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In the efforts to develop a full-fledged bond market, the Taiwan government has implemented a series of programs, including setting up regular issuance schedule, when-issued trading system, reopen system, and primary dealer system for government bonds. These actions have helped augment the scale of the government bond market. According to statistics, the average daily trading value so far this year has reached NT$540 billion, up more than 50% as compared to last year. The debut of the TAIFEX GBF and the Bond Lending Center will help lower the costs of investment, making the bond market more appealing to individual investors as well.
In more than five years since its inception, Taiwan Futures Exchange has introduced seven products, including five futures and two options, which are all stock-related products. The listing of government bond futures means not only one more product in the market, but also signifies an important milestone for the Taiwan futures market as it moves beyond the scope of the current stock based product line. According to the experience of other futures and bond markets, government bond futures are more actively traded products among derivatives, mainly because the majority of bondholders would use bond futures for hedging purpose. On the other hand, because the TAIFEX GBF are settled by physical delivery, a Bond Lending Center can act as a bridge between the futures and spot markets.
The availability of the TAIFEX GBF and the bond lending system provides market participants with a hedging tool, which further assist strategic trading in the bond market. To support the needs of individual investors for their bond futures trading, the Bond Lending Center will be open to the general public and make sure that all futures traders have ample supply of bonds for settlement. Moreover, the launching of the TAIFEX GBF will help relieve the hesitation of conservative foreign institutional investors to invest in our bond market due to the lack of hedging function. It is expected to draw international attention to Taiwan's market and attract more foreign funds into our market.
Taiwan Futures Exchange and GreTai Securities Market are to hold a ceremony for the listing of government bond futures and the opening of Bond Lending Center at 8:40AM on January 2, 2004 at Grand Formosa Regent Taipei. Premier Yu Shyi-kun, Minister of Finance Lin Chuan, and SFC Chairman Ding Kung-wha are invited to attend and jointly witness this most significant moment in the history of our futures and bond market.
