The bills market plays an important role in Taiwan’s money market. The total turnover amounted to 49 trillion NT dollars in 2003, 20 plus trillion NT dollars more than the stock market. Lacking short-term interest rate index, however, interferes with the development of relevant derivative products. To develop bill interest rate futures, TAIFEX has been actively involving in the construction of short-term interest rate index since 2001. With the assistance of DIDC and information vendors, the short-term interest rate index was completed and promulgated in September 2003.
Taking into account the current conditions of the domestic money market and the experiences of foreign markets, TAIFEX has completed the design of short-term interest rate futures. This futures product takes the most actively traded financing commercial papers that best reflect the actual funding demands in the market as underlying and settles by cash. Its designed aim is to provide more hedging tools for investors, and more so, to build the term structure of short-term interest rates. It is quoted by 100 minus interest rate in percentage and has face value of NT$100 million. The initial margin is 17,000 NT dollars.
Dr. Chen and Mr. Ding stressed that CPF combines the efforts with different regulators, markets and industries. Taking the interest rate of the cash market as underlying, the CPF is more impartial and more representative than many current interest rate derivative products quoted by the market. After the launch of CPF, TAIFEX’s product line becomes more diversified.
Following the CPF launch ceremony, TAIFEX Chairman, Der-Shan Wang, and DIDC Chairman, Helena Kuo, signed the Memorandum of Understanding. By signing the MOU, the two companies will share market information and cooperate closely to prevent illegal trading and manipulations in the future.
