TAIFEX: The Right Venue of Hedging Global Tech Supply Chains

In October 2019, following the successful launch of Dow Jones and S&P 500 Futures, Taiwan Futures Exchange (TAIFEX) introduced the world’s first offshore Nasdaq-100 index futures – TAIFEX Nasdaq-100 Futures, to provide traders for hedging the volatile global technology supply chains on one of Asia’s most forefront trading venues. The product features a small contract size and New Taiwan Dollar denomination, and enables traders to implement intermarket trading strategies between Taiwan and the US. Further, it strengthens TAIFEX’s ability to cater to the growing demand in Taiwan and the Asia-Pacific for offshore technology-sector exposure, including the popular FAANG stocks.

TAIFEX Nasdaq-100 Futures successfully gains momentum with an average daily trading volume (ADTV) of over 1,500 contracts in just its first month of launch. Joining TAIFEX’s US index product suite of S&P 500 and Dow Jones, Nasdaq-100 completes the Exchange’s last piece in offering three most widely-tracked US stock indices. Notably, the Exhange’s Dow Jones Futures is the most heavily-traded Dow futures overseas with ten thousand contracts traded on a daily basis. Investors are provided a one-stop shop overseas to collectively manage their exposure in the US market outside the US exchanges.

October also saw the launch of TPEx 200 Futures. Covering the fast-developing semiconductor, life science and healthcare industries, the TPEx 200 Index tracks the 200 largest companies listed on the Taipei Exchange (TPEx), the listing board for Taiwan’s most innovative technology SMEs and start-ups. As the global economy faces increasing headwinds, product such as Nasdaq-100 Futures and TPEx 200 Futures will help traders across the Asia-Pacific adopt more sophisticated trading strategies to manage their increasingly complex exposures, while seeking niches to gain an edge in their performance.

In all, with TAIFEX’s adding of Nasdaq-100 Futures and other new products complementing core offerings, popularity of night session, other new major measures, and proactive marketing initiatives to local and foreign investors, the Exchange’s trading volume reached 200 million contracts in the first three quarters of 2019 and over one million contracts in ADTV, making TAIFEX one of the top 20 largest exchanges worldwide by Euromoney TradeData.

In the same period, ranked by Futures Industry Association the world’s top six most traded equity index option – TAIEX Options (TXO) – was traded over 125 million contracts, while the Exchange’s other core products – TAIEX Futures (TX) and Mini-TAIEX Futures (MTX) – were traded close to 50 million contracts altogether. These products continue to attract a rising level of foreign participation, including international investors using TXO and TX to gain exposure to Taiwanese equities and proprietary firms operating at a global level, which accounts for about 40% of the trading in both TXO and TX.

As well, TAIFEX’s night session also turns in impressive performance. With the extension of trading to 19 hours beginning from 2017, TAIFEX provides traders with genuine round-the-clock trading and the ability to respond to global and domestic events in real time. The night session continues to be well-received by traders since its launch – close to 230 thousand contracts are now traded overnight, representing around 20% of the ADTV of the entire market.

More exciting product launches are also in the works for 2020. As part of its development roadmap, TAIFEX plans to introduce three strategic indices, including the TAIEX Futures index, Covered Call index and Market Neutral index, to be used as underlying of ETF, ETN, warrants or OTC products. It will also introduce products that align with Environmental, Social and Governance (ESG) and sustainability trading strategies as Taiwan and other countries across the region transition and decarbonize their economies. By leveraging its core strengths, TAIFEX will continue to work ceaselessly to build a solid, convenient and accessible trading environment, and to encourage the market’s growth and maintain its soundness for the future.