Constant trading system set for equity market

NO LAG::The change is set for March 23, 2020, but the Taiwan Stock Exchange is to launch a simulation platform in March next year to familiarize investors

Staff writer, with CNA

Wed, Sep 05, 2018 - Page 12

The nation’s equity market is to launch a continuous trading mechanism in March 2020 in a bid to enhance trading efficiency and meet international standards, the Financial Supervisory Commission (FSC) said.

The mechanism would be different from the call auction platform used by the local equity market, the commission said.

Under a continuous trading platform, buy and sell orders are matched up as soon as they are reported to the exchange, leading to trading on a real-time basis without any time lag.

In contrast, a call auction platform matches potential buyers and sellers of shares, and buy and sell orders are collected over a fixed period — five seconds in Taiwan’s case — and matched at the end of the period.

The continuous trading mechanism would speed up the pace of dealmaking without any lag, as buyers and sellers continuously place orders and are matched on a continuous basis, which is expected to boost efficiency and transparency on the local equity market, the commission said.

Major equity markets in the world, such as those in New York, London, Tokyo, Hong Kong, Singapore, Shanghai, Shenzhen, Seoul, Bangkok and Kuala Lumpur, use continuous trading platforms, it said.

Starting on March 23, 2020, all trades, with the exception of those at the opening and closing of the market, are to be executed under the continuous trading mechanism, the commission added.

The call auction market only provides investors with post-trade information, whereas the continuous trading platform would provide both pre-trade and post-trade information, which is expected to make the local market more transparent, it said.

The commission began discussing the possibility of introducing continuous trading with securities houses more than two years ago.

FSC Chairman Wellington Koo (顧立雄) said that after two years of coordination with the securities sector, he expects the continuous trading mechanism to launch with no problems.

The launch has been set for 2020 to give investors time to prepare for the change, the commission said.

To help investors familiarize with the new mechanism, the Taiwan Stock Exchange is to launch a simulation platform in March next year, the commission said.