i Financial market and regulation overviewStock exchanges
In Taiwan, there are two public securities markets, the Taiwan Stock Exchange (TWSE) and the Taipei Exchange (TPEx). TWSE is operated by the Taiwan Stock Exchange Corporation. Products listed on the TWSE include Taiwan depository receipts (TDRs), call (put) warrants, shares, and exchange traded funds (ETFs). Currently, the most heavily traded product is shares. The TWSE is the flagship market for larger, more established companies. According to information released by the TWSE, as at 2019, there were 956 listed companies (including TDRs) with total market capitalisation of NT$36.42 trillion. The market capitalisation of domestic and foreign companies was NT$35.32 trillion and NT$1.09 trillion respectively. Furthermore, as at the end of September 2019, there were 121 ETFs listed on the TWSE, with assets of NT$407.1 billion. These assets include stocks, overseas bonds, commodities (oil, gold, silver, copper, soybean), exchange rates (US dollars, Japanese yen) and REITs, in addition to trading products such as leveraged, inverse and futures products. The indices tracked encompass the United States, Europe, Japan, China, Hong Kong, India and many other markets.
The Mainboard of the TPEx offers a listing market for smaller companies that may not meet the criteria for listing shares on the TWSE. TPEx also operates an Emerging Stock market, which is generally a market for pre-listing preparation but can also serve as a trading platform for public companies that do not yet meet the criteria for listing on the TWSE and the TPEx Mainboard. According to the information released by the TPEx, as at 2019, there were 775 listed companies on its Mainboard, with a market capitalisation of NT$3,434 billion, and 248 listed companies on the Emerging Stock market with a market capitalisation of NT$489.91 billion. The TPEx is also the platform for bond trading in Taiwan. Almost all bonds publicly issued in Taiwan, including government bonds, corporate bonds, financial debentures and international bonds, are listed on the TPEx bond market.
Taiwan’s capital market legislation includes several fundamental laws, the most important of which are the Company Act and the Securities and Exchange Act, followed by a series of rules promulgated by the Financial Supervisory Commission of the Republic of China (FSC), the main regulator of the financial industry, and the Ministry of Economic Affairs of the Republic of China. The Company Act applies to companies incorporated in Taiwan and foreign companies operating within Taiwan, and it sets out the principle rules for matters including:
- company organisation and establishment;
- company wind-ups and liquidations;
- company governance and management;
- corporate bonds and shares; and
- mergers and demergers.
While the Company Act applies to all companies, the Securities and Exchange Act applies only to public companies; however, the Securities and Exchange Act provides the principle rules for the issuing and trading of securities and the responsibilities of securities issuers, market discipline, and securities firms operation, etc.
ii Regulatory bodies and the central bank
The regulator of the financial market in Taiwan is the FSC, which is empowered by law with the authority to promulgate and pass regulations, and to issue rulings or interpretation letters. The FSC is in charge of comprehensive reviews of the development, supervision, management and examination of the financial market and services offered, and aims to establish an ideal financial market by improving the operation of financial institutions, maintaining financial stability and promoting the development of the financial market. Four agencies operate under the FSC: the Banking Bureau, the Securities and Futures Bureau, the Insurance Bureau and the Financial Examination Bureau, which are responsible for banking, securities and futures, insurance industries and markets, and the supervision and examination of financial institutions, respectively. Among these agencies, the Securities and Futures Bureau has jurisdiction over the financial market and has main functions such as:
- regulating public companies and the offering, issuance, listing and over-the-counter trading of securities;
- regulating investment in Taiwan securities and futures markets;
- regulating securities investment trust funds and securities margin transactions; and
- protecting securities investors…
Read More: In review: capital markets law in Taiwan