either here or abroad.
Trade
Confirmation
Place Order
Introducing Broker
Funds
Customers
Place Order
Consulting

4. TAIFEX ETS Framework Structure
Company Introduction
100% Electronic Trading
TAIFEX ETS Framework Structure
TAIFEX ETS
CCITT X.25
FCMs’ Proprietary
System T1
9600
or 64K
Information Vendors
Lease lines
Broadcasting
Public Network
Information users
TAIFEX is a 100% electronic exchange right from the beginning, and our current trading system is in-house developed and maintained.
The system is developed under an open platform. It applies the host-to-host framework along with the distribution system jointly developed by TAIFEX and Futures firms. This system can be connected to any model of computers.
As the market scale in terms of numbers of products and trading volume is increasing rapidly, the TAIFEX has been constantly upgrading our system to meet demand on functionality and capacity.
The TAIFEX established the IT Operation Counseling Committee this year.
The major function of the Committee is to provide the President consultation and advices regarding
Evaluation of Existent IT Operation
Guidance to IT Development Plan
Strategies of Long-term IT Development Plans and
IT Operation and Related Proposal

5. Futures Intermediaries
Market Overview
Futures Intermediaries
As of February 2004
24 Futures firms (50 business sites)
17 Securities firms concurrently conduct futures business (84 business sites)
83 Introducing Brokers (IB, 961 business sites)
A total of 124 firms (1,095 business sites)
The followings are some facts of the market. Currently, we have:
24 Futures firms, 17 Securities firms concurrently conduct futures business, and 83 Introducing Brokers offer a total of 1,095 business sites all over the country.
The number of participants in the futures market grew rapidly. The accumulated number of trading account exceeded 852 thousand.
Compared with the number of local securities trading account, which is more than seven million (7,217,981), we certainly can see there is plenty of room for the local futures business to develop and prosperous.

6. Products Futures Options Market Overview TAIEX Futures TE Futures
TF Futures
Mini-TAIEX Futures
TSEC Taiwan 50 Futures
Government Bond Futures
Options
TAIEX Options
Equity Options
With regard to our products, we have by far 5 index futures, 1government bond futures, 1 index options, and equity options on 5 underlying stocks.
The group of futures contracts includes the TAIEX futures, Mini-TAIEX futures, two sector index futures, the TE and TF futures, the TSEC Taiwan 50 index futures, and the 10-year government bond futures.
The group of futures contracts includes the TAIEX futures, Mini-TAIEX futures, two sector index futures, the TE and TF futures, and the TSEC Taiwan 50 index futures. All of them are equity index futures.
Regarding the group of options contracts, we have the TAIEX Options, by far the most successful contract, and the Equity Options.
I will talk about the contracts and their trading volume briefly.

7. Underlying Stock Market
Taiwan Stock Exchange
Employs a 100% Computerized Trading System, providing an efficient and stable stock market
669 listed companies (December 2003) with a total market capitalization of 4.72 trillion (NT$)
Extremely liquid market: total trading value of trillion (NT$), average daily trading value of 81.7 billion (NT$), and a turnover rate of 205.5%
Bond Market
100% Computerized Trading System, an efficient and stable platform (cleared through the clearing banks)
2003 total bond trading value(buy & sell): trillion (NT$)
Outright sale accounts for 60% of total trading (eg. 9.9 billion (NT$) for December 2003
Average daily trading value(buy & sell): over 430 billion(NT$) for December 2003

8. Trading Volume Futures & Options
Performance Overview
Trading Volume Futures & Options
This is a graph showing the total trading volume and average daily trading volume of our futures and options products, since the inception of the market.
The market started with a very slim volume. But the trading volume has growing rapidly from mid-2000, thanks to the SFC’s announcement of cutting the futures transaction tax in half, from 0.05% to %.
The market demonstrates an impressive growth over the years. The annual trading volume last year achieved an all-time record of 31,874,934 contracts, representing an increase of over 300%, compared with 7,944,254 contracts of year The average daily trading volume of year 2003 was 128,067 contracts, representing a growth of exactly 300%, compared to 32,033 contracts of year 2002.
As I previously mentioned, together with the regulator, we have proposed a law amendment to further reduce the transaction tax rate. The proposed amendment is now pending with our legislature. We expect the trading volume will demonstrate another sloppy growth after the passage of the amendment.

9. Ave. Daily Trading Volume Futures & Options
Performance Overview
Ave. Daily Trading Volume Futures & Options
This graph is to show how the trading volume allocated among our products. Obviously, TAIEX options owns the lion’s share.

10. Ave. Daily Trading Volume TAIEX Options
Performance Overview
Ave. Daily Trading Volume TAIEX Options
As I mentioned earlier, the TAIEX options is so far the most successful contract at the TAIFEX.
Its average daily trading volume for 2002 was only 6,316 contracts, but the figure until last year is 87,229 contracts, which is more than tenfold! The January figure was more than 200 thousand contracts.
Historic high of 312,123 contracts
traded on January 02, 2004

11. Trading Volume by Investor Category
Market Overview
Trading Volume by Investor Category
Domestic individual traders are still the main streams at the TAIFEX market. However, the market share of institutional participants has been increased tremendously from 5 % to more than 31% since then. We believe that with the increasing liquidity and decreasing regulatory barriers, the TAIFEX is able to provide a better trading environment for all.

12. Product Plans 2004 2004 & beyond Short-term Interest Rate Futures
Options on GBF
Metal Futures
Commodity Futures
Energy Futures
Looking into the future, our product plans include