A Study on Improvement of Our Financial Supervision from Learning the Integration of Securities and Futures Acts of Singapore
Date Issued
2010
Date
2010
Author(s)
Su, Hui-Fen
Abstract
More and more Taiwan securities firms concurrently operate futures business and vice versa. Investors may also concurrently make stock and futures transactions. Because there is highly market price correlations between stock market and futures market, insider trading and market manipulation in securities market or futures market may have serious impact on both securities and futures markets. This thesis takes the Singapore Securities and Futures Act for reference to analyze the difference between Taiwan Securities Transaction Act and Futures Trading Act. Apparently, the insiders and investors may make regulation arbitrage because of the discrepancy between the above Acts to do insider trading or manipulation in the futures market to prevent from the punishment of Securities and Exchange Act.
Besides, whether the financial product is recognized as securities or futures contract will apply to different regulations with different requirement and punishment. In the end, it will impact the supervision efficiency and the international competition.
In addition, Taiwan securities firms and futures firms shall comply with the requirement of capital adequacy and net adjusted capital, respectively. Because the components of these two capitals are not similar, it is difficult to properly evaluate the capital requirement if the securities firm concurrently operates the futures business, or vice versa. The requirement and punishment respect to the business operation and representatives’ conduct are also quite different if they comply with different Acts.
Concerning the timeline of administrative operation and legislative review, and related cost and benefit factors, this thesis suggests that Taiwan authority may take the following measures in due course.
1. Strengthening the cross markets supervision function and amending the establishment criteria of securities firms and FCMs, and related representatives requirements
This thesis suggests that financial authority shall strengthen the cross markets supervision function to establish a smoothly and timely communication channel among securities markets, futures markets and OTC markets to prevent the illegal transactions and protect the fair market mechanism. Besides, the authority may amend rules of securities and FCMs, and the conduct regulation of responsible persons and representatives in order to set up a similar requirement of the securities and futures industries.
In addition, the authority may review the establishment and operation requirement, and the scope of the securities and futures industries, ease the restriction of the financial products, adopt the negative listing method in stead of positive listing method to allure financial innovation, improve the manpower efficiency and raise the competitiveness.
2. Amending the Futures Trading Act to in line with the Securities and Exchange Act
This essay suggest that the authority may amend the Futures Trading Act with respect to the insider trading, market manipulation, international investigation assistance, and the requirement about the conduct of responsible person, representatives and business operation of futures enterprises, to be in line with the Securities and Exchange Act. It will improve the supervision function, maintain a fair market trading and competition environment.
3. Deliberating to integrate the Securities and Exchange Act, Futures Trading Act and Securities Investment Trust and Consulting Act
The authority shall deliberate the administrative department and legislative institution’s cost and the benefit of integrating the above-mentioned Acts. In the long run, if all the investors, financial industries, administrative department and legislative institutions reach the agreement on integration the said Acts, the Authorities may set a long-term goal to integrate the Exchange Act and Futures Trading Act, and amend the Securities Investment Trust and Consulting Act to include the similar stipulation on futures trust enterprises, futures management enterprises and futures consulting enterprises whose business activities are more similar to securities investment trust and consult enterprise than futures enterprises, and also change the name of Securities Investment Trust and Consulting Act to Securities and Futures Investment Trust and Consulting Act. These measures will effectively solve the problem of regulation arbitrage, enhance the efficiency of financial supervision function, and keep abreast of the international financial markets.
Subjects
securities
futures
integration
financial supervision
Type
thesis
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