Day trades approved for Taiwanese stocks with cash settlement

The Taiwan Stock Exchange Corporation has announced that day trading of stocks with cash settlement is now permitted.

The Taiwan Stock Exchange Corporation (TWSE) has announced  that day trading of stocks with cash settlement is now permitted.

TWSE will allow buy-first-sell-later day trades for 150  components of the Taiwan 50 and mid-cap 100 Indices, as well as stocks of the GreTai 50 Index on the GreTai Securities Market.

In Taiwan’s securities market, day trading falls  under the margin trading and short sales system, as such a trade typically serves to offset margin positions bought plus short positions sold on the same day.

Previous resistance to the measure included credit controls and margin requirements conducive to the goals of minimizing trade risks for investors and the ease of market surveillance. however, the TWSE now feels that this move will improve market trading mechanisms and increase volumes.

In 2013, the TWSE authorised securities dealers to set transaction fees on behalf of clients, and also waived the uptick rule on certain securities eligible for margin, so that they can be sold short at a price lower than that of the previous trading day.TWSE considers this short selling relaxation has been a success and hopes its move on day trading will prove likewise.

By 30 December 30, 2013, investors had conducted short sales on an average of 558 companies per day. The number of securities involved in short selling and stock borrowing activity constitutes approximately 73.2% of all companies whose stocks are qualified to be sold short or borrowed. Average daily turnover for short sales and sales of borrowed stocks increased 12.9% to TW$5.23 billion.