A merger of the stock exchange and the futures exchange has been mooted over the past few years. "But it has been all talk and no action,ö says Wu. Now the plan is to take the consolidation a step further and launch an IPO. ôThe exchange will find it very difficult to remain competitive with other exchanges in the region unless it has an IPO,ö he says.
Wu says the different entities involved in the consolidation have almost reached a consensus on the plan. There is, he says, the incentive that once the consolidated entity is listed, the value of its shares will rise.
But there are a number of details yet to be resolved. These include the issue of whether all of the existing staff at the four organisations will be retained or whether there will be layoffs. Another issue is market surveillance which at present is carried out by the exchange. Wu says this function should be separated from the exchange since it represents a potential conflict of interest.
The TSEC is a private company, of which two-thirds is owned by the banks, with the remaining shares held by securities companies and by companies that were among the first to be listed when the exchange was formed in 1961.
The government exerts a strong influence over the exchange, however, appointing one-third of the board directors and requiring that senior management report to government officials.
Wu is under no illusions that there are formidable obstacles to an early IPO. Chief among them are two security exchange articles which prohibit the listing of the exchange on its own exchange or any other, and which expressly state that the exchangeÆs shares cannot be sold to the public.
ôWe are talking to the government and within our own organisations to see what we can do about these articles,ö says Wu. Changing the articles will require a change in the law, but Wu says it was difficult to change the law quickly in Taiwan particularly as there is an election due in May next year. He says there is an outside chance that the law could be squeezed through rapidly in the confusion that accompanies the closing of a legislative session at the end of the year, but he was not resting his hopes on this manoeuvre.
Other exchanges in the region that are listed include Australia, Hong Kong, Singapore and New Zealand. South KoreaÆs KRX recently delayed plans to launch its IPO in the face of resistance from workers' unions and disagreement over key issues with the government and financial regulatory bodies.
Malaysia demutualised in 2004, and Thailand is starting the process.
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