2019 Viewpoints: Yu-Jer Sheu, Chairman, Taiwan Futures Exchange (TAIFEX)

Please outline the three most important macro trends that you believe will impact the market infrastructure industry in 2019.

Firstly, Fintech is undoubtedly the next big wave in the industry. Responding to this global trend, Taiwan Futures Exchange (TAIFEX) has established a Fintech taskforce for the research and development of this new technology, in addition to introducing an online customer service based on Artificial Intelligence (AI).

Secondly, the financial industry will face more global competition. To cope with this issue, TAIFEX continues to sharpen its competitive edge through a diverse product offering and efficient IT services. TAIFEX will also enhance the global accessibility of its flagship products ‒ TAIFEX Futures and Options as well as introducing more products at the night session to attract more foreign participants.

Lastly, the rise of global uncertainty has cast a shadow over financial markets, e.g. no-deal Brexit, US-China trade war etc. However, it may also be a turning point in terms of the market restructuring, bringing new opportunities. TAIFEX will work to take advantage of this, by enhancing its market’s risk management capability, and by positioning itself as a marketplace where investors can hedge and manage their risk exposure.

The WFE’s Sustainability Principles (launched in October 2018) and its annual environmental, social & governance (ESG) survey show us that more and more exchanges and CCPs are taking a leadership role in promoting the sustainable finance agenda. How is your business taking a more sustainable approach to the financial system?

TAIFEX has been active in building a sustainable financial ecosystem in Taiwan. In terms of environmental sustainability, TAIFEX continues to promote the use of green equipment, and has created a 'green computing centre' that reduces pollution and energy consumption, as well as implemented 'green purchasing' that prioritises the purchase of energy-saving and environmentally certified equipment and materials.

We have also collaborated with stakeholders to advance a sustainable finance agenda, and do our utmost to fulfill corporate social responsibilities, as well as enhance corporate governance. Our corporate charter demonstrates our commitment to applying tangible resources to charity and good deeds by mandating that we budget 3-5% of the previous year’s after-tax earnings to charitable giving.

Moving forward, TAIFEX will maintain its focus on addressing the issues of importance to our stakeholders, and on elevating our sustainable-development capabilities, as well as continuing to prosper with Taiwan’s financial markets.

In your view, what’s the technology most likely to disrupt global capital markets in the next 12 months?

AI will be the most disruptive of all the technologies we have seen so far, and its application in financial markets will heavily impact the industry. Just a few years ago, AI seemed to be out of reach from our daily life; nevertheless, it might be soon reshaping the global capital market.

AI will advance into finance - not only in back office processing, but also in trading, from data analysis, signal generation to trade execution, and consequently resulting in huge job displacement.

Contrary to popular belief, I think new positions will be created to offset the job losses. For example, AI can do better forecast and analysis, but jobs that involve subjective judgement and responsibility can only be well executed by human beings. Therefore, while AI drives down costs by improving efficiency and performance, more people will be needed to enhance the value of products and ensure clients’ rights.

What are the key strategic initiatives you’re working on at the moment? 

TAIFEX is working on providing better services and a more efficient infrastructure.

First, we will continue product development to cope with market needs for trading and hedging purposes. TAIFEX will leverage its strength on providing more equity index contracts, including mid-cap indexes and well-known overseas indexes. Furthering our business relationship with our partner exchanges will also remain a focus, providing comprehensive services and broadening our global reach.

Secondly, TAIFEX is authorised to set up central clearing for OTC derivatives in Taiwan. By collaborating with banks and big financial institutions, our goal is to promote central clearing as part of mitigating systemic risk and making the derivatives market safer.

Lastly, we will enhance our system’s matching speed and performance by gradually migrating all our IT systems to a new state-of-the-art data warehouse. The off-site emergency management capabilities will be strengthened, and the new data warehouse will help to enhance trading and technological efficiency, and enable us to stay abreast with international exchanges.