Next year’s launch of a continuous trading system would affect day traders and institutional investors the most, as the new mechanism would generate multiple trading prices at any given time, the Taiwan Stock Exchange (TWSE) said yesterday.
“Day traders, who aim to buy low and sell high within the same day, would face a bigger challenge than other investors,” Taiwan Securities Association (券商公會) chairman Ted Ho (賀鳴珩) said at a news conference that marked the launch of a simulator for the new trading system.
Unlike individual investors, who generally look to perform a trade once a day at an expected price, day traders pay close attention to price movements over time, Ho said.
Photo: Chen Yung-chi, Taipei Times
Compared with the current call action system, which matches buy and sell orders and generates one trading price over five seconds, the new mechanism would match orders without any wait and thus generate multiple trading prices, he said.
“We expect each transaction to be completed within a millisecond on the new system, which would require day traders to monitor the price more closely than before,” Ho said.
The new system would allow traders to see price movements better than they do with the current system, because the pre-trade information is continuous, TWSE trading division director Ben Chen (陳正斌) said.
“Day traders would need to adjust their strategies, but the new system is likely to help them make smarter decisions,” Chen told the Taipei Times.
Institutional investors would also need to change their strategies, as they would want to take advantage of the five new types of orders that the mechanism allows, he said.
According to the TWSE, the additional order types are market order, in which the buy order is for a certain volume at the best available price; immediate or cancel, in which the buy order is filled immediately, with any unfilled portion canceled; and fill or kill, in which the buy order is filled in its entirety or canceled.
Individual traders, who account for 60 percent of the overall trading, are not expected to use the new order types due to their smaller trading volumes, Chen said.
The continuous trading system is to be officially implemented on March 23 next year and all trades, with the exception of those made at the opening and closing of the trading day, are to be executed via the new system, the TWSE said.
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