The Financial Supervisory Commission yesterday gave its approval for Taiwan Stock Exchange Corp to set up a subsidiary to oversee cross-border equity transactions and to promote the trading of international stocks.
The company is to be established as a special-purpose vehicle (SPV) and with a paid-in capital of NT$300 million (US$9.09 million), the commission said.
“By using the new company’s services, small brokerages would be able to offer the option of trading international stocks to their clients,” Securities and Futures Bureau Deputy Director-General Chang Li-chen (張麗真) told a press conference.
She said that only large brokerages are able to offer trading of international stocks to their clients as they have the resources to set up the required back-office systems.
Through the SPV scheme, the required transaction costs and procedural complexity would be greatly reduced, Chang said, adding that the move would also make investment in Taiwanese equities easier for overseas investors.
Stocks listed on the Singapore Exchange would made available to domestic retail investors after the new company commences operations before the end of the first quarter next year, she said.
Regulators of various governments are working toward trading on other international bourses, including those in Hong Kong, South Korea and Japan, she said.
Although 42 brokerages had filed applications with the commission to gain approval to offer trading in international equities, only 10 had implemented a service, the commission said.
However, the measure is not as direct as the Shanghai-Hong Kong Stock Connect program, in which a subsidiary is established in both cities to process trades at the local clearing houses.
The commission yesterday also announced it is to ease the regulations on share buybacks for publicly traded brokerages, by lifting a restriction that brokerages initiate a share buyback if they have accumulated losses in the previous year.
“The decision factored in the immense pressure on earnings faced by brokerages amid rising market volatility,” Chang said.
Of the nation’s eight listed brokerages, two have incurred losses this year, the commission said, adding that one of the brokerages currently in the red has expressed an interest in initiating a share buyback.
In related news, as of the end of last month, the securities brokerage sector reported an aggregate net income of NT$21.2 billion, down 24 percent year-on-year, the Taiwan Stock Exchange said in a statement.
In the first 11 months, brokerages’ fee income declined by 8.4 percent, or NT$3.7 billion, year-on-year, while there was NT$1.9 billion less profit from proprietary trading in the same period, the exchange said.
During the first 11 months, market turnover on the local bourse contracted by 1.27 percent year-on-year, with the TAIEX slumping 9.43 percent over the same period.
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