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Title:

Directions for the Handling of Malfunctions in the Quotation System for Liquidity Providers of Call (Put) Warrants  CH

Amended Date: 2016.08.23
1     These Directions are adopted pursuant to Article 8, Paragraph 3 of the Taiwan Stock Exchange Corporation ("TWSE") Rules Governing Review of Call (Put) Warrant Listings and Article 8, Paragraph 3 of the Taipei Exchange ("TPEx") Rules Governing the Review of Call (Put) Warrants for Trading on the TPEx.
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2     Except otherwise required by the TWSE or TPEx, any handling of malfunctions in the quotation system for liquidity providers of call (put) warrants shall be in compliance with these Directions.
3     The liquidity providers of call (put) warrants shall perform their quoting obligations under the Directions Governing Liquidity Providers of Call (Put) Warrants of the TWSE or TPEx. If the quotation system of a liquidity provider malfunctions, the time and cause of the malfunction and the name of the warrant experiencing the quotation in quotation shall be entered in the online information system specified by the TWSE prior to market opening on the business day following the day such malfunction occurs.
4     Where the quotation system of a liquidity provider of call (put) warrants malfunctions thus affecting the normal quotation procedure, save in the event of force majeure such as a natural catastrophe or act of God, breakdown or disruption of the data circuit of a telecommunications institution, or breakdown or disruption of the trading system or trading information transmission system of the TWSE or TPEx, the TWSE may assess demerit points against the liquidity provider depending on the seriousness of such malfunction, as follows:
  1. One to five demerit points shall be given upon a breakdown of the hardware or software of the quotation system.
  2. One to five demerit points shall be given upon a disruption of the quotation information transmission system or in the failure of the online transmission equipment to operate normally.
  3. One to three demerit points shall be given upon the failure of the terminal or other internal systems of a dealer to operate normally.
  4. One to five demerit points shall be given upon other information-system issues.
5     Where the information entered by the liquidity provider of call (put) warrants pursuant to Article 3 contains misrepresentation or nondisclosures, the TWSE may give five demerits to such liquidity provider.
6     Following the end of each quarter, the TWSE may act, depending on the demerit points given, in accordance with following:
  1. Where the cumulative total of demerit points given reaches 10, a default penalty of NTD 30,000 may be imposed on the issuer; where said total exceeds 10, an additional default penalty of NTD 20,000 may be imposed for every two additional demerit points assessed.
  2. Where the cumulative total of demerit points given reaches 20, the issuer may also be restrained from issuing TWSE or TPEx listed warranties for a period of one month.
  3. Where an issuer has been twice restrained from issuing warrants in a year pursuant to these Directions, it may be restrained from issuing TWSE or TPEx listed warranties for a period of one year.
    Where the TWSE imposes a breach penalty on an issuer or restrains an issuer from applying for issuing warrants for a prescribed period of time as a result of the demerit points given as in the preceding paragraph, the TWSE shall give notice to the issuer, with a copy submitted to the competent authority.
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7     Issuers of call (put) warrants that have been imposed a default penalty by the TWSE shall pay the penalty to the Finance Department of the TWSE within five days after the receipt of notice from the TWSE.
8     These Directions are adopted by the TWSE and TPEx and shall take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.