The Taiwan Stock Exchange Corporation ?TWSE? noted that Taiwan has launched omnibus trading accounts ?OTAs? in its securities market on Feb. 20, 2006.
The transaction allocation and the calculation of the average price were based on each transaction, a method that differed from international practices, TWSE recalled. In the international markets, achieving the average price is based on the total number of transactions per day. To comply with international practices, Taiwan amended the relevant regulations on July 3, 2006, and the investors could achieve the average price based on the total number and value of transactions made through an OTA.
In addition, to allow more time and flexibility in transaction allocations, Taiwan has allowed transaction allocations to be reported on T day, and to be adjustable on T+1 day.
To expand the use of OTAs, enhance their convenience, and make them available to more investors, TWSE launch four new measures related to OTAs, and the related regulations have been approved by the Securities and Futures Bureau under the Financial Supervisory Commission, which will be effective on May 25, 2009.
Under the four new measures, engaging in block trading through omnibus trading accounts will be allowed, and all investors will be allowed to use such accounts, In addition, odd lots owned by different investors will be permitted to be combined into round lots for trading using such accounts. Lastly, investors who make transactions through a personal account will be allowed to have their transactions combined with those made through an OTA so as to achieve the average price.
Of the four measures, the most sought by securities firms and investors is allowing block trading to be conducted through an OTA, according to the TWSE.
The TWSE explained that an authorized trader engages in block trading on behalf of his or her underlying investors, and under the new measure, it will not be required that underlying investors’individual trading sizes meet the minimum block trade size, only the trading size of an OTA needs to meet this minimum size.
The TWSE said that this new measure would make it easier for an authorized trader to accumulate enough consigned OTAs in order to meet the required number before engaging in block trading. Meanwhile, the measure would avert a huge impact on the price of normal transactions.
To offer more services to investors, Taiwan will no longer confine the use of OTAs to specific investors, but instead will open them up to domestic and foreign investors. Both institutional investors and individual investors will be allowed to use OTAs, the TWSE said.
In addition, with the effect from May 25, 2009, an authorized trader will be permitted to combine odd lots into round lots before trading them through an OTA. Afterwards, the authorized trader will be allowed to divide round lots into odd lots and allocate them to underlying investors for settlement.
The TWSE said that this measure is in line with international practices and consistent with the way foreign investors conduct transactions. Moreover, under this measure, securities firms will be less likely to report out-trades.
Besides, if an authorized trader wants to trade through an OTA, but by mistake he places the order through a personal account, the transactions will be allowed to be combined with an OTA so as to achieve the average price, as required by underlying investors, according to the TWSE.
