The relative efficiencies of price execution between the Singapore Exchange and the Taiwan Futures Exchange

Both the Singapore Exchange (SGX) and the Taiwan Futures Exchange (TAIFEX) offer future contracts based on Taiwan's stock‐market indices. TAIFEX reduced the transaction tax from 5 basis points to 2.5 basis points on May 1, 2000. Hence, empirical tests are performed on the differences in trading costs and information transmissions between SGX and TAIFEX for the sample periods both before and after the tax reduction. It is shown that the reduction in the transaction tax greatly improves the efficiencies of price execution. Due to the structural differences between these two markets, the trading costs and speed of information transmissions also are different. The results also provide implications for the relative efficiencies of different market structures. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22:173–196, 2002