Continuous Trading

Foreword

Major foreign stock markets (i.e., U.S., U.K., and neighboring countries such as Hong Kong or Singapore) adopt call auction trading for opening and closing, while continuous trading is adopted during mid-session. Currently, continuous trading has been adopted for trades of products such as futures, options and warrants during mid-session in the R.O.C.; call auction is still adopted only by the stock market during mid-session. For the purpose of aligning with international markets and allowing investors to adopt the same trading mechanism for arbitrage, hedging or strategic trading across products, thereby improving efficiency, the Financial Supervisory Commission announced on September 3, 2018 that “in order to enhance trading efficiency and align with international markets, stock markets will promote the continuous trading , which is scheduled to be officially launched on March 23, 2020.”

 

Introduction to continuous trading

  1. Applicable Time: The first matching (i.e., the opening) on the market adopts call auction, and then continuous trading is adopted for matching during the period afterwards until 13:25. Call auction is still adopted between 13:25 and the closing, so the applicable period of continuous trading is after the first matching upon the opening until 13:25 (hereinafter referred to as the “continuous trading sessions”).
  2. Order Type: New order types such as market order, Immediate or Cancel (IOC), and Fill or Kill (FOK) are available only during the continuous trading sessions. These provide investors with more options when placing orders.
    1. Market Order: Applicable during continuous trading session. A market order executes the investor’s desired order volume at the best available price. Investors are not required to enter the price.
    2. Immediate or Cancel (IOC): Applicable during continuous trading session. An IOC order must be immediately filled and any unfilled portion of the order is canceled.
    3. Fill or Kill (FOK): Applicable during continuous trading session. A FOK order must be filled in its entirety or canceled (killed).
      Incorporating the current limit order and Rest of Day (ROD) with the new orders types mentioned above, there are six new order types listed as below. summary_of_order_types_and_applicable_session
  3. Intra-day Volatility Interruption
    In order to limit extreme price fluctuation, intra-day volatility interruption is in place. Whenever the trading system detects that the potential execution price of a specific stock will fall out of a specified range (+/-3.5%) as compared to the weighted average traded price over the preceding five minutes (reference price), matching for that stock will be postponed for two minutes. The suspended stock will resume trading with a call auction, then return to continuous trading. The principles of reference price determination are as follow:
    1. 9:00-9:05:The fluctuation is based on the opening price determined by the opening call auction. If the opening price is not available, the reference price for the opening call auction is used instead.
    2. After 9:05:The fluctuation is based on the rolling weighted average traded price over the preceding five minutes. If there is no traded price in the last five minutes, the latest traded price is used instead. If the latest traded price is not available, the fluctuation will be based on the reference price for the opening call auction
    3. Post intra-day volatility interruption: After any intra-day volatility interruption, the fluctuation is based on the call auction price for the first five minutes following the trading resumption. Afterward, the fluctuation base is transferred back to the rolling weighted average traded price over the preceding five minutes. If there’s no call auction price following the trading resumption, the fluctuation will be based on the latest traded price. If the latest traded price is not available, the fluctuation base will be set as the reference price for the opening call auction
    4. Investors can add limit ROD orders during intra-day volatility interruption. However, market order, IOC, and FOK are not accepted.
      When the intra-day volatility interruption is triggered, the matching system will automatically delete existing market orders. During the intra-day volatility, trading information will be disclosed every five seconds, same as the opening and closing session.
  4. Information Disclosure
    The price, volume, and best five bid/ask prices are disclosed on a real-time basis. A five-second snapshot is also provided.

 

Note:The above documents have been translated by the Linguitronics Co., Ltd. The English translation is for reference only. In case of any discrepancy between the English version and the Chinese version, the Chinese version shall prevail.