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Below are the Directions for Handling the Trading and Exercise of Call (Put) Warrants During Natural Disasters, Election and Recall of Public Officials, or National Holidays:
- In the event of a natural disaster (or an election and recall of public officials) in which the centralized securities exchange market remains open, the following operational guidelines shall apply to investors' requests to exercise a call (put) option and receipts and payments of funds and securities to be exercised in areas where the local government closes:
- In areas where the local government closes, if a securities firm decides to suspend business activities, its investors will not be able exercise a call (put) option on the day until the securities firm resumes business.
- Receipts and payments of funds and securities for warrants to be exercised are not guaranteed by the Taiwan Stock Exchange Corporation (TWSE) for settlement, to which the current regulations that the TWSE shall advance settlement funds in the event of a natural disaster (or an election and recall of public officials) do not apply. Processing of requests to exercise a call (put) options for which funds and securities are receivable and payable that are given during the two business days before the day of a natural disaster (election and recall of public officials) which should have been processed by the securities firms (including such securities firms appointed by the issuer and those dealing with holders) in areas where the local government closes and the TWSE shall be postponed to the date when business is resumed and handled together with requests to exercise call (put) options for which funds and securities are receivable and payable that are given on the business day immediately before the business day preceding the natural disaster (election and recall of public officials).
- Securities firms in areas where the local government closes that decide to open for business as usual shall exercise call (put) options for which funds and securities are receivable and payable as requested by their investors during the occurrence of the natural disaster (election and recall of public officials) with the TWSE on the second business day after the business is resumed.
- In the event a natural disaster (election and recall of public officials) occurs and the centralized securities exchange market remains open on the expiration date of warrants, investors in areas where the local government closes may request to exercise call (put) options on the date business is resumed. As for portions subject to cash settlement and automatic exercise, on the date of a natural disaster (election and recall of public officials), the TWSE will only perform the automatic exercise for investors in areas where the local government is open for business as usual. Automatic exercise for investors in areas where offices are closed will be postponed until the date business is resumed. Both settlement price and index shall be calculated based on the simple arithmetic average of the settlement prices or settlement index of the underlying securities during 60 minutes before closing of market on the expiration date. In the case the underlying securities have no strike price during 60 minutes before closing of market, the strike price of the most recent transaction shall be used in the calculation. In the event of a circumstance under Paragraph 5, Article 58 of the Operating Rules of the TWSE, the strike price or index during the extended period shall be included in the calculation. If the underlying securities are foreign securities or indices, the TWSE Guidelines for the Exercise of Call (Put) Warrants shall govern.
- In the event a natural disaster (election and recall of public officials) occurs and the centralized securities exchange market remains open on the expiration date of warrants, investors in areas where the local government closes may request to exercise call (put) options for an extended period until the day following the date business is resumed. Settlement price shall still be calculated based on the simple arithmetic average of the settlement prices or settlement index of the underlying securities during 60 minutes before closing of market on the expiration date. In the case the underlying securities have no strike price during 60 minutes before closing of market, the strike price of the most recent transaction shall be used in the calculation. In the event of a circumstance under Paragraph 5, Article 58 of the Operating Rules of the TWSE, the strike price or index during the extended period shall be included in the calculation. If the underlying securities are foreign securities or indices, the TWSE Guidelines for the Exercise of Call (Put) Warrants shall govern.
- According to Paragraph 4, Article 58 of the Operating Rules of the TWSE, the TWSE will stop accepting orders and trading of call (put) warrants on the business day preceding the expiration date of the warrants. As such, the last trading date for all call (put) warrants shall be the second business day of the expiration date of the warrants. To ensure the rights and interests of holders of the warrants will not be compromised due to closure of the centralized securities exchange market, the expiration date of call (put) warrants shall always be postponed if a natural disaster (election and recall of public officials) occurs during the three-day period from the last trading date to the expiration date of the warrants when the centralized securities exchange market is fully closed. Their settlement price and index shall be handled in accordance with the TWSE Guidelines for the Exercise of Call (Put) Warrants. In the case the expiration date of warrants falls on a national public holiday, handling of a request to exercise a call (put) option shall be postponed to the next business day.
- The settlement index in the preceding paragraphs shall be calculated in accordance with Article 10, subparagraph 6 of the TWSE Rules Governing Review of Call (Put) Warrant Listings.
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Standards for Calculating if a Call (Put) Warrant whose Performance Method is "Cash Settlement" Possesses Exercise Value and Guidelines for the Calculations are as follows:
- The Standards for Calculating if a Call (Put) Warrant whose Performance Method is "Cash Settlement" Possesses Exercise Value are as follows:
- Call warrants
In the case of non-index warrants, they possess exercise value if the result of the following calculation is greater than zero: (Settlement Price - Exercise Price) × Number of Underlying Securities - (Settlement Price - Exercise Price) × Number of Underlying Securities × Securities Transaction Tax Rate.
In the case of index warrants, they possess exercise value if the result of the following calculation is greater than zero: (Settlement Index - Strike Index) × Corresponding Amount per Index Point × Number of Units of Warrants × Exercise Ratio - (Settlement Index - Strike Index) × Corresponding Amount per Index Point × Number of Units of Warrants × Exercise Ratio × Securities Transaction Tax Rate.
- Put warrants
In the case of non-index warrants, they possess exercise value if the result of the following calculation is greater than zero: (Exercise price - Settlement Price) × Number of Underlying Securities - (Exercise Price - Settlement Price) × Number of Underlying Securities × Securities Transaction Tax Rate.
In the case of index warrants, they possess exercise value if the result of the following calculation is greater than zero: (Strike Index - Settlement Index) × Corresponding Amount per Index Point × Number of Units of Warrants × Exercise Ratio - (Strike Index - Settlement Index) × Corresponding Amount per Index Point × Number of Units of Warrants × Exercise Ratio × Securities Transaction Tax Rate.
- The guidelines for calculation of the exercise value above are as follows:
- The exercise processing fee collected by a securities firm is not deducted from the basis for exercise value calculation. Therefore, when the amount receivable by the holder as a result of exercise, after subtraction of the transaction tax, is less than the exercise processing fee calculated pursuant to Article 14 of the TWSE Rules Governing Trading of Call (Put) Warrants, the exercise processing fee collected by the securities firm may not be higher than the amount receivable by the holder as a result of exercise.
- The Taiwan Depository & Clearing Corporation ("TDCC"), after accepting a securities firm's application requesting to exercise a call (put) warrant for which the performance method is "cash settlement", will review and approve the application in accordance with the standards for calculating exercise value. When the call (put) warrant for which the securities firm requests exercise has no exercise value according to the calculation formulas above, the TDCC will reverse it.
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