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Yuanta to sell stake in TAIFEX to European futures exchange firm

TAIPEI, Taiwan -- Yuanta Financial Holdings Co. (元大金控, YFH) on Thursday announced its plans to sell its stake in the Taiwan Futures Exchange (期交所, TAIFEX), marking the first landmark international collaboration for the local bourse via mutual shareholding.

Yuanta's announcement stated that the company will sell about 12.92 million TAIFEX shares currently held by its banking, securities and futures brokerage arms to Eurex Zurich AG, a continental-based futures exchange. The transaction amount is expected to reach a staggering US$42.74 million, at the price of US$3.3064 per TAIFEX share. Following the transaction the Yuanta group is expected to see a tremendous windfall at 900 percent profitability, as the conglomerate had purchased TAIFEX shares at the book value of NT$10 per share. Profits from the deal is anticipated at around NT$1.116 billion, and contribute per-share earnings of NT$1 for Yuanta Financial Holdings Co's books.

According to reports, the move may have been initiated to meet regulatory requirements. Since Yuanta's acquisition of Polaris Securities (寶來證卷), Polaris MF Global Futures (寶來期貨), the financial conglomerate's holdings of TAIFEX shares have exceeded regulator's limit of 5 percent of total shares in circulation. Consequently, the Financial Supervisory Commission (FSC, 金管會) ordered Yuanta to liquidate its excess holdings of TAIFEX shares within a two-year timeline.

Market commentators, however, stated that the deal still requires the approval of the FSC and other regulators. Without mishap the approval process may be expected to be completed by the first half of next year, granting the EUREX a 5 percent stake in TAIFEX.

Meanwhile, the deal represents the furthering of efforts in international collaborations between international organized markets, such as the InternationalExchange's (ICE) acquisition of NYSE Euronext to enable the formation of a larger-scaled trading platform for trading derivative instruments.

Incidentally, reports indicate that EUREX have completed similar acquisition of stakes in the futures exchange of Brazil and India. Reports also suggest that EUREX had played an active role in the deal, and had approached Yuanta on the knowledge that the conglomerate was under regulatory pressure to unload a portion of its TAIFEX holdings.

According to market observers, the international profile of Taiwan's financial markets has been elevated since the inking of various cross-strait trade and currency clearing accords with China. Attracted by the Taiwan's prospects as an important, safer and more transparent gateway into the vast China markets, the local exchanges have drawn collaborative interest from various U.S., United Kingdom and Europe-based exchanges. The progress in deregulation and bridging international gaps however are lacking compared to the pace in the endeavor set by the London Stock Exchange, according to market observers. With China impetuously propelling the Shanghai Stock Exchange into the regional financial epicenter by 2020, further efforts is required, said commentators.

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