Taipei, The Taiwan equity market is set to introduce a "continuous trading" mechanism in March 2020 in a bid to enhance trading efficiency and meet international standards, according to the Financial Supervisory Commission (FSC).
The FSC, the top financial regulator in Taiwan, said the continuous trading mechanism will be different to the call auction platform currently used by the local equity market.
Under a continuous trading platform, buy and sell orders are matched up as soon as they are reported to the exchange, leading to trading on a real-time basis without any time lag.
In contrast, a call auction platform matches potential buyers and sellers of shares, so buy and sell orders are collected over a fixed period (which in Taiwan is five seconds) and matched up at the end of the period.
The FSC said the continuous trading mechanism will speed up the pace of deal making without any lag as buyers and sellers continuously place orders and are matched on a continuous basis, which is expected to boost efficiency and transparency on the local equity market.
Currently, the major equity markets in the world such as New York, London, Tokyo, Hong Kong, Singapore, Shanghai, Shenzhen, Seoul, Bangkok and Kuala Lumpur, use continuous trading platforms, the FSC said.
Starting on March 23, 2020, all trades, with the exception of those at the opening and closing of the market, will be executed under continuous trading.
At present, the call auction market only provides investors with post trade information, whereas the continuous trading platform will provide both pre-trade and post trade information, a move that is expected to make the local market more transparent, the FSC said.
The FSC began discussing the possible introduction of continuous trading with securities houses more than two years ago.
FSC Chairman Wellington Koo (???) said after two years of coordination with the securities sector, he expects the continuous trading mechanism to launch with no problems.
The introduction of the new system is set for 2020 so that investors have time to prepare for the change, the FSC said.
To help investors familiarize themselves with the new trading mechanism, the Taiwan Stock Exchange is scheduled to launch a simulation platform in March 2019, the FSC said, when it is hoped retail investors will familiarize themselves with the system.
Source: Focus Taiwan News Channel