The Taiwan Stock Exchange (TWSE) has set up a new wholly-owned subsidiary, Taiwan Index Plus Corporation (TIP), in a move to expand its index and information services to investors and "to better meet the growing appetite for more innovative financial products".
According to the exchange, TIP will take over TWSE's existing responsibilities for index development, maintenance, licensing and marketing both in Taiwan and in overseas markets. This includes index licensing for use in financial products such as exchange-traded funds (ETFs), index funds, index futures, index options, index warrants, structured products, and other index-based instruments. TIP will also be responsible for maintaining and promoting indices currently available on the exchange, including its benchmark TAIEX series, indices co-compiled with FTSE, Research Affiliates and S&P Dow Jones Indices, as well as its other customized indices such as the Taiwan Stock Exchange Weighted Index (TWII) which appears in 79 structured products, and the Taiwan TAIEX Electronics Index which is featured on five products.
There are more than 270 products across jurisdictions featuring the TAIEX index of which 144 are live products, mainly sold in Sweden, the US, South Korea and China. With 75 TAIEX-linked products launched, HSBC is the most active provider of the Taiwanese benchmark.
In addition to providing a wide range of index services, information services, and products for Taiwan's capital markets, TIP will also promote international connections and cooperation between Taiwan and global markets, said Sush-der Lee, chairman of the TWSE.
The new subsidiary will also have responsibility to identify and compile new indices to expand the country's US$11tr index investment market and "to help investors implement more diversified indexing strategies". These new types of indices may include leveraged and inverse indices, equal-weighted indices, dividend point indices, thematic indices, smart beta indices, and customized indices. TIP will also seek cooperative partnerships with foreign financial services providers and index companies to co-compile indices that meet investors' demand.
Having one company dedicated to index services will increase the competitiveness of the Taiwan market in terms of innovation and efficiency, according to Shin-Chung Chen, senior vice president of corporate planning & strategy at TWSE who has been appointed chief executive at TIP. "It will also accelerate the development of diversified indices in Taiwan and promote their widespread adoption in domestic and overseas markets," said Chen, in a statement.
TWSE's TIP responds to the exchange's plans to expand its services and international links and follows the agreement reached with the Japan Exchange Group (JPX) in Q3 2015 to list the first leveraged and inverse exchange-traded funds (ETFs) tracking the Topix index on TWSE. The cooperation agreement is aimed at improving the access for investors in Taiwan and Japan to trade each market. Structured products issuance in Taiwan has increased by 11.9% year on year to 1,693 products compared to 1,524 recorded in 2014. Sales of structured products have also remained strong at TWD149m, despite a 10.75% fall compared to the TWD167.4m sold in 2014.
TWSE also announced the second umbrella ETF listing this year as Cathay Securities Investment Trust Co. launched the FTSE China A50 Daily Leveraged 2X ETF (Cathay A50 Lev 2X ETF) and the FTSE China A50 Daily Inverse ETF (Cathay A50 Inv 1X ETF) on March 18, and that the total of listed ETFs at the TWSE stands at 40. Cathay United Bank has opted for Numerix Treasurer to respond to increasing demand in the local structured products market. Cathay United Bank was the most active provider of structured products in Taiwan in 2014, with a 27% market share and a sales volume of TWD7bn (US$6.2m). The bank has marketed 45 deposit-based products since the beginning of 2014, and is the most active provider year to date with 10 products, followed by Shin Kong Bank and Taishin Bank (each with four products).
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