The WFE 2020 Series: Yu-Jer Sheu, Chairman, Taiwan Futures Exchange (TAIFEX)
1. As we kick off the year 2020, please can you look further into the future, and share your predictions on what the APAC market infrastructure industry might look and feel like by 2025?
With the demonstration of active derivatives trading in Asia in both 2018 and 2019, future growth in APAC looks promising. My personal views are that three key trends shall impact the APAC market infrastructure industry over the next few years:
- Growing interest and demand for ESG products
Sustainable investing has been gaining momentum as more institutions have incorporated ESG factors into their investment decision making. In the APAC region, ESG evaluation and investing will be picking up quickly, while discussions are already underway to launch derivative products linked to ESG indices to fulfill growing market demands.
- Exchanges increasingly tapping into the market data business
Market data services have become a key part of an exchange’s business by helping generate new revenue streams that are less cyclical and volatile than transactional fees. With Asia’s growing importance in international financial markets, global investors’ demands for Asian market data are on the rise. Exchanges in the APAC region will start to look more boldly at market data services, including market data sales, index compilation and licensing, among others, to diversify their revenue streams in the future.
- Rise of disruptive technology
Financial innovation attributes greatly to technologies, and the rise of Fintech and Artificial Intelligence (AI) is believed to profoundly impact the operation of exchanges despite the mass adoption is likely to take more time to materialize. Exchanges in APAC will continue to put more resources in developing new technologies and look for viable applications that could be adopted to better serve investors’ needs.
2. And how is your firm getting ready for the changes you’ve outlined above?
To face the fast-changing and more competitive derivative markets, TAIFEX will continue to provide diverse product offerings and better services to market participants. The growing ESG awareness in Asia will certainly drive investors to shift more assets to allocate in ESG-focused products. To echo this demand, TAIFEX is planning to launch ESG products in 2020.
As for market data services, TAIFEX is set to provide market participants with real-time market data feed in March, coexistent with current practice of the best five bids and asks every 125 milliseconds to provide investors with more choices based on their needs.
We have also extended outreach to new services, such as index compilation and licensing. Our very recent example is that we partnered with Taiwan Index Plus Corporation to launch the Taiwan Strategy Series Indices in December 2019, which will pave the way for banks, asset management companies or securities firms to list new products, including ETFs, ETNs and warrants.
Like most exchanges in APAC, we are now at the proof-of-concepts stage for the development of Fintech and AI. Prior to developing any solutions, we will continue our research in relevant fields as well as evaluate feasible applications to keep pace with the development of new technology.
Moving forward, by leveraging its core strengths, TAIFEX will strive to explore new business of market data services, upgrade our IT system, survey practical AI-based solution and work ceaselessly to build a solid, convenient and sound trading environment and propel its sustainable development.
3. Entering a new decade is not just about looking ahead; it’s also a good time for reflecting on the past. What’s the top lesson you’ve personally learned from the past ten years?
Prior to joining TAIFEX in 2018, I was the Minister of the Ministry of Finance of Taiwan. In the past decades, I involved in fiscal policy making and tax reforms concerning the growth of the nation and the fairness in taxation. When I took office at TAIFEX, these experiences have developed my holistic approach to corporate strategy of seeking growth while maintaining market stability.
Recognizing that the ongoing product innovation as well as market integrity have been the drivers for TAIFEX’s growth, we will continue to provide a wide range of products across various asset classes for market participants seeking opportunities or hedging their exposure. At the same time, we will constantly strengthen our risk management measures to maintain a safe and orderly trading venue.
As well, we will endeavor to maintain an equilibrium between retail and institutional investors. Currently, the individual investors account for roughly 50% of the trading volume at our market. This healthy participant structure has contributed to a liquid and active marketplace and helped to inject the growth momentum to the industry. Accordingly, we carry on providing individual investors with online educational programs, a web-based virtual trading platform and free courses to improve their knowledge. Meanwhile, we strive to boost institutional participation by conducting international roadshows and streamlining measures and practices to be in line with international standard.
Looking into the future, we will continue to enhance our core competencies and provide a fair, stable and flexible market environment.