The Taiwan Futures Exchange is planning to launch single stock futures in the fourth quarter of this year.

Speaking at the New Era for Investment in Taiwan Forum 2009 event in London in September, Peter Chiu, senior executive vice-president at the exchange, said Taifex was planning to offer cash-settled futures on the most liquid stocks listed on Taiwan Stock Exchange.

Taifex already lists options on 30 stocks, as well as eight futures and six options on a variety of share indices.

The underlyings of the new futures will mirror those of the options: stocks such as China Steel Corp, China Airlines, Fubon Financial Holding and Sinopac Financial Holdings.

Chiu said the new futures would enhance investors’ hedging strategies. Taifex is also considering launching futures and options on other major indices, including emerging market indices, and on exchange-traded funds on the Taiwan Stock Exchange.

The Taipei-based exchange is also evaluating whether to introduce energy products and derivatives on the stockmarket volatility index.

In the past few years Taifex, Taiwan’s only futures exchange, has undergone important changes aimed at increasing market efficiency.

The exchange lowered trading costs, allowed eligible securities to be used as margin deposit and introduced a Span margin system. It is also considering allowing block trading.

“We’re making our futures market more efficient and with a lower cost of trading,” Chiu said.

So far, Taifex’s most liquid contracts are futures and options on the Taiex index of all the shares listed on the Taiwan Stock Exchange. Some 92.8m Taiex options were traded last year and 19.8m Taiex futures.

Taifex has been trying to increase the number of institutional market participants using the market, and to strengthen cooperation with Taiwan’s securities market.

Joseph Tsai, who took over as chairman of Taifex in July, vowed to lead Taifex to become “an international level derivatives market”.n