The Taiwan Futures Exchange (TAIFEX), the only derivatives exchange in Taiwan, received the No-Action Letter from the US Commodity Futures Trading Commission (CFTC) dated Oct 11 2006, permitting the offer and sale in the US of TAIFEX futures contract based on the MSCI Taiwan IndexSM.
According to the Commodity Exchange Act (CEA), there are three criteria governing the trading of futures contracts on a group or index of securities on designated contract markets and registered derivatives transaction execution facilities (DTEFs):- the contract must provide for cash settlement;
- the contract must not be readily susceptible to manipulation nor to being used to manipulate any underlying security; and
- the group or index of securities must not constitute a narrow-based security index.
CFTC has examined and determined that the MSCI Taiwan IndexSM and TAIFEX’s futures contract based on the MSCI Taiwan IndexSM conform to these requirements and will not recommend any enforcement action if TAIFEX’s MSCI Taiwan IndexSM Futures contract is offered and sold in the US. Accordingly, US registered futures commission merchants (FCMs) are now allowed to accept orders for TAIFEX MSCI Taiwan IndexSM Futures from investors located in the U.S.
In addition to the MSCI Taiwan IndexSM Futures, TAIFEX has been granted No-Action Letters on four other products: TAIEX Futures, Mini-TAIEX Futures, Electronic Sector Index Futures, and Finance Sector Index Futures.
Since the launch of TAIEX Futures in 1998, TAIFEX has experienced tremendous growth. According to FIA, as of June 2006, TAIFEX’s trading volume was ranked 18th globally. The TAIEX Options, TAIFEX’s flagship product, is the third-most actively traded stock index options contract in the world. To further expand the market scale, TAIFEX has actively taken measures to facilitate internationalization and to boost foreign participations. On March 27 2006, TAIFEX launched three US dollar-denominated products, including TAIFEX Gold Futures, TAIFEX MSCI Taiwan IndexSM Futures and TAIFEX MSCI Taiwan IndexSM Options. In conjunction with the launch of new products, TAIFEX has taken several liberalization measures, including the permissioning of trading for non-hedging purposes by foreign investors, the introduction of omnibus accounts and the acceptance of US dollar as margin deposit to keep in line with international practices.
