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The Economic Roundup is an excerpted translation of the Chinese-language ROC Economic Yearbook published by the Economic Daily News, a sister publication of the Taiwan Economic News. The yearbook is the most comprehensive and authoritative source for understanding the fundamentals of Taiwan's economy, both in the macro and micro aspects. The excerpted translation gives foreign readers a concise view of the island's overall economic picture. It is divided into four parts: general economy, primary industries, secondary industries, and tertiary industries.
 
 Tertiary Industry > Futures Industry
In 2005, the global stock market staged a good performance, notably some Asian markets which scored exceptional performance due to the patronage of international funds. Stock markets of Korea, Japan, and India hit new highs repeatedly, with the Korean stock price index soaring over 50%. Taiwan's stock market had a lackluster performance in the year, with the Taiex index rising only 7.3% in the year. However, Taiwan's futures market continued to rack up remarkable performance. In 2005, overall trading volume of domestic futures products jumped 57% and the number of trading accounts rose 11%, both record highs since the inauguration of the domestic futures market in 1998.

In the aspect of new products, following the rollout of bond and interest futures, electronics and financial indices options were added to the trading list in March 2005. Taiwan Futures Exchange is also actively developing U.S. dollar-denominated international futures products, with gold futures being the first item under planning. In 2005, there were 11 products available in Taiwan's futures market, including five stock price index futures, three index options, two interest futures, and one stock option (containing 30 stocks).

In 2005, most futures firms had lackluster performance. Dedicated futures firms garnered pre-tax profits of NT$0.78 per share, the lowest over the recent five years. 38 futures traders and non-dedicated futures brokers fared even worse, with their average profits reaching only NT$0.18 per share and none of them scored profits over NT$2 per share. With futures prices fluctuating within a narrow range, it was very difficult for futures brokers to score satisfactory performance. Of the five futures firms for re-commissioned business, one closed shop and average profits for the remaining four reached NT$1.19 per share.

Since the launch of interest futures in 2004, due to the taxation problem and sluggish trading on the spot market, trading volume of the new futures product has remained limited. Electronic and financial indices options, though, have rather good performance since its inauguration in March 2005. In 2006, according to the first-phase planning for the international futures board, gold futures, MSCI stock price index, and MSCI stock index option will hit the market simultaneously. Plus the opening of non-hedge and general-account trading for foreign investors, Taiwan's futures market is expected to enjoy booming business in 2006. However, the battle between the trading strategies of foreign and local investors will heat up and the professional requirement for futures investment will become even more important.

The most exciting development for the Taiwanese futures market in 2005 was the passage of the bill for lowering futures trading taxes by the Legislative Yuan, as a result of which average trading tax for Taiex index futures drops by 60% and average trading tax on options declines by 20%, and tax levy on profits for interest futures is replaced with trading tax. Investors will enjoy considerable reduction in the costs for futures trading, which will not only stem underground futures trading but also attract more international funds for investment in the Taiwanese futures market. The program has been put into practice from January 1, 2006. However, in 2005 there occurred a major futures-trading dispute caused by the illegal discretionary-account operation by a broker at a futures firm. The regulator suspended the operation of the firm for half a year, cautiously intensified the internal auditing and control of futures firms, and rectified the defects in the process of account opening and the cash flow, in hopes of eliminating illegal discretionary-account operations for futures trading.

The futures regulator, related agencies, and industry have been sparing no effort in promoting the internationalization of the domestic futures market. Taiwan Futures Exchange has actively jointed various noted international futures organizations and set up channels for information exchange with noted international futures exchanges. Moreover, with the approval of CFTC (Commodity Futures Trading Commission) of the U.S., Taiwanese futures firms can directly solicit American traders in the U.S. for trading in futures products on the Taiwan Futures Exchange.

   
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