TAIPEI - Taiwan's financial regulator announced on Tuesday it will allow greater daily fluctuations on the equity market to encourage investors to buy into small and medium cap stocks.

The loosening of daily limit for stocks on the main board and on the over-the-counter market to 10 percent is to become effective as early as Aug. 3 this year. The current 7 percent maximum upward or downward limit has been in place since 1989.

The proposed easing brings the Taipei market in line with the Shanghai and Shenzhen stock exchanges on the Chinese mainland.

The quota of margin trading will also be loosened and short-selling and margin trading will be allowed for more stocks, according to the Financial Supervisory Commission.

The regulator also plans to introduce renminbi exchange rate futures, double-currency denominated exchange-traded funds, cross-border stock trading with Singapore and other financial products.

Tseng Ming-chung, chairman of the Financial Supervisory Commission, said the Taipei equity market will see more liquidity and be more competitive once all the measures are in place. Turnover of the stock market is also expected to increase by 10 percent by the end of this year.