Regulatory changes and information competition: The case of Taiwan index futures

✍ Scribed by Wen-liang Gideon Hsieh

• Publisher: John Wiley and Sons
• Year: 2004
• Tongue: English
• Weight: 161 KB
• Volume: 24
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.10122

✦ Synopsis

Abstract

This article examines the cross‐border competition in price discovery between the Taiwan Futures
Exchange (TAIFEX) and the Singapore Exchange Derivatives Trading (SGX). We focused on the
impact of market reforms on the information leadership of similar contracts traded on the two exchanges. Utilizing
synchronized transaction data, it was found that reducing the futures transferring tax was the only policy change
that enhanced TAIFEX's information role. Evidence supported the trading‐cost hypothesis that a lower
transaction cost is associated with better price discovery. A brief linkage between trading volume and price
discovery was found when data were broken down into subperiods according to the relative volume of TAIFEX and SGX.
Evidence suggested that the SGX's information advantage reported in previous research had diminished as the
rival market progressed. It also indicated that exchanges seeking to improve information efficiency should adopt
policies that will reduce transaction costs or increase trading volume. © 2004 Wiley Periodicals, Inc. Jrl
Fut Mark 24:399–412, 2004