A Formosa bond
is a non-New Taiwan Dollar
issued in Taiwan
by a foreign institution.
The major designer and promoter of the Formosa bond was Lee Shyan-yuan
, a board member of Taiwan's market regulator, the Financial Supervisory Commission
. The name refers to Formosa, an alternative name for the island of Taiwan; it was chosen as the result of a contest held in September 2006 by the FSC. 15 names were suggested, intended to reflect special characteristics of Taiwan; two different Chinese-language
versions of the name "Formosa bond" were suggested, as well as "C-Wang Bond" and "High-Tech Island Bond". Participants were also invited to suggest their own names for the bonds. The result of the contest was announced on 25 September 2006
; "Formosa Bond" was the most popular choice, with 5,776 votes, or 57.16% of the total cast; the second-most popular choice, Taiwan 101
Bond, had only 1,229 votes, and the third-most popular choice, an alternative Chinese translation of "Formosa Bond", garnered only 618 votes.
Bonds to be traded must have a credit rating
of BBB or higher; they may not be issued in Chinese renminbi
, the official currency of the People's Republic of China
. Trading between securities firms has to be carried out through a subsystem of the GreTai Securities Market's Electronic Bond Trading System, for which trading hours are between 9:00 AM and 1:30 PM. However, Formosa bonds also listed on overseas exchanges may be traded over-the-counter
between bond dealers.
The first Formosa bonds were part of a US$250
million carried out by Deutsche Bank
in November 2006; BNP Paribas
followed with a Australian dollar
issuance, initially planned at A$500 million (US$386 million at then-current exchange rates) for February 2007, but later reduced to A$308 million (US$258 million) and delayed until 10 April 2007
were also said to be considering issuing such a bond, and BNP Paribas suggested that they might regularly issue Formosa Bonds. Presently, only Taiwan branches of publicly-traded overseas financial institutions are permitted to issue Formosa Bonds; the market regulator has floated the idea of extending this permission to other branches and subsidiaries of such institutions as well.