Table of Contents
Introduction
Taiwan Stock Exchange (TWSE) was established in 1961 when the Taiwan Stock Exchange Corporation was founded based on the local securities exchanges in Taipei, Hsinchu, and Taichung. The Taiwan Stock Exchange has been a center of voluntary trading for foreign investments and domestic securities for over 50 years. It is also the only domestic securities exchange in Taiwan.
Let’s explore its journey in more detail:
Overview of Taiwan’sTaiwan’s Economy
Taiwan has a highly developed and booming capitalist economy with considerable investment in the high-tech sector. Over the last decades, economic reforms and investments in high-value industries have been implemented to increase economic growth. As a result, the country is a major manufacturer of electronics, steel, machinery, timber, petrochemicals, and plastic goods. As a result, the economy has grown exponentially since the 1980s and is currently the twelfth-largest export economy in the world.
The Taiwan Stock Exchange (TWSE) was founded in 1961 as the Taiwan Securities Exchange Corporation (TSEC). It is now one of the leading stock exchanges in Asia, with more than 633 listed companies ranging from financial service companies to technology and industrial sector companies. In 2018 it was ranked seventy-second globally by market capitalization according to the World Federation of Exchanges ranking system.
With almost 24 million people in its total population, Taiwan has a formidable consumer base that drives economic demand for locally produced goods and services. In addition, financial developments such as pension reform, banking regulations, and capital market liberalization have made Taipei attractive for investors seeking longer-term investment returns. The TWSE provides an effective platform for investors to access these markets through its ever more sophisticated online trading services, which are designed to assist them in achieving their objectives on dual fronts – short-term and long-term investment goals.
Early History
The Taiwan Stock Exchange (TWSE) was founded in 1961 and was originally known as the “Taipei Exchange.” Its main purpose was to facilitate trading government bonds and other fixed-income instruments. In 1965, the exchange was renamed the Taiwan Stock Exchange, and its trading activities were expanded to include stocks and other equity instruments. It marked the beginning of the Taiwanese stock market.
Establishment of the Taiwan Stock Exchange
The establishment of the Taiwan Stock Exchange (TWSE) in 1961 marked a significant milestone in developing modern capital markets in Taiwan. It was founded to provide a platform for local companies to raise capital and facilitate securities trading. With its headquarters in Taipei, the TWSE began operations on February 24, 1962.
Initially, only 11 locally incorporated companies were listed on its main board when it opened, and regulations focused primarily on protecting investors’ interests. Nevertheless, by its first anniversary, there were 22 listed companies, and more than 1000 investors had traded their shares. Market consolidation continued throughout the 1960s and 1970s, and by 1980 there were 51 listed stocks.
In 1992 new regulations for issuing stocks and dually-listed securities revised listing requirements for overseas Chinese entities that wanted to list on the exchange. In December 1994, designated foreign institutional investors from Hong Kong, Macau, and Singapore were allowed to invest in TWSE markets, which further encouraged foreign investors to participate. The 2001 Securities & Exchange Act introduced several vital modifications, including enhanced disclosure requirements, supervision of insider trading regulations, along with stricter rules for corporate governance which saw further growth in TWSE participating entities, both domestic and overseas-registered corporate entities raised capital through the shorter listing period after becoming eligible for public floatation.
The establishment of the TWSE has significantly impacted modern-day capital markets by providing a secure platform to facilitate stock trading among domestic investors while allowing access to foreign investment into various listed companies throughout the Taiwanese economy. Doing so has helped form a foundation for how financial markets can operate efficiently while protecting investors’ interests.
Early Regulations and Trading
The first Stock Exchange regulations, guaranteeing public disclosure on all trades, were implemented in 1992 and remain in effect today. Furthermore, in 1997, the government established the Taiwan Over-the-Counter Exchange (OTC) as a separate entity from the TSE. It was to help facilitate trading between large and small investors over-the-counter (OTC).
In 2000, the day trading of stocks became legal, allowing investors to quickly buy and sell stock to capitalize on short-term price movements. During this period, the TSE also developed two new derivative instruments – futures and options trading. In addition, electronic trading was also introduced in 2001 with the creation of necessary infrastructure like the Automated Trading System (ATS).
That period’s main focus was improving transparency, developing sophisticated clearing procedures, and introducing new products such as ETFs. Three trading platforms were launched between 2002 and 2006 to enable electronic stock trades for investors of all sizes. In 2007, Taiwan began offering online share trading, which has since become a popular way for individuals to purchase stocks from their homes or offices without visiting a physical exchange office.
Modern History
The Taiwan Stock Exchange (TWSE) began operations in 1961, at the end of the Chinese Civil War. It was then known as the Taipei Stock Exchange, or TSE. Trading began with 13 domestic companies listed and 15 foreign companies.
In 1969, the Taiwan Stock Exchange Corporation was established to manage the exchange’sexchange’s operations. Since then, the Taiwan Stock Exchange has grown steadily and become one of Asia’s most important regional stock exchanges.
Demutualization of the Taiwan Stock Exchange
Since its inception in 1962, the Taiwan Stock Exchange (TSE) has become one of Asia’s largest and most influential exchanges. With increasing levels of sophistication and efficiency brought on by technological advances and deregulation, it has become an increasingly attractive venue for investors seeking almost immediate access to a wide range of Taiwanese companies.
One key move that helped align the Taiwan Stock Exchange with modern industry standards was its demutualization in 2001. Demutualization is when a stock exchange, previously owned and managed by professional traders and company representative members, is converted into a private corporation, and all stakeholders become shareholders. This move promoted stability, created a business model based on profitability for its shareholders, consolidated ownership of the exchange into fewer hands (which also increased shareholder control), and reduced transaction costs through increased automation and other benefits. After a successful demutualization, the Taiwan Stock Exchange was listed on its main board in November 2002 under the stock code “TWAEN.”
Introduction of the Electronic Trading System
The Taiwan Stock Exchange (TWSE) was established in 1961, making it one of the Asia-Pacific region’s oldest and most influential exchanges. Throughout its history, the TWSE has undergone numerous changes to modernize its trading operations.
In 2001, the TWSE implemented a Computerized Stock Broking System (CSBS), which allowed brokers to conduct transactions electronically rather than through traditional paper-based systems. The system also included various order types and conditions, such as limit and stop loss orders.
Over the next few years, the TWSE refined and improved its electronic trading system. In 2004, they launched an online platform for private investors to buy and sell stocks directly over the internet. This system allowed individuals to place orders from any place with internet access and receive real-time market data on their computer screens with a high accuracy rate.
In 2007, a mobile trading app was released for smartphones, tablets, and PCs. This app allowed for more efficient order execution without sitting in front of a computer all day. As a result, by December 2013, most traders were using only electronic systems for their transactions instead of traditional paper-based records or manual exchange floor trading methods; this marked the transition of a complete electronic transition at the Taiwan Exchange towards a technology-driven trade environment.
Recent Developments
The Taiwan Stock Exchange (TWSE) is an important center for trading stocks, bonds, and derivatives in Taiwan. Recently, the exchange has seen significant developments in the number of listed companies and trading volume.
This section will discuss the recent developments in the TWSE, helping you understand the current state of the Taiwanese stock market:
Expansion of the Taiwan Stock Exchange
The Taiwan Stock Exchange (TWSE) growth has been consistent since its founding in 1961. It is Asia’sAsia’s 9th largest stock exchange and is the 9th most traded internationally. Over the past decade, the TWSE has seen significant expansion, with several initiatives designed to increase domestic and foreign market participation through mergers with other exchanges and promising technological developments.
In 2010, TWSE merged with its main competitor, the GreTai Securities Market (GTSM). It, coupled with other large-scale structural reforms, allowed for increased liquidity in the stock market and extended hours for over-the-counter trades. Furthermore, in 2014, TWSE opened its first international representative office in London. The same year, TWSE joined the Young Adult Innovative Investment Network (YAII). This global finance platform provides exchanges between professional investors from developed countries and emerging markets such as Taiwan.
Additionally, in 2019 – 2020, TWSE started discussing how to incorporate features of emerging technologies such as blockchain into their transactions. As a result, an innovative reform was introduced that ushered in a new system based on Elastos’Elastos’ blockchain infrastructure which could potentially shorten trade settlements by a few seconds or reduce processing costs of capital increases by around 80%. These measures will address existing issues at the exchange while promoting further development toward becoming one of Asia’sAsia’s leading stock markets – positioning Taiwan as an attractive and competitive financial hub.
Introduction of the Taiwan Futures Exchange
The Taiwan Futures Exchange (TAIFEX), a wholly-owned subsidiary of the Taiwan Stock Exchange (TWSE), was founded in 1997 as part of the TWSE’s efforts to adapt to new internationalization strategies and trends in capital markets. The new futures market opened on April 15, 1998, and began operating actively in July 1998.
The initial products listed by TAIFEX were futures contracts based on individual stocks and financial indices, including the TAIEX, TAIWAN 50 Index, and Electronic Components Index (TaiwanECI). New products have been added since that time, including:
- Gold Bullion Futures (1999)
- Prime Rate Futures (2004)
- Stock Options (2006)
- Currency Futures and Options (2007)
- Interest Rate Options 2011).
In 2012, TAIFEX developed Mini-Options Contracts approved by the Financial Supervisory Commission of Taiwan. In 2013 TAIFEX moved to a “one month/three settlement” system which permits enhanced liquidity and faster settlement cycles.
By 2017 a range of Index Products was being offered, including:
- Shareholder Weighted Stock Value Index Products
- Target Matured Bond Value Liquidation Market Instruments
- Corporate Bond Collateralized Finance Instruments
- Sectoral/Strategic Investment Instruments
- Margin Futures Contracts Investment Instruments
All index products are denominated in New Taiwan Dollars with no foreign currency exposure available.
Conclusion
The Taiwan Stock Exchange, or TWSE, has been a continental exchange since 1962. Over the decades, this extensive history has seen its challenges and successes. However, today, it remains one of the most vibrant exchanges in Asia, with robust trading activity and daily listings of new securities.
As technology and policies have increased access to information, retail investors have grown to consider this market an attractive source of capital gains and income. In addition, the ability to trade directly from Taiwan, due to its home country status, with no exchange rate risk, warrants strong consideration from domestic and international investors.
In conclusion, the Taiwan Stock Exchange has been around for decades with an outstanding track record of performance; it should be treated seriously by any investor looking for reliable returns and security.
