Mon, Jul 04, 2011 - Page 12 News List

CBBCs set to list on main board on Friday

Staff Writer, with CNA

The first callable bull/bear contracts (CBBCs) are scheduled to list on the Taiwan Stock Exchange (TWSE, 台灣證券交易所) on July 8, the exchange said on Friday.

The TWSE said it accepted applications from eight potential issuers of the new derivatives on the first day applications could be filed, adding that the eight applicants were from brokerages.

The exchange will review the applications before giving the green light for the first batch of CBBC listings on Friday.

The TWSE will also continue to take applications to allow more CBBC listings after Friday, it said.

The move to allow CBBCs to trade on the local bourse is an effort to boost the trading volume of derivatives after the Financial Supervisory Commission approved the issuance of the investment instruments in April.

Similar to stock warrants, but issued by third parties such as investment banks and brokerages, CBBCs follow the performance of an underlying asset or stocks and according to the Wall Street Journal blog, appeal to the gambling instincts of retail investors.

They are leveraged instruments, meaning investors need only pay a fraction of the value of the underlying asset or stock to get contracts. Investors who buy callable bull contracts tend to hold a bullish view on the underlying asset or stock, while buyers of callable bear contracts think the asset value will fall.

Before taking the applications, the TWSE publicized on Thursday a list of 30 underlying stocks for the issuers to focus on from next month to September.

The list of underlying stocks will be revised at the end of every quarter, the exchange said.

The 30 underlying stocks on the current list include 12 financial, 10 electronics and eight old-economy shares, such as Cathay Financial Holding Co (國泰金控), Mega Financial Holdings Co (兆豐金控), Chinatrust Financial Holding Co (中信金控), Taiwan Semiconductor Manufacturing Co (台積電), United Microelectronics Corp (聯電), Hon Hai Precision Industry Co (鴻海精密), Taiwan Cement Corp (台泥), China Steel Corp (中鋼), Yulon Motor Co (裕隆汽車), China Airlines Ltd (中華航空) and EVA Airways Corp (長榮航空).

CBBCs have been well received on the Hong Kong stock exchange since their launch in 2006. In Hong Kong, CBBC trading volume expanded to HK$940.9 billion (US$121 billion) last year, up from HK$11.3 billion recorded in 2006, according to the TWSE.

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