Regulatory Changes and Information Competition: The Case of Taiwan Index Futures

Wen-liang Hsieh*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

17 Scopus citations

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.

Original languageEnglish
Pages (from-to)399-412
Number of pages14
JournalJournal of Futures Markets
Volume24
Issue number4
DOIs
StatePublished - 1 Jan 2004

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