The first regional product put together by the Hong Kong Futures Exchange - futures and options linked to a Taiwan index created by the exchange - is set to be launched on May 26. Futures exchange chief executive Randy Gilmore said the new product was the first step in the exchange's plan to transform itself from a local exchange into a regional derivatives trading centre. 'We will launch a wide range of Asian regional products, including index futures, currency futures and interest rate contracts,' he said. 'In recent years Taiwan has emerged as one of the largest and most active equity markets in the world. 'The growth of the Taiwan stock market has generated a need for hedging tools for market participants to transfer their risks.' Last April two investment banks - Peregrine Derivatives and Union Bank of Switzerland - were threatened with legal action for launching derivative warrants on the Taiwan weighted index. Taiwan's financial regulators warned that investment banks must seek approval before using the Taiwan index for their warrants. Mr Gilmore said the futures exchange was launching its product based on its own Taiwan index and not on the actual Taiwan weighted index, which yesterday closed above 9,000 points for the first time in five months. He said the exchange had been discussing the new product with Taiwanese authorities since last September and received no objection. 'The Hong Kong Futures Exchange will help to establish the Taiwan futures market by launching this new product,' he said. The futures exchange is considering signing a memorandum of understanding with Taiwan which would enable Hong Kong and Taiwan regulators to exchange information and crack down on market manipulation and malpractice. The new futures and options contracts will be based on the HKFE Taiwan Index, which is newly created and owned by the futures exchange. The index will be calculated four times every minute during Taiwan trading hours by Bridge Information Systems (Hong Kong). The index will track the performance of 60 constituent companies which represent more than 50 per cent of Taiwan's stock market capitalisation. It will have a 99 per cent correlation with the Taiwan Stock Exchange's benchmark weighted index. The new index is being dated back to June 30, 1995 with a base value of 2,000 on that day. It closed at 3,579.64 yesterday. The new futures and option contracts will be settled in US dollars, and traded on the electronic trading system that 79 exchange members have installed. The margin will be about US$2,800 per contract in current market conditions, representing about 7.8 per cent of the contract value, which is in line with Hang Seng Index futures and red chip futures.