| Title： |
Taiwan Stock Exchange Corporation Rules Governing Trading of Beneficial Certificates (2015.04.07) |
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Article 1
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These Rules are adopted pursuant to Article 55 of the Operating Rules of Taiwan Stock Exchange Corporation (TWSE).
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Article 2
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The term "beneficial certificate" as used in these Rules includes:
- Any beneficial certificate for an offering of a closed-end securities investment trust fund issued by a securities investment trust enterprise (SITE) pursuant to the Regulations Governing Securities Investment Trust Funds.
- Any beneficial certificate for an offering of an exchange-traded securities investment trust fund ("ETF beneficial certificates") offered by a SITE pursuant to the Regulations Governing Securities Investment Trust Funds. If the component securities of the underlying index of such fund are all domestic securities, the fund is referred to as a domestic component securities ETF; if one or more component securities of the underlying index are foreign securities, or the fund is an ETF under Article 37 paragraph 4 of the Regulations Governing Securities Investment Trust Funds ("linked ETF"), the fund is referred to as an ETF with foreign component securities; if the fund tracks, simulates, or replicates a multiple of the performance of an index ("leveraged ETF"), or a multiple of the inverse performance of an index ("inverse ETF"), the fund is referred to as a "leveraged or inverse ETF".
- Any beneficial certificate, fund share or investment unit issued for an offering of offshore ETFs issued by an offshore fund manager, or its designated institution ("offshore fund entity") pursuant to the Regulations Governing Offshore Funds ("offshore ETF beneficial certificates").
- Any beneficial certificate issued by a trustee institution for the establishment of a real estate investment trust (REIT) fund pursuant to the Real Estate Securitization Act.
- Any beneficial certificate issued by a futures trust enterprise, in accordance with the Regulations Governing Futures Trust Funds, for the offering of an exchange-traded futures trust fund ("futures ETF beneficial certificate").
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Article 3
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Book-entry settlement of beneficial certificates listed for trading on the TWSE's centralized securities exchange market shall be conducted by a central securities depository, and the trustor may not apply to withdraw those beneficial certificates.
The first time a principal places an order for trading of any futures ETF beneficial certificates or leveraged or inverse ETF beneficial certificates, the securities firm may only accept the order after the principal has signed a separate risk disclosure statement for the certificates of that ETF. Professional institutional investors trading leveraged or inverse ETF certificates may be exempted from signing risk disclosure statements.
The matters that must be set out in the risk disclosure statement as referred to in the preceding paragraph will be separately prescribed by the TWSE.
"Professional institutional investors" in paragraph 2 means domestic and foreign banks, insurance companies, bills finance companies, securities firms, fund management companies, government investment institutions, government funds, pension funds, mutual funds, unit trusts, securities investment trust companies, securities investment consulting companies, trust enterprises, futures commission merchants, futures service enterprises, and other institutions with approval from the competent authority.
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Article 3-1
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The first time a securities firm accepts an order from a principal for trading of leveraged or inverse ETF beneficial certificates, the principal, with the exception of professional institutional investors, is required to meet at least one of the following conditions:
- The principal has opened a margin account.
- The principal has had at least 10 trading orders for call (put) warrants executed within the most recent one year.
- The principal has had at least 10 trading orders of futures trading contracts listed on the Taiwan Futures Exchange executed within the most recent one year.
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Article 4
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The trading of beneficial certificates shall be conducted in accordance with these Rules. For matters not specified herein, relevant rules and regulations of TWSE shall apply.
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Article 4-1
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When the original market on which the offshore ETF beneficial certificates circulate is closed, the beneficial certificates will continue to be traded on the TWSE central market.
When the original market on which the foreign securities represented by the ETF beneficial certificates with foreign component securities is closed, the beneficial certificates will continue to be traded on the TWSE central market.
For a leveraged or inverse ETF of which the component securities of the underlying index contain one or more foreign securities, when the overseas market on which those securities circulate is closed, the beneficial certificates will continue to be traded on the TWSE central market.
When the original market on which the foreign futures contracts represented by the futures ETF beneficial certificates is closed, the beneficial certificates will continue to be traded on the TWSE central market.
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Article 5
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The minimum lot size for trading beneficial certificates shall be represented by one trading unit or its integer multiples, where one trading unit equals 1,000 beneficial units, provided the offshore institution issuing ETF beneficial certificates has not set out different specifications .
Where the ordered quantity does not meet the minimum lot size, such odd-lot orders shall be handled mutatis mutandis according to the TWSE Regulations Governing Odd-Lot Trading of Listed Shares.
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Article 6
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Quote information consists of the bid and offer price per beneficial unit.
The minimum tick size of ETF beneficial certificates, futures ETF beneficial certificates, offshore ETF beneficial certificates, and real estate investment trust beneficial securities is one cent, or NT$0.01, for beneficial units quoted less than NT$50, and five cents, or NT$0.05, for beneficial units quoted at more than or equal to NT$50.
Provisions regarding minimum tick sizes for beneficial certificates other than those specified in the preceding paragraph are subject mutatis mutandis to the minimum tick size rules for listed stock prices.
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Article 7
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The relevant daily price fluctuation limit provisions for listed stocks shall apply mutatis mutandis to beneficial certificates after they are listed, provided that no price fluctuation limits are imposed on ETF beneficial certificates with foreign component securities, futures ETF beneficial certificates that track a foreign commodities futures index, and offshore ETF beneficial certificates.
For a leveraged or inverse ETF of which the component securities of the underlying index are all domestic securities, the relevant daily price fluctuation limit for the beneficial certificates shall be 10 percent multiplied by the multiple of the fund. No price fluctuation limits are imposed on leveraged or inverse ETF of which the component securities of the underlying index contain one or more foreign securities.
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Article 8
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With respect to the beneficial certificates referred to in Article 2, paragraph 1, subparagraphs 1, 2, 4, and 5,the calculation basis for the price fluctuation limits for the first day of listing are determined on the first business day before listing in accordance with the following rules:
- For a securities investment trust fund issued by a securities investment trust enterprise, the net asset value per unit of beneficial interest on the most recent business day, obtainable by calculation pursuant to Article 72 of the Regulations Governing Securities Investment Trust Funds.
- For a futures trust fund issued by a futures trust enterprise, the net asset value per unit of beneficial interest on the most recent business day, obtainable by calculation pursuant to Article 76 of the Regulations Governing Futures Trust Funds.
- For a real estate investment trust fund established by a trustee institution, the net asset value per unit of beneficial interest calculated according to the provisions of the real estate investment trust contract.
With respect to the beneficial certificates referred to in Article 2, paragraph 1, subparagraphs 1, 2, 4, and 5, the auction reference price at market opening on the first day of listing shall be the price arrived at by processing the calculation basis set under paragraph 1, pursuant to Article 6, paragraphs 2 and 3 herein.
With respect to offshore ETF beneficial certificates, the auction reference price at market opening on the first day of listing shall be the price arrived at by processing the latest net asset value per unit of the offshore fund, during TWSE business hours on the day before listing as published by the representing master agent of the offshore fund pursuant to Article 14 of the Regulations Governing Offshore Funds, pursuant to Article 6, paragraph 2 herein.
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Article 9
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Any beneficial certificate trade for which gains are distributed by the securities investment trust enterprise (SITE) pursuant to Article 77 of the Regulations Governing Securities Investment Trust Funds or by the real estate investment trust (REIT) established by the trustee institution pursuant to the REIT contract, and for which settlement is conducted after the date of suspension of changes to entries in the register of beneficial owners, shall be an ex-dividend transaction. On the commencement date of ex-dividend trading, the price fluctuation limits for those trades shall be calculated based on the previous day's closing price minus the dollar amount of distributed gains, and the auction reference price at market opening shall be the price arrived at by processing the previous day's closing price, minus the dollar amount of distributed gains, pursuant to Article 6, paragraphs 2 and 3 herein.
Any beneficial certificate without price fluctuation limits, for which gains are duly distributed, and for which settlement is conducted after the date of suspension of changes to entries in the register of beneficial owners, shall be an ex-dividend transaction. The auction reference price at market opening on the commencement date of ex-dividend trading shall be the price arrived at by processing the previous day's closing price, minus the dollar amount of distributed gains, pursuant to Article 6, paragraph 2 herein.
When there is no previous day's closing price on the commencement date of ex-dividend trading, the closing price used as the basis for the calculations referred to in paragraphs 1 and 2 shall be replaced with the price determined by the principles laid down in Article 58-3, paragraph 2, subparagraph 2 of the TWSE Operating Rules.
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Article 10
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The relevant portions of the provisions regarding stocks of the TWSE Operating Rules shall apply mutatis mutandis to the clearing and settlement of beneficial certificates.
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Article 11
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A securities firm shall sign the relevant agreements with the SITE before it may begin to conduct creation or redemption of ETF beneficial certificates, whether in kind or through delivery by a method specified in the securities investment trust contract, for its own account or on behalf of its customers.
A securities firm that carries out operations for creation or redemption of futures ETF beneficial certificates for its own account or on behalf of customers may do so only after entering into a relevant contract with the futures trust enterprise.
A securities firm shall sign the relevant agreements with the offshore fund institution before it may begin to conduct creation or redemption of offshore ETF beneficial certificates for its own account or on behalf of its customers.
A securities firm shall report any creation or redemption operations of domestic component securities ETF beneficial certificates to the TWSE. The guidelines for such reporting will be separately prescribed by the TWSE. A securities firm shall report any creation or redemption operations of ETF beneficial certificates with foreign component securities, leveraged or inverse ETF beneficial certificate, or futures ETF beneficial certificates to the central securities depository, which shall transmit the information on creation and redemption to the TWSE. The guidelines for such reporting shall be separately prescribed by the central securities depository.
The reporting operations specified in the preceding paragraph do not apply to the creation or redemption operations of offshore ETF beneficial certificates, but the central securities depository shall nevertheless transmit to the TWSE the itemized information on any transfers.
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Article 11-1
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A securities firm that signs relevant agreements under paragraph 1, 2 or 3 with a SITE, futures trust enterprise, or offshore fund institution is referred to as a participating dealer. A participating dealer shall meet the following conditions and pass the review of the TWSE before being issued a written approval:
- The capital adequacy ratio of the securities firm has remained over 150% for the last six months, save in the event of a financial institution acting concurrently as a securities firm, in which case the capital adequacy ratio is governed by the relevant provision of Article 44 of the Banking Act; provided, however, the above does not apply to a Taiwanese branch of a foreign securities firm where the head office of the home country has calculated its own capital adequacy ratio according to the local laws and regulations, with the operating risk of the Taiwanese branch included in the calculation, and the criteria are met, and the Financial Supervisory Commission has granted exemption from the capital adequacy ratio requirements that are applicable to Taiwanese securities firms.
- A long-term credit rating of a specific level or higher from a credit rating agency shall be obtained: Taiwan Ratings Corporation twBB- or above, Moody's Service Ba3 or above, Standard & Poor's Corp. BB- or above, or Fitch Inc. BB1 or above. In the event of a financial institution acting concurrently as a securities firm, the credit rating of the financial institution may apply. In the event of a Taiwanese branch of a foreign securities firm, the credit rating of the group's financial holding company may apply.
A securities firm shall enter into a participation agreement with the SITE and offshore fund institution issuing ETF beneficial certificates or with the futures trust enterprise issuing futures ETF beneficial certificates, within three months of said firm's procurement of the written approval of the TWSE, to become a participating dealer. A domestic securities firm having established a service agreement with an affiliate of a participating dealer of offshore ETF beneficial certificates in the same enterprise group and handling the relevant matters is also deemed a participating dealer of offshore ETF beneficial certificates.
A securities firm which acts as a participating dealer with the TWSE's permission or which has obtained the permission but has not signed the agreement shall desist from acting as a participating dealer if its own capital adequacy ratio has fallen below 150% for two consecutive months, and may not be reinstated until it has fulfilled the requirement governing the capital adequacy ratio for three consecutive months and procured the approval of the TWSE.
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Article 12
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If on a same day the amount of underlying portfolio securities of a domestic component securities ETF beneficial certificate purchased by a securities firm for its own account or on behalf of a single account, or the total amount of the aforementioned purchased securities plus that securities firm's original holdings and borrowings thereof and the amount of portfolio securities it purchased or acquired through in-kind redemption on the preceding day, meets the requirements for in-kind creation of that ETF beneficial certificate, and on that same day it sells the same quantity of that beneficial certificate; or if on a same day the amount of domestic component securities ETF beneficial certificates that a securities firm purchases for its own account or on behalf of a single account, or the total amount of the aforementioned purchased certificates plus that securities firm's original holdings and borrowings thereof and beneficial certificates it purchased or acquired through in-kind creation on the preceding day, meets the requirements for in-kind redemption of the underlying portfolio securities of that ETF beneficial certificate, and on that same day it sells the same quantity of those underlying portfolio securities; then that securities firm's settlement, and subsequent related matters, shall be conducted according to the following provisions:
- On the transaction date, the securities firm, via computer link, shall report to the TWSE and submit an application to postpone settlement.
- If the securities firm reports the sale of domestic component securities ETF beneficial certificates or such beneficial certificate's underlying portfolio of stocks and applies to postpone settlement pursuant to the preceding subparagraph, after the TWSE has reviewed and approved the application it shall prepare a statement and transmit an electronic file thereof to the central securities depository to conduct the relevant operations accordingly. The provisions of Article 109 of the TWSE Operating Rules do not apply to the aforementioned operations.
- After the securities firm has completed settlement on the second business day after the transaction date for the underlying securities portfolios of domestic component securities ETF beneficial certificates, or for the beneficial certificates, that it has purchased, and for any price payable for other purchases, the portfolio securities or beneficial certificates receivable by it shall be transferred to serve as collateral for the postponed settlement, and the TWSE will notify the central securities depository to thereupon apply to the SITE for the in-kind creation of that beneficial certificate, or in-kind redemption of that beneficial certificate's underlying portfolio securities to unwind the position.
- If the securities portfolio underlying a domestic component securities ETF beneficial certificate listed for trading on the GreTai Securities Market (GTSM) includes exchange-listed securities, after the TWSE receives notification from the GTSM regarding the portion of listed securities sold by the securities firm, the TWSE shall prepare a statement for that portion and transmit an electronic file thereof to the central securities depository pursuant to subparagraph 2.
When a securities firm conducts creation of leveraged or inverse ETF beneficial certificates in which the component securities of the underlying index are all domestic securities, for its own account or on behalf of its customers, after confirmation has been given by the securities investment trust enterprise, the beneficial certificates may be sold from the date of creation. When the component securities of the underlying index contain one or more foreign securities, after confirmation has been given by the securities investment trust enterprise, the beneficial certificates may be sold from the business day preceding the day when they are registered with the central securities depository.
When a securities firm conducts creation of ETF beneficial certificates with foreign component securities or futures ETF beneficial certificates for its own account or on behalf of its customers, after confirmation has been given by of the securities investment trust enterprise or the futures trust enterprise, the beneficial certificates may be sold on the business day preceding the day when they are registered with the central securities depository. When a securities firm conducts creation of domestic component securities ETF beneficial certificates for its own account or on behalf of its customers, except under the circumstances set out in paragraph 1, the beneficial certificates may be sold on the business day next following the creation.
When a securities firm carries out creation of ETF beneficial certificates for an offshore exchange-traded fund for its own account or on behalf of its customers, those ETF beneficial certificates may be sold only after registration and account entry with the central securities depository and confirmation of the same by the securities firm.
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Article 13
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A SITE that issues ETF beneficial interest certificates, a futures trust enterprise that issues futures ETF beneficial certificates, or an offshore fund institution that issues offshore ETF beneficial certificates, may designate a liquidity provider to provide liquidity when the certificate is traded on the centralized market of the TWSE. The relevant operational guidelines shall be adopted separately by the TWSE.
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Article 14
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After the execution of a beneficial certificate trade, the fee rate provisions for stock transactions apply mutatis mutandis to any commission or transaction charge collected by the securities broker that accepted the order and the TWSE.
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Article 15
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These Rules, and any subsequent amendment thereto, shall be implemented after being submitted to and approved by the Competent Authority.
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