| Title： |
Taiwan Stock Exchange Corporation Rules Governing Trading of Beneficial Certificates(2018.10.15) |
| Date： |
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Chapter 1 General Provisions
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| Article 1 | These Rules are adopted pursuant to Article 55 of the Operating Rules of Taiwan Stock Exchange Corporation (TWSE).
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| Article 2 | 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 of the following beneficial certificates issued for an offering of an exchange-traded securities investment trust fund ("ETF") by a SITE pursuant to the Regulations Governing Securities Investment Trust Funds, by an offshore fund manager or its designated institution ("offshore fund entity") pursuant to the Regulations Governing Offshore Funds, or by a futures trust enterprise pursuant to the Regulations Governing Futures Trust Funds:
- Beneficial certificates issued by a SITE for an offering of a securities investment trust ETF ("securities investment trust ETF") (such certificates hereinafter called "securities investment trust ETF beneficial certificates):
- The term "securities investment trust ETF with domestic component securities" refers to an ETF in which the component securities of its underlying index are all domestic securities.
- The term " securities investment trust ETF with foreign component securities" refers to an ETF in which the component securities of its underlying index contain one or more foreign securities, or to an ETF as specified under Article 37, paragraph 4 of the Regulations Governing Securities Investment Trust Funds ("linked ETF").
- The term "leveraged or inverse securities investment trust ETF" refers to an ETF that 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").
- Any beneficial certificate, fund share or investment unit issued for an offering of an offshore ETF ("offshore ETF") issued by an offshore fund entity ("offshore ETF beneficial certificates").
- Any beneficial certificate issued by a futures trust enterprise for an offering of an exchange-traded futures trust fund ("futures ETF") (such certificates hereinafter called "futures ETF beneficial certificate"). If intended to track, simulate or replicate the performance of its underlying indexes in the positive direction ("leveraged futures ETF") or opposite (inverse) direction ("inverse futures ETF"), the fund is called a leveraged or inverse futures ETF.
- Any foreign-currency beneficial certificate of a fund offered by a SITE pursuant to item 1 ("underlying ETF beneficial certificate").
- 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.
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| Article 3 | 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 for withdrawing those beneficial certificates.
When a principal trades in any of the following ETF beneficial certificates, the securities firm may only accept the order after the principal has signed a separate risk disclosure statement:
- futures ETF beneficial certificates.
- leveraged or inverse securities investment trust ETF beneficial certificates.
- ETF beneficial certificates traded in foreign currency.
- underlying ETF beneficial certificates.
- beneficial certificates of high yield securities investment bonds ETFs.
- beneficial certificates deemed necessary by the TWSE.
The following funds and accounts may be exempted from signing risk disclosure statements: privately placed securities investment trust funds managed by professional institutional investors or SITEs, futures trust funds offered by futures trust enterprises to persons with prescribed qualifications, discretionary investment accounts managed by SITEs, securities investment consulting enterprises or securities brokers concurrently operating securities investment consulting enterprises, and discretionary investment accounts managed by managed futures enterprises.
The matters that must be set out in the risk disclosure statement as referred to in paragraph 2 will be separately prescribed by the TWSE.
"Professional institutional investors" in paragraph 3 means the professional institutional investors defined in the Regulations Governing Offshore Structured Products.
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| Article 4 | A principal that trades in leveraged or inverse securities investment trust ETF beneficial certificates or leveraged or inverse ETF beneficial certificates for the first time 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.
- The principal has trade confirmation records of leveraged and inverse securities investment trust ETF beneficial certificates or leveraged and inverse futures ETF beneficial certificates.
The principal may apply to a securities firm by correspondence or electronic means that is sufficient to identify the applicant as the principal himself/herself/itself and confirm his/her/its indication of intent.
Professional institutional investors that conform to Article 3 of the Regulations Governing Offshore Structured Products, privately placed securities investment trust funds managed by professional institutional investors or SITEs, futures trust funds offered by futures trust enterprises to persons with prescribed qualifications, discretionary investment accounts managed by SITEs, securities investment consulting enterprises or securities brokers concurrently operating securities investment consulting enterprises, or discretionary investment accounts managed by managed future enterprises are not governed by paragraph 1.
Should the principal engage in irregular trade in order to fulfill the conditions in the first paragraph, the securities firm shall ascertain whether the principal has actual trading experience in respect of beneficial certificates as mentioned in the first paragraph and may, where necessary, refuse to accept trading orders from the principal.
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Chapter 2 Market Trading
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| Article 5 | 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 of the component securities of the underlying index of a securities investment trust ETF with foreign component securities circulate is closed, the beneficial certificates and underlying ETF beneficial certificates will continue to be traded on the TWSE central market.
For a leveraged or inverse securities investment trust 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 or the exchange market of the investment object is closed, the beneficial certificates and underlying ETF beneficial certificates will continue to be traded on the TWSE central market.
When the original market of the foreign futures contracts of the component securities of the underlying index of a futures ETF is closed, the beneficial certificates will continue to be traded on the TWSE central market.
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| Article 6 | 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. The trading unit of offshore ETF beneficial certificates may be determined by offshore fund entities. The trading unit of underlying ETF beneficial certificates may be determined by SITEs.
Fractions of a trading unit are governed mutatis mutandis by the TWSE Regulations Governing Odd-Lot Trading of Listed Shares.
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| Article 7 | Quote information consists of the bid and offer price per beneficial unit. The currency that such prices are quoted in is the currency in which the SITE, offshore fund entity, futures trust enterprise or trustee institution applies to the TWSE for listing.
The minimum tick size of 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 8 | The relevant daily price fluctuation limit provisions for listed stocks shall apply mutatis mutandis to beneficial certificates after they are listed, provided no price fluctuation limits are imposed on the following beneficial certificates:
- securities investment trust ETF beneficial certificates with foreign component securities, and the underlying EFT beneficial certificates.
- futures ETF beneficial certificates that track a foreign futures index.
- offshore ETF beneficial certificates.
For a leveraged or inverse securities investment trust ETF of which the component securities of the underlying index are all domestic securities, the relevant daily price fluctuation limit for the beneficial certificates and their underlying EFT beneficial certificates shall be 10 percent multiplied by the multiple of the fund. No price fluctuation limits are imposed on the beneficial certificates and their underlying EFT beneficial certificates where the component securities of the underlying index contain one or more foreign securities.
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| Article 9 | The calculation basis for the price fluctuation limits on beneficial certificates except offshore ETF beneficial certificates for the first day of listing are determined on the business day before listing in accordance with the following rules:
- For a securities investment trust fund offered 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 offered 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.
- For an underlying ETF beneficial certificate, the ratio of its trading units to the trading units of the beneficial certificates mentioned in Article 2, paragraph 1, subparagraph 2, item 1 and the net asset value per unit of beneficial interest on the most recent business day as converted at the exchange rate.
With respect to the beneficial certificates referred to in the preceding paragraph, 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 the same paragraph, pursuant to Article 7, 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 7, paragraph 2 herein.
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| Article 10 | Any beneficial certificate trade for which gains are distributed by the SITE pursuant to Article 77 of the Regulations Governing Securities Investment Trust Funds, the futures trust enterprise pursuant to Article 78 of the Regulations Governing Futures Trust Funds, or the REIT fund 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 7, paragraphs 2 and 3 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 11 | A SITE that issues ETF beneficial interest certificates, a futures trust enterprise , or an offshore fund institution shall 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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Chapter 3 Creation and Redemption
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| Article 12 | A securities firm shall sign the relevant agreements with the SITE before it may begin to conduct procedures relevant to the creation or redemption of securities investment trust ETF beneficial certificates 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, conducted for its own account or on behalf of its customers, of beneficial certificates of ETFs except those of offshore ETFs to the TWSE.
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 13 | 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, offshore fund institution or futures trust enterprise 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 14 | If on a same day the amount of component securities portfolio of the underlying index of a securities investment trust ETF with domestic component securities 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 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 beneficial certificates of a securities investment trust ETF with domestic component securities 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 component securities portfolio of the underlying index of that ETF, and on that same day it sells the same quantity of those component securities portfolio of the underlying index of the ETF; 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 beneficial certificates, or component securities portfolio of the underlying index, of a securities investment trust ETF with domestic component securities, and applies for postponing 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 component securities portfolio of the underlying index, or beneficial certificates, of a securities investment trust ETF with domestic component securities that it has purchased, and for any price payable for other purchases, the component 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 the component securities portfolio of the underlying index of the fund to unwind the position.
- If the component securities portfolio of the underlying index of a securities investment trust ETF with domestic component securities 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 securities investment trust 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 securities investment trust 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 beneficial certificates of a securities investment trust ETF with domestic component securities 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, subject to confirmation of the participating securities firm, be sold on the second business day after the creation.
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Chapter 4 ETF Beneficial Certificates and Underlying ETF Beneficial Certificates Traded in Foreign Currency
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| Article 15 | A principal to trade in ETF beneficial certificate in foreign currency may not do so until after it has opened a foreign savings account with a foreign exchange bank designated by a securities broker.
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| Article 16 | A securities broker to accept an order of a principal for the purchase of foreign-currency ETF beneficial certificates shall collect full payment before proceeding to report the purchase, unless the principal has engaged a trustee institution to handle settlement affairs.
The advance collection of payment for the purchase mentioned in the preceding paragraph is governed by the Operation Directions for the Advance Collection of Funds and Securities by Securities Brokers in Brokerage Trading mutatis mutandis.
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| Article 17 | ETF beneficial certificates traded in foreign currency are not eligible for margin purchases and short sales, day trades, money lending and borrowing transactions in connection with securities business, money lending and borrowing transactions for indefinite purpose, financing of securities settlement, securities secured lending, and securities lending and borrowing transactions, nor may they be used as collaterals.
The securities lending and borrowing transactions in the preceding paragraph do not include securities to be borrowed for settlement pursuant to Article 109 of the TWSE Operating Rules.
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| Article 18 | The total reported dollar amount of trading orders entered by a securities firm for foreign-currency ETF beneficial certificates for its own account or on behalf of principals in a single day is governed by Article 28-1 of the TWSE Operating Rules.
The reported dollar amount of ETF beneficial certificates traded in foreign currency is included in the total reported trading amount in the preceding paragraph upon conversion at the exchange rate posted on the preceding day by the bank designated by the TWSE.
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| Article 19 | The beneficial certificates in Article 2, paragraph 1, subparagraph 2, item 1 and their underlying ETF beneficial certificates may be swapped with each other at the ratio of one trading unit to one trading unit.
If a principal applies to a securities broker for swapping, the TWSE will seek confirmation from a central securities depository that the amount sought in the application is less than or equal to the balance available in the custodial book-entry account and, upon such confirmation, advise the securities firm in response of the success of the swap application.
The swap time is between 8:30 A.M. and 5:00 P.M.
No swap application is allowed in respect of the beneficial certificates in paragraph 1 if they are used for purchasing and borrowing positions by way of margin purchase.
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| Article 20 | No creation and redemption of underlying ETF beneficial certificates is permitted.
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Chapter 5 Fees, and Clearing and Settlement
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| Article 21 | After the execution of a beneficial certificate trade, the fee rate provisions for listed stocks apply mutatis mutandis to any commission or transaction charge collected by the securities broker that accepted the order and the TWSE.
After the execution of an ETF beneficial certificate trade, the securities broker that accepted the order and the TWSE will collect the aforementioned payment in the listing and trading currency.
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| Article 22 | The TWSE Operating Rules shall apply mutatis mutandis to the clearing and settlement of beneficial certificates.
Separate settlement spreadsheets shall be prepared for ETF beneficial certificates traded in foreign currency. The TWSE Operating Rules shall apply mutatis mutandis to the clearing and settlement of such beneficial certificates. The applicable currency shall be the same as their listing and trading currency.
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Chapter 6 Supplementary Provisions |
| Article 23 | 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 24 | These Rules shall take effect after having been submitted to and approved for recordation by the competent authority. Subsequent amendments thereto shall be effected in the same manner.
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