The government will allow banks to invest as much as NT$200 billion (US$5.9 billion) in the futures market to hedge their securities investment risks, the Ministry of Finance said in a statement.
The move is aimed at enhancing the development of the futures market, allowing more institutional investors to invest and giving banks more flexibility to manage their risks against price fluctuations.
The amount is derived from the estimated outstanding balance of domestic lenders' combined securities investments at the end of June, said Huang Tien-mu (黃天牧), deputy director general of the ministry's Bureau of Monetary Affairs.
"The relaxation is part of the nation's financial reforms," Huang said. "It is the right time as investors are getting more familiar with the futures market mechanism since the trading started in 1998."
He said the regulation change is effective immediately.
The Taiwan Futures Exchange, formed in 1998, currently offers five futures and two options products. TAIEX futures, which underline the benchmark index, traded 39,008 contracts on Tuesday, compared with 211 traded contracts when the product started operating on July 21, 1998.
"Taiwan's futures market activities only became more active in the past two years," said Vince Chia, a futures analyst at Polaris Futures Co (
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