US investors would be prohibited from trading TAIEX futures by the US securities regulator from as early as July 29 due to a classification of the TAIEX as a so-called “narrow-based security index,” the Financial Supervisory Commission (FSC) said on Tuesday.
The heavy weighting of contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) has prompted the TAIEX futures to hit criteria set by the US Commodity Futures Trading Commission (CFTC).
Therefore the CFTC is expected to ban US investors from trading TAIEX futures and mini-TAIEX futures.
Photo: CNA
TAIEX futures and mini-TAIEX futures have different contract terms, including value and deposits, but their underlying index is the TAIEX.
From Feb. 15 to Monday, TSMC, the most heavily weighted stock in the local market, had accounted for more than 30 percent of the local main board’s total turnover for 45 trading sessions in a row, which led the TAIEX to meet one of the criteria set by the CFTC defining it as a narrow-based security index.
Due to TSMC’s heavy weighting, the CFTC would soon be informed by the Taiwan Futures Exchange that the exchange has met the criteria to be classified as a narrow-based security index, Securities and Futures Bureau Deputy Director-General Julian Hwang (黃厚銘) said on Tuesday, adding that the exchange awaits a response from the CTFC regarding revoking trading permissions of TAIEX futures and mini-TAIEX futures, he said.
The CFTC’s revoking of the trading permission for TAIEX futures and mini-TAIEX futures would likely be implemented on July 29 because of a three-month grace period, Huang said.
US investors make up only 0.7 percent of the transactions in Taiwan’s futures markets, Huang said.
Many investors in the US markets belong to multinational groups, which allow them to trade TAIEX futures through overseas affiliates, he said.
The impact of the revoking on the local equity market is expected to be minimal, he added.
However, past experiences indicate the impact could be more serious.
In April 2021, the CFTC revoked TAIEX futures and mini-TAIEX futures trading permissions, also because TSMC’s heavy weighting led the TAIEX to be classified as a narrow-based security index.
The trading permissions were not regranted until October 2022. During the period, the TAIEX fell from 16,571 to 12,856.
It is unlikely that the FSC would impose a weighting ceiling on a single stock to avoid a CFTC ban, Huang said.
However, Taiwan Futures Exchange officials would make more visits to foreign institutional investors to encourage them to participate in the local futures markets, he said.
Semiconductor shares in China surged yesterday after Reuters reported the US had ordered chipmaking giant Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) to halt shipments of advanced chips to Chinese customers, which investors believe could accelerate Beijing’s self-reliance efforts. TSMC yesterday started to suspend shipments of certain sophisticated chips to some Chinese clients after receiving a letter from the US Department of Commerce imposing export restrictions on those products, Reuters reported on Sunday, citing an unnamed source. The US imposed export restrictions on TSMC’s 7-nanometer or more advanced designs, Reuters reported. Investors figured that would encourage authorities to support China’s industry and bought shares
TECH WAR CONTINUES: The suspension of TSMC AI chips and GPUs would be a heavy blow to China’s chip designers and would affect its competitive edge Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s biggest contract chipmaker, is reportedly to halt supply of artificial intelligence (AI) chips and graphics processing units (GPUs) made on 7-nanometer or more advanced process technologies from next week in order to comply with US Department of Commerce rules. TSMC has sent e-mails to its Chinese AI customers, informing them about the suspension starting on Monday, Chinese online news outlet Ijiwei.com (愛集微) reported yesterday. The US Department of Commerce has not formally unveiled further semiconductor measures against China yet. “TSMC does not comment on market rumors. TSMC is a law-abiding company and we are
FLEXIBLE: Taiwan can develop its own ground station equipment, and has highly competitive manufacturers and suppliers with diversified production, the MOEA said The Ministry of Economic Affairs (MOEA) yesterday disputed reports that suppliers to US-based Space Exploration Technologies Corp (SpaceX) had been asked to move production out of Taiwan. Reuters had reported on Tuesday last week that Elon Musk-owned SpaceX had asked their manufacturers to produce outside of Taiwan given geopolitical risks and that at least one Taiwanese supplier had been pushed to relocate production to Vietnam. SpaceX’s requests place a renewed focus on the contentious relationship Musk has had with Taiwan, especially after he said last year that Taiwan is an “integral part” of China, sparking sharp criticism from Taiwanese authorities. The ministry said
US President Joe Biden’s administration is racing to complete CHIPS and Science Act agreements with companies such as Intel Corp and Samsung Electronics Co, aiming to shore up one of its signature initiatives before US president-elect Donald Trump enters the White House. The US Department of Commerce has allocated more than 90 percent of the US$39 billion in grants under the act, a landmark law enacted in 2022 designed to rebuild the domestic chip industry. However, the agency has only announced one binding agreement so far. The next two months would prove critical for more than 20 companies still in the process
RSS