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Derivatives

Taiwan Rule Changes Hit Structured Products

Structured derivative product flows in Taiwan have been slashed by nearly half because of new restrictions enacted by the Bureau of Monetary Affairs.

Structured derivative product flows in Taiwan have been slashed by nearly half because of new restrictions enacted by the Bureau of Monetary Affairs. Recent regulations banned domestic bond funds, a multi-billion dollar sector, from making further investments in structured products. "The government wants to limit exposure in such products because there is no liquid secondary market," said a senior official at an international house in Taipei, noting with interest rates on the rise such funds are under increasing pressure and greater redemptions.

The official said the impact has already been felt, with volumes on structured products falling by almost 50%. "I don't think it's the right thing to do but we have to go along with it," he reflected. International players may still provide derivative products to local banks and corporates, market officials noted.

Gary Tseng, director general at the FSC in Taipei, did not return messages.

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