The rise of retail traders in major markets around the world has been well observed. The so-called ‘GameStop phenomenon’ suddenly unveiled that retail investors, young and old, can too actively participate in and even shape markets thanks to the low barriers of entry brought about by low-fee and easy-to-use brokers and platforms.
Yet, little of this attention focused on Asia where a similar trend has been underway, especially in the area of derivatives. At Taiwan Futures Exchange (TAIFEX), active retail engagement combined with strong institutional participation, which each accounts for approximately half of the Exchange’s trading volume, are the reasons behind the Exchange’s stellar performance in 2021.
The percentage of retail traders is even higher during TAIFEX’s night trading session at 57%, and more notably, in the trading of the Exchange’s most popular equity index futures product － Mini-TAIEX Futures (MTX), at close to 60%. With 28% of Taiwan’s new futures trading accounts opened in the first nine months of 2021 being aged in their twenties, younger retail investors have also become keener to get in on the action, calling for more accessible products to the market.
Introducing TAIFEX’s new mini finance futures
With demand from small investors showing no signs of slowing, TAIFEX has been committed to introducing more small-sized contracts to cater to this customer segment. Earlier in the year, TAIFEX amended the listing criteria of its Mini Single Stock Futures (SSF), lowering the threshold of prices for eligible stocks. This brought in a wider suite of Mini SSFs, including global Taiwan blue-chips such as TSMC.
Essential industries within the Taiwan economy will be the focus of new product creation. Following the successful launch of Mini Electronics Sector Futures in June 2021, which tracks all major companies in the country’s most critical industry, TAIFEX is setting its sights on the industry with the second-largest market capitalization － the financial sector. With many financial companies recording strong growth in recent years pushing up the price level of the TAIEX Finance and Insurance Index, the contract size of TAIFEX’s existing Finance Sector Index Futures (TF) rose to approximately US$58,000, a high threshold for small traders.
With the upcoming launch of Mini Finance Sector Futures (ZFF) on December 6, 2021, TAIFEX aims at providing investors of all sizes with a more approachable tool for trading and hedging Taiwan’s finance and banking sector. The new ZFF features a small-sized contract with a contract value of approximately USD 14,500, one-fourth the size of the TF contract.
Complementing the larger-sized TF contract, the reduced size of ZFF not only lowers the barrier for investors to participate in and to express their views on Taiwan’s financial sector, it also presents more viable risk management alternatives for a range of market participants – from institutions to new and sophisticated retail traders – to navigate in Taiwan’s liquid financial markets, with enhanced efficiency and precision in trade execution.
Launching mini contracts is just one way in which the Exchange responds to the needs of the market. En route to a new annual trading record in 2021, TAIFEX will continue to observe local and global market trends to broaden its product line up, lower barriers of entry for hedging, and make more risk management strategies available for Taiwan’s futures markets.