Bond & Derivatives Market

Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Corporate Bonds (including CBs) 7,555 9,217 10,521 10,906 11,541 10,881 11,334 10,819 11,376 12,902 15,235

Financial Debentures 1,299 2,639 4,551 5,836 7,418 7,541 8,062 7,370 7,659 8,479 9,904Government Bonds 22,127 25,871 28,507 31,417 33,825 35,185 37,352 39,709 43,342 46,442 49,343

Unit: NT$100 million

70,000

60,000

50,000

40,000

30,000

20,000

10,000

0

The bond market ranks alongside the stock market as one of the most important constituent elements of capital markets. GTSM has been involved in the administration of Taiwan’s bond market ever since its establishment, and has worked actively to develop bond trading and other relevant systems. Currently, all Taiwan government bond trading takes place on GTSM platform. GTSM also provides trading platforms for other instruments, such us corporate bonds and fi nancial debentures. In addition, GTSM has been developing interest rate and bond derivatives markets; products trading on the market include New Taiwan Dollar interest rate swaps, swap options, bond options, convertible bond asset swaps and bond forwards. In these days, GTSM tunes its policy to encourage foreign bonds issuing in Taiwan. In this regard, we launched Renminbi-denominated bonds, named Formosa Bond in 2013. By introducing diversifi ed products to the market, GTSM bond market is gradually striding toward international standards.

GTSM has established an electronic bond trading system to facilitate the establishment of a long-term benchmark rate and enhance the effi ciency of government bond trading and settlement. This electronic trading platform, which covers the whole trading process from quotation and dealing through to risk management and settlement, has proved to be very effi cient and its establishment marked the beginning of a new era of electronic trading for Taiwan’s bond market. To stimulate the growth of the corporate bond, fi nancial debenture and benefi ciary certifi cate markets, GTSM has also introduced a fi xed income securities trading system. This automatic trade matching system facilitates the transaction of convertible corporate bonds. The trading system operates in a similar manner to GTSM stock trading making it very convenient for investors.

GTSM has established a foreign government bond trading platform, to provide domestic securities firms with a convenient, competitive channel for foreign government bond investment. Through this platform, Taiwan securities fi rms are able to participate directly in the global U.S. government bond B2B market.

The Size of the Bond Trading Market in Taiwan

GreTai Securities M

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Bond & Derivatives Market

GreTai Securities M

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Bond & Derivatives Market

OTC Derivatives Trade Repository

Formosa Bond

In consideration of the trends of financial supervision in the international markets and to shore up the supervision of our OTC derivatives market, the FSC instructed GTSM to construct an OTC derivatives trade repository (TR). The whole system has been rolled out in three stages by product categories. In the fi rst stage, products including NDFs, FX Swaps, IRS, TAIEX related products have required to report and the amount outstanding of which takes up 70% of the market. In the second stage, products including foreign exchange options and foreign exchange forwards have required to report and the amount outstanding for products from the fi rst and the second stages takes up to 90% of the market. In the third stage, all OTC derivatives are required to report, and the TR therefore is completed.

Institutions to report to the GTSM TR system include domestic banks (including branches of foreign banks in Taiwan), securities firms, bills finance companies and insurance companies. Currently, there are 66 banks, 8 bills finance companies, 35 insurance companies, and 26 securities fi rms reporting to GTSM TR.

To address the demands of investors, companies, and the government’s policy to develop “financial businesses specifically relevant to the nation’s cross-strait relations”, the GTSM has made the necessary preparations to better accommodate future financial services and to satisfy the need of investors for more diverse fi nancial investment options, and therefore introduced “Formosa Bond.”

Bonds denominated in foreign currencies offered and issued in Taiwan by domestic and overseas issuers are called International Bonds. Bonds denominated in Renminbi (RMB) are specifi cally called Formosa Bonds.