Taiwan Futures Exchange launches OTC derivatives clearing
28 July 2022 Taiwan
Image: AdobeStock/Podsawat
The Taiwan Futures Exchange (TAIFEX) has launched a central clearing facility for over-the-counter (OTC) derivatives.
On the day of release, 11 banks have registered with the CCP as clearing members. At 14:00 local time on 25 July, nine of the banks submitted TWD interest rate swap contracts for central clearing with a total notional value of over NT$16 billion (US$500 million), according to a statement from the exchange. “This opens a new page for the central clearing of derivatives in Taiwan,” it says.
TAIFEX indicates that technology for the clearing system has been built in-house, assembled from 16 component modules, and it took the decision not to buy a clearing platform from an external vendor.
“Despite all the difficulties that we faced, we overcame them, successfully launching the clearing system and opening a new page in the Taiwan OTC derivatives markets,” says TAIFEX chairperson Wu Tzu-hsin.
“Starting today, the massive OTC derivatives transactions will be cleared domestically in phases that can help to reduce operating costs for financial institutions, eliminate systemic risks, and strengthen the resilience of the financial system,” adds Wu Tzu-hsin. “In addition, TAIFEX has also been seeking the accreditation of Qualifying Central Counterparty (QCCP) from the US, the European Union, the UK and Canada, to attract foreign capital to the Taiwan futures market and to enhance its international competitiveness.”
Reflecting on the decision to introduce an OTC derivatives CCP, Huang Tien-mu, chairperson of the Financial Supervisory Commission, says that the supervisory authorities in Taiwan committed to developing an OTC derivatives central clearing mechanism in the wake of the 2008 financial crisis as a means to increase funding transparency, reduce derivatives transaction risk and improve the safety of financial markets.
“From the perspective of financial institutions, the [clearing] mechanism can reduce the cost of risk management and lower capital requirements, effectively improving the safety, efficiency and competitiveness of the Taiwan capital market,” says Huang Tien-mu.
On the day of release, 11 banks have registered with the CCP as clearing members. At 14:00 local time on 25 July, nine of the banks submitted TWD interest rate swap contracts for central clearing with a total notional value of over NT$16 billion (US$500 million), according to a statement from the exchange. “This opens a new page for the central clearing of derivatives in Taiwan,” it says.
TAIFEX indicates that technology for the clearing system has been built in-house, assembled from 16 component modules, and it took the decision not to buy a clearing platform from an external vendor.
“Despite all the difficulties that we faced, we overcame them, successfully launching the clearing system and opening a new page in the Taiwan OTC derivatives markets,” says TAIFEX chairperson Wu Tzu-hsin.
“Starting today, the massive OTC derivatives transactions will be cleared domestically in phases that can help to reduce operating costs for financial institutions, eliminate systemic risks, and strengthen the resilience of the financial system,” adds Wu Tzu-hsin. “In addition, TAIFEX has also been seeking the accreditation of Qualifying Central Counterparty (QCCP) from the US, the European Union, the UK and Canada, to attract foreign capital to the Taiwan futures market and to enhance its international competitiveness.”
Reflecting on the decision to introduce an OTC derivatives CCP, Huang Tien-mu, chairperson of the Financial Supervisory Commission, says that the supervisory authorities in Taiwan committed to developing an OTC derivatives central clearing mechanism in the wake of the 2008 financial crisis as a means to increase funding transparency, reduce derivatives transaction risk and improve the safety of financial markets.
“From the perspective of financial institutions, the [clearing] mechanism can reduce the cost of risk management and lower capital requirements, effectively improving the safety, efficiency and competitiveness of the Taiwan capital market,” says Huang Tien-mu.
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