Foo-Shiung Ho, Ph.D.
President of Taiwan Futures Exchange
Interview Date: March, 2006
Interviewed by John F. Gallwas, Founder of Striker Securities, Inc.
Striker presents an interview with Dr. Foo-Shiung Ho, who after 26 years with the Chicago Board of Trade (CBOT) in Chicago, Illinois, moved back home to Taipei in 2000 as President of the Taiwan Futures Exchange (TAIFEX). The exchange, established in 1998, is one of the world's fastest growing derivative exchanges and is currently ranked in the top 20. Although many of our readers may already have a passing familiarity with the nation of Taiwan, some may be surprised to learn that it is an island, 100 miles off the cost of China, and while it is physically less than half the size of the state of Illinois, its population is nearly twice that of the Land of Lincoln, at 23 million persons.
Taipei is the capital, with 2.6 million people and the home of TAIFEX as well as the Taipei Financial Tower, a 101 story skyscraper that is 220 feet higher than Chicago's 110 story Sears Tower. Taiwan's foreign exchange reserves are the third largest in the world and its very active financial markets are now in the process of opening their doors to international traders.
John Gallwas: It might be helpful for our readers to have a brief understanding of how Taiwan became one of Asia's economic "Tigers".
Dr. Ho: Some major factors which attributed to Taiwan's economic success and being one of Asia's economic Tigers include the prevalence of education, diligent habit, correct and resilient economic and trade policy. Since 1949, Taiwan has experienced different phases of economic development and gradually transited from agricultural society to industrial and commercial society. People on the island also have benefited from the transition. From the land reforms in 1949, the development of light-industry and the expansion of export, Taiwan built a solid foundation for development on international trade. In the 1970s, Taiwan started the "Ten Development Projects" that further strengthened the infrastructure for industrialization. In the 1980s and 1990s, the Taiwanese government started upgrading domestic industry and strived to develop high-tech industry. The fruitful results that were known as "Taiwan Experiences" successfully pushed Taiwan onto the international stage. The correct and resilient economic and trading policy was the key success factor for Taiwan's economic growth. In addition, during the phases of economic development, the prevalence of education contributed significantly to the smooth transformation from an agriculture-based to an industry-based, and further to a service-based society. On the other hand, the diligent culture of Taiwanese also helped accumulate the kind of capital that was critically needed for economic development
John Gallwas: What has caused the recent movement to "internationalize" the Taiwanese financial services sector including TAIFEX?
Dr. Ho: With the significant growth in our hi-tech industries and economic developments, as well as strong financial service sectors, more and more foreign companies are entering into Taiwan market, looking for investment opportunities. As those foreign companies and employees join domestic economy, many potential market demands, especially consumption and financial service needs emerge. That is why we are eager to expand our financial service more internationally so that those foreigners who come to work in Taiwan could enjoy convenient facilities in our country. In addition, because of the successful growth of our national income in the past decades, many Taiwanese are also going abroad, seeking good opportunities overseas, instead of just investing domestically. They would like to understand other markets in the world, finding potential investment targets, and of course, they need more internationalized service as well. Due to these two strong market needs; Taiwan is pushing and has to push the movement toward internationalization swiftly. Regarding TAIFEX, in the view of Taiwan futures markets, there are more and more foreign investors, including individuals and institutions, investing in Taiwan. They are either having the cash securities and thus having the hedging needs or waiting the potential investment and arbitrage opportunities. To satisfy the market needs of foreign investors, the TAIFEX is following the internationalization trend, plans a series of measures for internationalizing the market, more on this later
John Gallwas: Why should our readers, many of whom are Commodity Trading Advisors, System Developers, and traders, be interested in the internationalization of TAIFEX?
Dr. Ho: The internationalization movement I mentioned above at TAIFEX actually stands from the perspective of foreign investors. For the purpose of "internationalizing", on the other hand, to attract more foreign investors, we are planning to launch many new products denominated in US dollar and trying to introduce more convenient market access systems for foreign investors to enter into our market easily. These new US dollar-denominated products and new market systems for foreign investors will be launched and operated at the end of the first quarter in 2006. Following these internationalized movements at TAIFEX, the global investors who are seeking investment opportunities and trading globally will understand the Taiwan market more comprehensively and are much easier to find the attractive opportunities in and easy access to the Taiwan futures market. That's why we believe your readers, most are foreign traders and system developers as well as trading advisors will be interested in the internationalization of TAIFEX.
John Gallwas: What are TAIFEX's most active markets and why are they so popular?
Dr. Ho: The TAIFEX has launched five index-based futures contracts, three index-based options, two interest rate futures contracts as well as thirty stock options on the list of product offering so far. The most actively traded product amongst these listed products is the TAIEX options (TXO). TXO, one of our three index-based options products, reached 324 thousands lots of average daily trading volume in 2005, representing a growth of 85% in the last year over 2004. In addition, on January 18th of this year, the record trading volume of 930,373 lots pushed TXO into a new era of growth. TXO was ranked among the top three index-based options products around the world, according to the statistics from FIA, and was the major driving force for the TAIFEX to be awarded the "Derivatives Exchange of the Year" award in 2004 by Asia Risk magazine and to be ranked the 18th largest exchange globally in 2005.
John Gallwas: Where can our readers, who would like to research your markets, find technical trading information and historical files on the TAIFEX markets?
Dr. Ho: For those who are interested in our TAIFEX markets, they could browse our exchange website (http://www.taifex.com.tw) to access the trading information and historical data. The detailed data could be viewed under the "market data" and the "statistics" items. In addition, readers may also contact with our staff via 886-2-2369-5678 by phone or our service mailbox: (email@example.com).
John Gallwas: Is there anything in the "what's new" department you would like to share with our readers now?
Dr. Ho: The latest developments at TAIFEX include two important projects. The first one is that we are going to launch three US dollar-denominated futures and options contracts in the first quarter of 2006. These three new US dollar-denominated contracts include the gold futures, the MSCI Taiwan Index futures and the MSCI Taiwan Index options contracts. So far, we have five index-based futures contracts, three index-based options, two interest rate futures contracts as well as thirty stock options on the list. All these products are denominated in New Taiwan Dollar. For the purpose of matching the internationalization movement in our country, we would like to introduce these three new products to your readers. These products will all be traded and settled in US dollar and certainly save the cost of FX for some potential investors, especially for foreign investors. We believe it will be more convenient and helpful to attract foreign investors to pay more attentions to Taiwan futures market in the near future. The other important development in our market is the opening of the omnibus account systems and the permission of foreign investors engaging in Taiwan's futures market for non-hedging purposes. The introduction of the omnibus account for foreign investors would be helpful to attract more off-shore investors who prefer to trade anonymously into our market. The permission of trading for non-hedging purposes for foreign investors brings more flexibility for foreign investors to construct their portfolio positions. They will not be limited in the short positions in the futures market for having long cash positions any longer under the previous hedging purpose restrains. The opening of omnibus accounts and the permission of trading for non-hedging purposes, we believe, would catch more foreign investors' eyes and definitely match the internationalization movement as well.
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