Commission shoots second arrow in order to stimulate market activity

By Ted Chen,By Ted Chen

TAIPEI, Taiwan — A second round of stimulus measures designed to stimulate market activity came into effect yesterday, allowing traders to initiate short sell orders on shares trading below their opening price. The market yesterday saw an 84-point rally, and closed at 8,293 points. Trading volume yesterday reached NT$85.2 billion, exceeding the previous five consecutive sessions.

The move is part of the Financial Supervisory Commission’s (FSC) so-called “three arrows,” a trio of policies aimed at stimulating market volume and activity from a persisting slump. The policy’s namesake is inspired by the “three arrows” proposed by Japan’s Prime Minister Shinzo Abe.

The Taiwan Stock Exchange (TWSE) stated that it is ready for the change, announcing that its computer systems have completed stress tests and simulations, and stands ready to accommodate new trading options for investors. It also expects the trio of policies to reap long-term benefits for the development of the Taiwan market. The FSC’s three stimulus policies debuted on Sept. 9, under which dealers of stock brokerage companies were allowed to place sell or buy orders on shares at the intraday limits of 7 percent above or below their opening price. The move is widely referred to as the FSC’s first arrow.

The FSC announced that it completed amendments of regulations to pave way for its “third arrow,” which is set to be let loose next year. The third round of market stimulus policies will allow investors to day trade shares held in the custody of depository trust and clearing companies, as related limitations have been rendered exempt from regulations following amendment of laws by the FSC. The move is designed to bridge the gap between the Taiwan market and international markets.

The TWSE stated that the lifting of day trading limitations may be in effect as soon as January 6, 2014. The TWSE added that the trading of shares listed on the FTSE Taiwan 50 Index, the FTSE TWSE Taiwan Mid-Cap 100 Index, and the over-the-counter Gretai 50 Index will be among the first to be affected by the change next year.