Overall trading volumes on the Taiwan Futures Exchange reached another all-time record in 2018. More than 308 million contracts were traded, an increase of 16% compared to the previous year. In addition to growth in the exchange's core products, two other distinct factors also contributed to this exciting growth: the popularity of TAIFEX's night session, which more than doubled compared to 2017, and the expanding participation of international investors, who now account for 20% of the exchange's total volume.
Volume growth stemming from core products and night session
In 2018, trading in each of TAIFEX's core products—TAIEX Options (TXO), TAIEX Futures (TX), Mini-TAIEX Futures (MTX) and Single Stock Futures (STF)—hit all-time trading records. In particular, TXO remained robust as one of the world's top six most actively-traded equity index options, with almost 194.4 million contracts traded, up 4.3% from 2017. The demand for weekly contract also continued to strengthen and now accounts for nearly 60% of TXO's total trading volume. The TX contract, which has a multiplier that is four times larger than the TXO contract, was one of the exchange's fastest growing futures products, with volume jumping 38% to nearly 47 million contracts in 2018.
The exchange is also proving its credentials as a hub for trading offshore indices. In 2017, TAIFEX introduced futures based on two U.S. stock indices. The Dow Jones Index Futures (UDF) have proved particularly popular. More than eight thousand contracts were traded daily on average in Q4 of 2018, which was quite significant for a newly launched product. Providing investors with opportunities to execute cross-market trading strategies, UDF has become TAIFEX's fifth most traded product, making the exchange the largest overseas market trading the Dow.
In addition, the night session introduced in 2017 continues to be well-received by investors. With the extension of trading from 5 hours to 19 hours, the exchange provides local and foreign investors with genuine round-the-clock trading and the ability to respond to global and domestic events in real time. More than 210 thousand contracts are now traded overnight, equal to 23% of the average daily trading volume of TAIFEX's regular session.
Rising foreign investor participation
In 2018, a key trend was the rising level of foreign participation. More than a third of the exchange's trading volume last year came from two types of foreign market participants: international investors that use TAIFEX futures and options to gain exposure to Taiwanese equities, and proprietary trading firms operating at a global level. Foreign participation was even higher in the markets for TAIFEX's core products, with these two groups of market participants now accounting for close to 40% of the two benchmark equity index contracts, TXO and TX.
These flows are supported by a large number of local brokers that provide low-latency access to TAIFEX. In addition, nine global investment banks have established local brokerage affiliates to provide their international clients with access to the exchange, and five of these nine institutions are also clearing members of TAIFEX.
Over the years, TAIFEX has strived to diversify the exchange's offerings. In addition to reinforcing its portfolio of equity products, the exchange has stepped into the currency and commodity categories. For example, it has collaborated with ICE Futures Europe on the launch of TAIFEX's Brent Crude Oil Futures, which enabled participants to manage their risks in the energy markets. TAIFEX also broadened the range of products eligible for trading during the night session. A recent example was the addition of Electronic Sector Index Futures to the night session—a product highly useful to foreign investors seeking to hedge technology supply chains. Trading volumes of this product rose by more than 25% in 2018.
By leveraging its core strengths, TAIFEX aims to provide a convenient, accessible and liquid marketplace not only for local investors, but also for participants who live outside of the Asian time zone.
