"Letter to the Shareholders"
1 Letter to the Shareholders Dear shareholders, It has been 11 years since TAIFEX was established in 1997. The principles upon which we were founded have remained our guideposts over the years. The works to build a world-class exchange characterized by fairness, safety, effi- ciency, professionalism, and innovation continued in 2008. TAIFEX has thus turned in a sterling report card despite the global financial crisis. TAIFEX’ s total trading volume in 2008 came to 136,719,777 contracts, marking a historic high and an increase of 18.73% over the previous year. Along with the surge in trading volume, shareholders’ returns improved further with pre-tax earnings of NT$1,877,639,597 and net income of NT$1,421,107,824 recorded for the year. The pre-tax earnings per share and net income per share came to NT$8 and NT$6 respectively, making TAIFEX the most profitable entity among exchange and deposi- tory organizations in Taiwan. Mr. Andy Yeh Mr. Steve C. Wang Chairman President Let t er t o th e S h a re h o ld e rs It is not a coincidence that TAIFEX has delivered a ster- The volume of TAIFEX futures equivalent traded in 2008 ling report card. Over the course of 2008, a series of new was 1.31 times the volume of MSCI Taiwan Index Futures measures were introduced and new products were launched. traded on SGX (Note: The Mini-TAIEX Futures (MTX) has They include: (1) the launch of NT Dollar Gold Futures on 28 been included in the computation of TAIEX futures equiva- January; (2) the disclosure of information on market activities lent, at a conversion ratio of 4 MTX to 1 TX). In terms of trad- ing value, the TAIFEX futures market was 2.05 times that of of major institutional trader groups in April; (3) the adjust- MSCI Taiwan Index Futures in Singapore. We believe that ment of margin ratios in June; and (4) the implementation of the competition landscape has thus changed fundamentally. multi-currency margining. In the 4th Quarter of 2008, new Coupled with the home market advantage which we have measures were rolled out at an even quicker pace: (1) the regained, we expect the competitiveness and global pres- introduction of institutional hedge accounts; (2) an increased ence of the Taiwan futures market will continue to scale new frequency of clearing margin withdrawals in October; (3) highs. implementation of SPAN margining to end-customers; (4) ac- Meeting the needs of our customers has been our key ceptance of stocks and bonds as margin collateral ;(5) the consideration. In this respect, the NT Dollar Gold Futures adjustment of final settlement price calculation methodology (TGF) contract which was launched in January 2008, has and final settlement day for stock index futures and options been designed with its unit of measurement most familiar to in November; and (6) implementation a TCP/IP futures trad- local investors in Taiwan, i.e, the Taiwan tael (one tael = ing order routing network in December. 37.5 grams). With the successful launch of TGF, we have The new measures and new products have put our subsequently launched NT Dollar Gold Options (TGO) on 19 January 2009. futures market on a more solid footing. Despite the global The aggregate TGF trading volume in 2008 came to financial crisis in 2008, the trading volume on TAIFEX still hit 5,314,069 contracts, or 3.89% of the total volume traded on a new high, with a growth rate surpassing the global average TAIFEX. In the very first year of its launch, TGF became the of 13.24%. fourth most actively traded gold futures contract in the world, In 2008, TAIFEX’ s average daily trading volume was indicating that it has been widely accepted by local traders in 549,075 contracts, an increase of 17.78% from 466,197 con- Taiwan. tracts in 2007. Trading in the Mini-TAIEX Futures rose the In the area of international cooperation, TAIFEX in 2008 fastest, up 205% year-on-year, followed by the TAIEX Fu- signed MOUs with the Warsaw Stock Exchange (WSE), the tures at 67%. The trading activities on Finance Sector Index OMX Nordic Exchange (OMX AB), and the Johannesburg Futures and Electronic Sector Index Futures have also Stock Exchange (JSE). increased, with a growth of 41% and 35% respectively. In addition, TAIFEX actively took part in international The various new measures have injected added liquidity conferences and events, including these organized by the US into the Taiwan futures market and tilted the competition Futures Industry Association (FIA), FIA Asia, the Association of Futures Markets (AFM), the International Options Markets landscape. Indeed, the year 2008 marked an important mile- Association (IOMA), the World Federation of Exchanges stone in TAIFEX’ s history, in particular, with respect to the (WFE), and the Swiss Futures and Options Association competition with SGX which has lasted for more than 10 (SFOA). We also sponsored activities in some of such con- years. ferences and events so as to enhance the image and profile of the Taiwan futures market. Let t er t o th e S h a re h o ld e rs To keep abreast of developments beyond our shores, to promote better understanding of the Taiwan futures market TAIFEX in 2008 sent a total of seven delegations to visit the on the part of both traders and the general public, we pub- United States, the United Kingdom, France, Germany, Italy, lished Taifex Quarterly, TAIFEX Newsletter, and the Journal Japan, South Korea, India, Singapore, Australia, China, of Futures and Options, which were distributed to futures Hong Kong, and Russia, where they visited 39 exchanges firms, colleges, universities, and libraries. and related organizations. Useful information was gathered The development of TAIFEX can be divided into three and cooperative ties have been strengthened. distinctive five-year periods. The first five years were the Taiwan's futures market continued its process of engag- startup period, the second five years were the growth period, ing the international participants. Having been granted the and in 2008 we entered into a reformation period Part 30 exemption and 5 No-Action Letters previously, we The purpose of the many new measures introduced in followed up to obtain a No-Action Letter from the Commodity 2008 is to lay a solid foundation for the Taiwan futures Futures Trading Commission(CFTC) on the Non-Finance market. Next year, our focus will be on the follow-up of the Non-Electronics Sub-Index Futures. In addition, the applica- various initiatives implemented this year, in order to ensure tion for no-action letter on GreTai Securities Market Stock that their full benefits will be realized. Focuses will also be Index Futures is pending for CFTC approval. With the ex- on enhancing the risk management function of the market emption from CFTC, qualified members of TAIFEX may offer and expanding the institutional participation base. We will their services to investors in the United States, which in turn also continue to explore new products and new measures so helps to increase the participation of foreign traders in the as to improve the breath and depth of our market. We would Taiwan futures market. like to express our sincere gratitude to the competent au- Marketing efforts have also been an important focus. A thorities for their guidance, to our members and market par- total of 34 workshops have been held to acquaint some 7,000 ticipants in the futures industry for their support, and to all of attendees with our plans, prior to their implementation. Pro- our colleagues for their hard work over the past year. With fessional development was another important focus last year. the continued support of our shareholders, we look forward We offered training courses in Hong Kong for "selected do- to another great year in 2009. mestic institutional traders" and conducted an "Introductory Training Course for Futures Dealers," a series of courses on the "Basics of Futures Trading" for traders employed at domestic0institutions,0and0a0"Futures0Professional Devel- opment Course." These courses attracted a total attendance of over 3,300. Also, in order to forge closer ties with the futures indus- try, TAIFEX held a "Panel Discussion for FCM Senior Man- agement" and "Panel Discussion for Managing Directors of Chairman FCMs," where industry professionals exchanged views. Andy Yeh Where appropriate, such views were incorporated into plans for further market promotion and development. And in order President Steve C. Wang