The Taiwan Stock Exchange (TWSE) yesterday announced a number of measures aimed at boosting waning turnover on the local bourse, including significant changes to trading mechanisms.
Proposed trading changes include the implementation of a trade-by-trade mechanism that would speed up matching of market orders and allow investors to take advantage of improved pricing information transparency, the TWSE said.
The current call auction mechanism used by the TWSE matches buy and sell orders at 10-second intervals to produce a single trading price once sufficient volume is achieved.
The trade-by-trade mechanism would match each market order immediately as it is made, with the possibility of creating multiple price points according to the amount of orders placed by investors, leading to higher trading frequency and potentially higher turnover.
Implementation of the trade-by-trade mechanism would also bring the local bourse more in line with major stock exchanges across the world, such as those in New York and London.
A trade-by-trade platform simulation has gone online for investors to become accustomed with the new mechanism, the TWSE said, adding that it would organize a series of seminars and paper trading contests next year to raise awareness.
The exchange is also looking to improve access to high-priced stock for retail investors who are unable to purchase full orders of 1,000-share lots.
The TWSE might allow the purchase of high-priced shares through smaller lots via alternative stock tickers, or by revamping the trading system to allow investors to make smaller orders, such as a 0.1 lot purchase order for 100 shares.
Shares of Largan Precision Co (大立光), the most expensive stock in Taiwan, yesterday fell 1.39 percent to NT$3,550, with one lot totaling NT$3.55 million (US$110,351), a prohibitive exposure for many retail investors.
From Jan. 16, retail investors would also be able to take advantage of a new dollar-cost averaging (DCA) investment scheme, which was previously allowed only for mutual funds, but is to include stocks and exchange-traded funds.
The scheme is an investment method in which a fixed US dollar amount of a particular investment is purchased on a regular schedule, regardless of market prices, which shelters investors from short-term market shocks, while allowing them to build long-term portfolios, the Financial Supervisory Commission has said.
Local brokerages have attributed anemic turnover to heavy tax burdens, appealing to the government for reductions.
However, capital market tax changes would be contingent on brokerages and regulators being able to furnish effective measures aimed at boosting turnover.
Premier Lin Chuan (林全) has maintained a reserved stance on the matter, telling financial sector representatives that tax cuts are not a panacea for current challenges.
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