The Financial Supervisory Commission yesterday rejected a proposal by Taiwan Stock Exchange Corp (TWSE) to raise the daily trading limit on stocks from 7 percent to 10 percent, citing a lack of supplementary measures.
The commission said that extending the daily limit on stock price fluctuations would have a “far-reaching” impact and asked TWSE to resubmit its proposal complete with supplementary measures, including risk management, to ensure market stability.
“As this matter is of vital importance, we have asked TWSE to put more consideration into the matter and resubmit the proposal after a comprehensive study,” FSC Chairman Sean Chen (陳冲) said during a question-and-answer session at the legislature.
Chen said he couldn’t express much of his own views on the matter because he must respect the opinion of other commissioners.
“But it is reasonable to raise the daily limit from the current 7 percent to 10 percent,” he said without elaborating.
To minimize sharp changes in the market, the daily price fluctuation limits on stocks, beneficiary certificates, Taiwan Depositary Receipts and convertible bonds is set at 7 percent of the closing price of the preceding trading day.
Securities and Futures Bureau Director-General Lee Chi-hsien (李啟賢) said “it’s not easy to make changes [to the trading system] as many factors have to be taken into account.”
Officials should ensure that these changes would be suitable for the market, Lee said.
TWSE chairman Schive Chi (薛琦) said that “timing” was important when deciding when to raise the daily limit on stock price fluctuations, adding that a good timing would be when the equity market is stable.
“It would hinder Taiwan from keeping pace with global standards if its neighboring countries all enjoyed a more relaxed daily price fluctuation limit on stocks,” Schive said.
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