CFTC No-Action Letter 04-16: Offer and Sale of TAIFEX Futures Contracts on the TAIEX in the United States

CFTC Letter 04-16
CFTC Letter No. 04-16
June 2, 2004
No-Action
Office of General Counsel
Michael S. Sackheim, Esq.
Sidley Austin Brown & Wood LLP
787 Seventh Avenue
New York, NY 10019
Re: No-Action Request to Permit the Offer and Sale in the United States of Futures Contracts on the Taiwan Stock Exchange Capitalization Weighted Stock Index Traded on the Taiwan Futures Exchange Dear Mr. Sackheim:
This is in response your letters, attachments, facsimiles and electronic mail dated from December 17, 2003 to February 25, 2004, requesting on behalf of the Taiwan Futures Exchange (“TAIFEX”) that the Office of General Counsel (“Office”) of the Commodity Futures Trading Commission (“Commission” or "CFTC") issue a “no-action” letter concerning the offer and sale in the United States (“U.S.”) of TAIFEX’s futures contracts based on the Taiwan Stock Exchange Capitalization Weighted Stock Index (“TAIEX” or “Index”), the TAIEX futures contract and the Mini TAIEX futures contract. We understand the facts to be as follows. TAIFEX is a futures exchange in Taiwan founded in 1997 pursuant to the joint efforts of the Taiwanese government and the private sector.[1] Originally named the Taiwan International Mercantile Exchange, the exchange’s name was changed to TAIFEX in 1999. TAIFEX was granted a corporate license, and its Board of Directors were selected as the highest executive body of the exchange. The principal regulatory authority in Taiwan having oversight over the exchange is the Taiwan Securities and Futures Commission (“SFC”). The SFC has broad supervisory responsibility for all aspects of securities and futures trading, including inspection, supervision, surveillance and enforcement. The Futures Trading Law of 1997, enforced by the SFC, is the principal statute under which TAIFEX operates.[2] The TAIEX is a broad-based, market capitalization-weighted composite index designed to reflect the overall performance of stocks traded on the Taiwan Stock Exchange Corporation (“TSEC”).[3] The Index includes all of the listed stocks on the TSEC, excluding preferred stocks, full-delivery stocks[4] and newly listed stocks that are listed for less than one calendar month. Based on data supplied by TAIFEX, the total adjusted market capitalization of the TAIEX was approximately U.S. $352.03 billion as of November 27, 2003.[5] Also as of that date, the largest single security by weight represented 10.63%, and the five most heavily weighted securities represented 24.75%, of the TAIEX.[6] The file:///H|/Desktop/04letters/tm04-16.htm (1 of 7) [5/6/2010 5:29:19 PM]