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September 26, 2017

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FSC is considering loosening margin trading limitations

TAIPEI, Taiwan -- The Financial Supervisory Commission (FSC) yesterday announced that the investing public may be able to conduct short-sell day trading orders on June 30.

The FSC stated that the change is designed to promote growth in market volume by balancing existing day-trading regulations, which allow only long-position day trades where an investor buys and then sells the shares within the same trading session. In addition, the FSC stated that it hopes to attract more trading volume from foreign institutions in the local market by allowing both long- and short position day trading, propelling intraday trading volumes to above the NT$120 billion benchmark year-round. The regulator also hinted at further loosening of limits on the borrowing of securities for short sells. The FSC however, stated that the loosening of limits placed on foreign exchange activities remains the domain of the central bank.

Meanwhile, trading statistics indicate that short-sale orders utilizing borrowed securities have been increasing markedly since May 30, with the past 5 trading sessions accumulating NT$2.52 billion in short-sell orders, vastly exceeding the NT$1.179 billion recorded in the preceding 5 trading sessions.

Market experts stated that the limits imposed on foreign institutions' investors' ability to utilize share loans remains one of the most significant factors impeding trading volume, and that once removed, the TAIEX stands to mount new heights above the 9,000 benchmark without discernable and immediate recourse.

Currently, foreign institutional investors are the largest entities utilizing securities loans, representing 80 to 90 percent of all borrowed shares.

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