A self-help group formed by TAIEX options investors yesterday continued to point at futures brokerages for heavy losses sustained in a bout of frenzied market sell-offs early last month.
At the end of the Feb. 6 session, TAIEX options investors reported an estimated loss of NT$4 billion (US$136.84 million at the current exchange rate), as well as racking up NT$1.44 billion in defaults as affected traders failed to perform clearing and settlement transactions.
During the session, a selling stampede was triggered by a steep overnight drop in the Dow Jones Industrial Average, which sent the TAIEX on a 4.95 percent or 542.25 point tumble to close at 10,404.
In a statement issued on Thursday, the group made allegations against their futures brokerages, which had summarily settled their positions in a bid to prevent further losses without giving them a chance to shore up their margin deposits.
Affected investors said that brokerages had settled their positions with market orders — which are to be executed immediately at current market prices — which had exacerbated the stampede.
During the frenzy, the TAIEX’s trading mechanism was compromised, leaving investors with no other option than to accept severe losses regardless of whether they had long or short positions, the group said.
Brokerages might have exploited flaws in the options trading mechanism to reap profits from the “Feb. 6 massacre,” the group said.
The group questioned how Yuanta Securities Co (元大證券) and Optiver Taiwan Futures Co Ltd (澳帝華), the local branch of a multinational options market maker headquartered in Amsterdam, were able to post stellar earnings last month despite the market rout.
Yuanta Securities’ proprietary trading unit reported pretax income of NT$980 million, while Optiver Taiwan Futures raked in NT$450 million, which happens to be the same amount as total defaults by affected traders, the group said.
The group accused Optiver Taiwan Futures board member Steve Wang (王中愷), a former president of the Taiwan Futures Exchange (TAIFEX), of helping to engineer an illicit move.
Yuanta Securities denied the claims, while the TAIFEX declined to comment on specific brokerages and its former president.
Meanwhile, the Financial Supervisory Commission’s Securities and Futures Bureau said that it is mulling reducing the maximum intraday movement of options on futures, which is set at 10 percent, adding that it is working on a price stabilization mechanism that would prevent stampedes during bouts of volatility.
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