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The Taiwan Futures Exchange (TAIFEX), the only derivatives exchange in Taiwan, received a No-Action Letter from the US Commodity Futures Trading Commission (CFTC) dated April 2 2008, permitting the offer and sale in the US of a TAIFEX futures contract based on the Taiwan Stock Exchange Non-Finance Non-Electronics Sub-Index. The futures contract ticker symbol is XIF.
The underlying index of the XIF contract is a broad-based, market-capitalization-weighted security index composed of stocks that are listed for trading on the Taiwan Stock Exchange Corporation (TSEC) and that are not finance- or electronics-related. Maintained by the TSEC, the underlying index tracked the stocks of 325 TSEC-listed companies as of October 31, 2007. Based on data supplied by TAIFEX, the total adjusted market capitalization of the index was approximately US$234.2 billion.
According to the US 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 Taiwan Stock Exchange Non-Finance Non-Electronics Sub-Index Futures meet these requirements and will not recommend any enforcement action if these futures are offered and sold in the US. Accordingly, US-registered futures commission merchants (FCMs) are now allowed to accept orders for Taiwan Stock Exchange Non-Finance Non-Electronics Sub-Index Futures from investors located in the U.S.
In addition to the Taiwan Stock Exchange Non-Finance Non-Electronics Sub-Index Futures, TAIFEX has been granted No-Action Letters for five other products: TAIEX Futures, Mini-TAIEX Futures, Electronic Sector Index Futures, Finance Sector Index Futures and MSCI Taiwan IndexSM Futures.
