Taiwan's Securities and Futures Commission is gearing up to allow local securities houses to market interest-rate swaps for the first time within a couple of months. The move is welcomed by Taiwan's two largest securities houses, Yuan Ta Securities Co. and Grand Cathay Securities Co., which are keen to become market makers in the product, leveraging off their corporate business. Currently only foreign and local banks are allowed to offer interest-rate swaps. An official at the SFC in Taipei said it wanted to help develop and deepen the local bond market and to help local securities houses compete better with foreign banks, which dominate the interest-rate swap market. The SFC is also responding to lobbying by securities houses which have repeatedly pressed it to give them approval. He declined to comment further on the timing of the move. Senior SFC officials are now on the verge of signing proposals on how the market could be regulated, he said, declining to elaborate. They were drawn up by the SFC's over-the-counter derivatives department.
Yuan Ta, with total assets of TWD47 billion (USD1.4 billion), is keen to become a market maker in interest-rate swaps, according to Samuel Wang, manager, derivatives department in Taipei. It will leverage its extensive corporate client base to gain a competitive edge over foreign banks. Grand Cathay, with total assets of TWD50 billion, aims to leverage off its corporate lending client base, said Tony Ko, assistant v.p., fixed income department. Both declined comment on whether they intend to hire interest-rate professionals.
Yuan Ta and Grand Cathay are both also eager to use asset swaps on convertible bonds. The SFC earlier this year approved their use by securities houses, pending individual approval (DW, 7/17). Officials from both attended a meeting Thursday at which the SFC's over-the-counter derivatives department was due to explain the application process. Yuan Ta hopes to use its first asset swap by the end of this quarter, Wang said. Its first deal could total TWD500 million–1 billion, he said. Grand Cathay hopes to use them before the end of the second quarter, with its first deal totaling around TWD50 million, Ko said.
