The trading link between the Taiwan Stock Exchange (TWSE) and Singapore Exchange (SGX) is the latest initiative by TWSE to enhance the globalization and competitiveness of the Taiwan securities market.
The move is in line with policies being implemented by the regulator to support the further internationalization of the Taiwan capital market, meet the needs of the investing public and take full advantage of the recent trend of closer cooperation between international exchanges.
Before TWSE's visit to SGX in April 2014, both sides started to evaluate the synergies, needs and feasibility of developing cross-border trading. The Taiwan market's solid foundation in the technology, manufacturing and services industries complements Singapore's developed financial and marine sectors, which should encourage investors to trade both markets.
Recent investment flows between regional markets have been increasing, despite the differences in investor composition in each market. This demonstrates that it is both necessary and efficient to simplify the trading and settlement process, as well as reduce trading costs, in order to increase investment allocations to both markets.
TWSE and SGX earlier reached a preliminary agreement to facilitate cross-border order routing, post-trade settlement and custodian activities for investors and brokers, in line with the principle of 'simplifying the trading process and reducing transaction costs,' while 'maintaining the existing trading rules and regulations of each market.'
TWSE will assist investors and brokers with routing orders to foreign exchanges and with settlement, clearing and custodian activities, helping them reduce operational costs and grow their international business.
Work on the TWSE-SGX trading link officially began after the signing of a Letter of Intent on 10 September 2014. TWSE expects the setup of the trading link to be completed within six months. Cooperation is also being pursued in the areas of market promotion and dual-listing in order to expand the scale of each market, create synergy and enhance the competitiveness of the Taiwan capital market.