Bi-Weekly Contracts of TAIEX Options and Mini-TAIEX Futures Taiwan Futures Exchange August 2022 1
Outline Market Development Contract Listing 2
Market Development 3
Purpose Weekly options trading is burgeoning. Most major futures exchanges have listed weekly options, with multiple expirations. In November 2012, TAIFEX launched weekly TAIEX Options. In the initial stage of listing, the aggregated average daily volume (ADV) of TXO (including both standard and weekly contracts) increased by 24.5%. In the second year after listing, TXO’s aggregated ADV continued to grow by 37.6%. In 2021, TXO’s aggregated ADV posted 809,000 contracts, of which weekly contracts accounted for 80%. 4
Market Demand and Benefit Analysis The trading volume of TXO increased as the spot month contract approached the expiration date, with the highest ADV posted in the second week prior to expiration. The futures industry has expressed interest in trading contracts of different expirations, such as bi-weekly contracts. Contracts with different expirations could facilitate strategic trading. Provide more opportunities for options spread trading. Improve the flexibility of positions rollover. TXO Average Daily Volume (contracts) Year The 4th week prior to expiration The 3rd week prior to expiration The 2nd week prior to expiration The week prior to expiration 2019 613,584 732,647 759,044 745,717 2020 774,977 821,794 865,152 849,529 2021 743,265 831,130 854,873 824,258 Average 710,609 795,191 826,356 806,501 5
Listing of Bi-weekly Mini TAIEX Futures The ADV of MTX weekly contracts exceeded 1,000 contracts, with retail investors and futures proprietary merchants each accounting for 43%. Year Foreign Investors Retail Investors Futures Proprietary Trading Others MTX ADV (contracts) 2019 1.82% 18.02% 80.07% 0.09% 968 2020 2.14% 24.12% 73.70% 0.03% 1,683 2021 4.20% 48.15% 47.20% 0.45% 991 2022(1-7) 12.71% 43.43% 43.10% 0.76% 1,400 By adjusting the expiry cycle of MTX weekly contracts from one week to two weeks, TXO and MTX bi-weekly contracts can be listed at the same time with the same expirations. Improve the hedging efficiency and reduce the basis risk. Enhance price discovery and pricing efficiency. Provide accuracy and flexibility of strategic and arbitrage trading. 6
Contract Listing 7
Listing of Bi-weekly Contracts Bi-weekly contracts are listed on Wednesdays. Present: weekly contracts expire in one week (blue) Future: bi-weekly contracts expire in two weeks (red blue) both weekly and bi-weekly contracts are available for trading at the same time. Expiration Months (Weeks) 2022.11 9 W 2022.12 10 11 14 15 16 17 18 21 22 23 24 25 28 29 30 1 2 5 6 7 8 9 12 13 14 15 16 19 20 21 T T F M T W T F M F M T W T F M T W T F M T W T W T F M T W 202211(Monthly) 202211(W4) 202211(W5) 202212(W1) 202212(W2) 202212(Monthly) The strike price interval of options series within 3% of the underlying index is half of that of the spot month contract. The highest and lowest strike prices cover 10% of the underlying index. 8
Listing of Bi-weekly Contracts (cont.) Bi-weekly contracts are listed every Wednesday, with the Wednesday after next as the last trading day, except for the first Wednesday of each month. Contract Code Week Bi-weekly Bi-weekly Options Futures Week 1 TX1 MX1 Week 2 TX2 MX2 Week 4 TX4 MX4 Week 5 TX5 MX5 Last Trading Day Initial Trading Day (Listing Day) Note The 1st Wednesday of the delivery month If the last trading day or the initial trading The 2nd Wednesday of the day falls on a holiday The Wednesday delivery month or if trading cannot two weeks ahead of proceed on that day The 4th Wednesday of the the last trading day due to a force majeure delivery month event, the next business The 5th Wednesday of the day shall prevail. delivery month 9
Listing Calendar for Bi-weekly Contracts (2022.11) Contracts Sun Mon Tue Wed Thu Fri Sat W1 10/30 10/31 11/1 11/2 11/3 11/4 11/5 W2 11/6 11/7 11/8 11/9 11/10 11/11 11/12 202211 11/13 11/14 11/15 11/16 11/17 11/18 11/19 W4 11/20 11/21 11/22 11/23 11/24 11/25 11/26 W5 11/27 11/28 11/29 11/30 12/1 12/2 12/3 Listing of Bi-weekly TXO Date Expiring Contracts Weekly Contracts Bi-weekly Contracts 11/2 202211W1 202211W2 - 11/9 202211W2 - 202211W4 11/16 202211 202211W4 202211W5 11/23 202211W4 202211W5 202212W1 11/30 202211W5 202212W1 202212W2 10
Disclosure of Market Information Market information can be accessed via websites of TAIFEX’s Real-Time Snapshot Quotes (https://mis.taifex.com.tw/futures/), major financial news media, and domestic IBs’ and FCMs’ ordering platforms. 11
Thank You www.taifex.com.tw 12
Listing of Bi-weekly Contracts (cont.) Bi-weekly contracts are listed every Wednesday, with the Wednesday after next as the lasttradingday,exceptforthefirstWednesdayof eachmonth. Week Contract Code Last Trading Day Initial Trading Day (Listing Day) Note Bi-weekly Options Bi-weekly Futures Week 1 TX1 MX1 The 1st Wednesday of the delivery month .
Rates - Standard Option Plan Bi-weekly Self Bi-weekly Self One Bi-weekly Self Family 3.25 6.49 9.74 Rates - High Option Plan Bi-weekly Self Bi-weekly Self One Bi-weekly Self Family 5.46 10.91 16.37 Benefit Description Copay Standard Option Plan Coverage with a MetLife Network Vision Provider Eye Exam Focuses on your eyes and .
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