Mon, May 30, 2005 - Page 8 News List

Editorial: Public-policy debate is no more

In any democratic country, launching a public policy has never been an easy job. The authorities need to move slowly, solicit stakeholders' input at every stage and pay careful attention to public interest, aiming at making their concerns about the prospective policy all the more remarkable.

The backing-off by financial regulators last week from considering a proposal for splitting the single stock-trading session into two -- one in the morning and the other in the afternoon -- was an example of not only how reckless financial regulators are in their approach, but also how there seem to be less and less debate over public policy these days.

The whole fiasco started with a poll conducted by the Taiwan Securities Association (券商公會) which suggested that financial regulators should change the current stock-trading hours. Although noting the poll was poorly conducted with less than 10 percent effective responses, regulators continued to make a concerted effort touting the advantages of extended trading hours, higher trading volume and the greater internationalization of the local bourse, to name but a few.

The proposal to extend trading hours was a simple matter of technical adjustment, but it deserved a good discussion over what impact it could have on local capital markets, on the process of stock delivery and on the ceiling of daily stock movements. However, brokerage workers' immediate opposition to the proposal and their threats to stage protests and mass rallies forced financial regulators to abandon their plan on Thursday, leaving no real and constructive room for public discussion.

The local bourse wasn't always restricted to a single trading session. In 1962 when the Taiwan Stock Exchange opened, it adopted a system of two stock-trading sessions on weekdays and only the morning session on Saturdays. It continued this system for almost two decades through 1984. In July 1984, the regulators decided to pursue a single-trading-session system between 9pm and noon daily, and extended the hours to 1:30am in 2001 after the nation began a new working-week system (Saturday off every other week).

Although local investors and securities companies said they are accustomed to four-and-a-half-hour sessions and rejected the change, if trading hours were adjustable in the past for various reasons, what's the reason now that they cannot be changed back? That's debate No. 1.

Secondly, financial regulators claimed that a longer session would generate more turnover. Are trading hours really a matter influencing stock turnover? That's debate No. 2.

Taiwan's stock market is known for being dominated by retail investors, who complained that extended trading hours would affect their living habits, as they might have to spend more time paying attention to stocks and this would result in less productivity in their own businesses. But if the government really meant to encourage more participation by institutional investors who are better equipped to make investment decisions for retail punters such as housewives and retired citizens, isn't it true that extended trading hours could be the only effective way to force retail investors into seeking the advice of institutional investors? This is debate No. 3.

Lastly, financial regulators said the purpose of extending trading hours was aimed at connecting with international stock markets and to compete with exchanges in countries such as Japan or Hong Kong, where there are two trading sessions daily. Shouldn't we ask whether the development of the local stock market is more relevant to our economy, the governance of listed companies and stock market regulations, than the simple issue of trading hours?

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