A Further Move to Liberalize Block Trading in Taiwan’s Stock Exchanges

The Taiwan Financial Supervisory Commission ("FSC") plans to reform the current block trading system in Taiwan's stock exchanges. Under Taiwan law, listed stocks generally cannot be sold outside the stock exchange and therefore, block trading is necessary to facilitate large transactions that will disrupt regular trading. Currently block trading occurs in prescribed time periods and is conducted in a sequential bidding fashion and meanwhile a single block of trade requires a minimum of 500 basic units of trade (1000 shares per basic unit) or NT$15,000,000 in monetary amount. A block trade administered in this fashion does not allow a particular buyer or seller to choose his or her trading counterpart, the fact of which has been criticized by many foreign investors as preventing the consummation of a strategic transaction. The FSC is prepared to add a new block trading system alongside the existing one and have it rolled out by June 2007. Nevertheless, under the proposed block trading system, the minimum requirements will be doubled, that is, a block must be 1,000 basic units or NT$30,000,000 in monetary amount. Along with the new block trading system, it will be permissible to set the ask price within 3.5% upward or downward of the average transaction price or the closing price of the normal session (upped from 2.5%) and settle a block trade using a T+2 scheme (instead of T+0).