Hong Kong Exchange to Launch New Futures Products on MSCI Taiwan 25/50 Index
21st August 2020 | Hong Kong
Hong Kong Exchanges and Clearing (HKEX) will be launching new futures products on the MSCI Taiwan 25/50 index on 28th September 2020.
” Hong Kong Exchange Launches New MSCI Taiwan 25/50 Index Futures “
The 2 futures are the MSCI Taiwan 25/50 Index Futures and the MSCI Taiwan 25/50 Net Total Return Index Futures.
New MSCI Taiwan 25/50 Index Futures:
- MSCI Taiwan 25/50 Index Futures (USD)
- MSCI Taiwan 25/50 Net Total Return Index Futures (USD)
View July 2020 Factsheets:
Measures to Support MSCI Taiwan 25/50 Index Futures
To support price discovery and open interest migration to the new MSCI Taiwan 25/50 Index Futures, early trading session will be introduced and full trading fee waiver (100%) will be applied for MSCI Taiwan futures and the new MSCI Taiwan 25/50 Index Futures.
The futures licensing agreement is between MSCI and Hong Kong Futures Exchange (HKFE), a full subsidiary of HKEX.
Early Trading Session to Promote Price Discovery
Hong Kong Futures Exchange Limited (HKFE) will introduce pre-opening trading at 8:30 am (HK) and opening trading will be brought forward to 8:45 am (HK) on the 28th September 2020.
This will facilitate price discovery for the existing futures contracts: MSCI Taiwan (USD) Index Futures and MSCI Taiwan Net Total Return (USD) Index Futures.
- Pre-trading time at 830 am (HK)
- Opening trading time at 845 am (HK)
100% Full Trading Fee Waiver
There will be also be a full trading fee waiver (100%) for MSCI Taiwan Index Futures (USD) and MSCI Taiwan Net Total Return (USD) Index Futures, effective on 17th August 2020.
The full trading fee waiver and new opening hours, will also apply to the new MSCI Taiwan 25/50 Index Futures after the contracts are launched on 28th September 2020.
100% Full Trading Fee Waiver
- MSCI Taiwan Index Futures (USD)
- MSCI Taiwan Net Total Return (USD) Index Futures
- MSCI Taiwan 25/50 Index Futures
This will support open interest migration and deliver optimized latency to customers.
Access 85% of Taiwan Listed Companies (By Market Cap) Through MSCI Taiwan Futures:
The new futures products will enable investors around the world to gain exposure to roughly 85 per cent of Taiwan’s listed companies by free float market capitalisation.
Enhancing Financial Risk Management
In addition, HKFE is also working with the Hong Kong Securities and Futures Commission to enhance its Capital-Based Position Limit (CBPL) framework, targeting late August 2020.
The enhancements will ensure the risk exposures of Clearing Participants are consistent with their financial strength to provide more capacity for activities such as migrating their book of MSCI index derivatives to Hong Kong.
Eligible for Commodity Futures Trading Commission (CFTC) Certification: Allow US Persons to Trade
HKEX expects the MSCI Taiwan 25/50 Index Futures to be eligible for Commodity Futures Trading Commission (CFTC) certification in the US, and to be offered to US persons shortly after launch.
Subject to the CFTC certifications, US persons including Regulated Investment Companies (RIC) in the US may trade the new futures contracts on HKEX. The MSCI Taiwan 25/50 Index takes into account certain investment limits that are imposed on RICs under the current US Internal Revenue Code.
HKFE and MSCI Indexes on Hong Kong Exchange
In May 2020, HKFE signed a licensing agreement with MSCI to license a suite of MSCI indexes in Asia and Emerging Markets for the launch of 37 futures and options contracts in Hong Kong.
33 of these contracts have been launched on HKEX (Hong Kong Exchange). HKEX is adding two more products to allow investors to migrate open interest to HKEX ahead of February 2021, as part of the expansion of the number of MSCI-linked derivatives listed on HKEX.
HKEX plans to complete the listing of all MSCI futures contracts in the current phase on 28th September 2020. It expects the 3 non-USD futures products to be launched on 28th September 2020.
- MSCI Singapore Free (SGD) Index Futures
- MSCI Japan (JPY) Index Futures
- MSCI Japan Net Total Return (JPY) Index Futures
HKEX Head of Markets, Wilfred Yiu:
“HKEX’s MSCI Taiwan equity index futures are geographically the closest offshore traded futures to the Taiwan market, offering investors the opportunity to optimize latency and enhance price discovery.
With these latest products, we will complete the current phase of the MSCI futures suite and actively help support our customers in migrating their open interest to HKEX. This reflects HKEX and MSCI’s commitment to building Hong Kong’s derivatives market and to supporting the global trading community in the region.”
1. MSCI Taiwan 25/50 Index
The MSCI Taiwan 25/50 Index is designed to measure the performance of the large and mid cap segments of the Taiwanese market. It applies certain investment limits that are imposed on regulated investment companies, or RICs, under the current US Internal Revenue Code. With 88 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Taiwan.
2. MSCI Taiwan 25/50 Index Top 10 Constituents
|S/N||Top 10||Map Cap. (US$)||Index Weight||Sector|
|1||Taiwan Semiconductor||$216.61 billion||28%||Info Tech|
|2||Mediatek||$38.33 billion||4.98%||Info Tech|
|3||Hon Hai Precision||$35.54 billion||4.55%||Info Tech|
|4||Delta Electronics||$15.52 billion||1.99%||Info Tech|
|5||Chunghwa Telecom||$15.32 billion||1.96%||Commercial Srvcs|
|6||Largan Precision||$14.18 billion||1.82%||Info Tech|
|7||Mega Financial Holding||$13.23 billion||1.69%||Financials|
|8||CTBC Financial Holding||$13.19 billion||1.69%||Financials|
|9||Uni-Preisdent||$12.81 billion||1.64%||Consumer Staples|
|10||Cathay Financial||$12.24 billion||1.58%||Financials|
3. MSCI Taiwan 25/50 Index Annual Performance
|Year||Annual Performance %|
4. MSCI 25/50 Index Methodology
The MSCI 25/50 Indexes take into account the investment limits required of regulated investment companies, or RICs, under the current US Internal Revenue Code. One requirement of a RIC is that at the end of each quarter of its tax year no more than 25% of the value of the RIC’s assets may be invested in a single issuer and the sum of the weights of all issuers representing more than 5% of the fund should not exceed 50% of the fund’s total assets.
The MSCI 25/50 Index methodology aims to minimize index turnover, tracking error and extreme deviation from the parent index. The indexes are rebalanced quarterly. Changes resulting from each rebalancing are made as of the close of the last business day of February, May, August and November, coinciding with the quarterly index reviews of their parent indexes.
Hong Kong Exchanges and Clearing Limited (HKEX) is one of the world’s major exchange groups, and operates a range of equity, commodity, fixed income and currency markets.
HKEX is the world’s leading IPO market and as Hong Kong’s only securities and derivatives exchange and sole operator of its clearing houses, it is uniquely placed to offer regional and international investors access to Asia’s most vibrant markets.
HKEX is also the global leader in metals trading, through its wholly owned subsidiaries, The London Metal Exchange (LME) and LME Clear Limited. This commodity franchise was further enhanced with the launch of Qianhai Mercantile Exchange (QME), in China, in 2018.
HKEX launched the pioneering Shanghai-Hong Kong Stock Connect programme in 2014, further expanded with the launch of Shenzhen Connect in 2016, and the launch of Bond Connect in 2017.
MSCI is a leading provider of critical decision support tools and services for the global investment community. With over 45 years of expertise in research, data and technology, we power better investment decisions by enabling clients to understand and analyze key drivers of risk and return and confidently build more effective portfolios. We create industry-leading research-enhanced solutions that clients use to gain insight into and improve transparency across the investment process.