What is Taiwan OTC exchange?

There are two public securities markets in Taiwan: the Taiwan Stock Exchange (TWSE) and the Taipei Exchange (TPEx). 

Operated by the Taiwan Stock Exchange Corporation, the TWSE is the main market for larger, more established companies. For smaller and less developed companies that may not meet the criteria for listing shares on the TWSE, TPEx offers a listing market.

TPEx also operates the Emerging Stock Board (ESB), launched in 2002 to address the country’s issue of the illegal trading of private stocks. The ESB has since developed into a preliminary market before initial public offerings (IPOs).

According to TPEX, over-the-counter (OTC) trading was launched in February 1988. To promote the development of the OTC market, the country’s Ministry of Finance set up TPEx as a non-profit institution to take over OTC trading on 1 November 1994.

The Taiwan OTC exchange definition refers to this alternative securities market operated by TPEx. It has lower listing criteria than the TWSE, the country’s main public market bourse. The Taiwan OTC exchange (TWO) serves as a trading platform for public companies’ stock that does not yet meet the criteria for listing on the TWSE and TPEx mainboard.

Smaller and less established companies often require a more flexible governance approach. By registering on TPEx’s ESB, these companies gain exposure to the securities market and become familiar with laws and regulations.

The less stringent regulatory system of this Taiwan OTC stock exchange allows smaller, less established companies to “raise their profile and visibility, and to discover reasonable share prices in IPO procedures”.

Registering on the ESB in the Taiwan OTC exchange means a possible step in getting listed on the TWSE.

To assist small-and-medium enterprises or emerging industries in raising capital, TPEx launched the Pioneer Stock Board in the third quarter of 2021, a new stock trading market for qualified investors.

History of TWSE

The Taiwan Stock Exchange was established in 1961. Located in Taipei, it was the country’s first regulated exchange. 

By October 1993, TWSE joined the International Organization of Securities Commissions (IOSCO) as an affiliate member.

According to data from TWSE, the market capitalisation for stocks trading on the exchange was NTD44.9trn ($1.6trn) in 2020.

According to TWSE data, the semiconductor sector was the largest by market cap on the TWSE in 2020, accounting for 40.28% of total traded stock value. The second largest sector was electronic parts and components, accounting for 5.63%, followed by computer and peripheral equipment at 4.77%.