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Taiwan Stock Exchange Corporation Operation Directions Governing Liquidity Providers of Call (Put) Warrants(2009.09.21) |
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1. These Directions are adopted pursuant to Article 19 of the Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings.
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2. An issuer may serve as its own liquidity provider, or engage another liquidity provider to provide liquidity for the warrants that it issues. Only one liquidity provider may be engaged for a single warrant. The issuer may engage different liquidity providers for each issue of warrants.
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3. A liquidity provider shall be a domestic securities firm that operates proprietary securities trading business, and shall appoint at least one associated person to be in charge of liquidity providing business. If the issuer changes liquidity providers during the period of validity of call (put) warrants, it shall notify the TWSE three business days prior to the change, and input the following matters into the TWSE-designated Internet reporting system:
(1) The abbreviation and code of the call (put) warrants.
(2) Name of the replacing liquidity provider.
(3) Contact telephone number of the replacing liquidity provider (not applicable to performance of the quoting obligation by means of "voluntary quoting").
(4) Effective date of the change.
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4. A liquidity provider shall apply with the TWSE to establish a segregated account. If the issuer serves as its own liquidity provider, the segregated account shall be established under the dealer's account and the account number shall be 888888-5. If the issuer engages another securities firm to serve as the liquidity provider, the segregated account shall be established under the dealer account of the institution so engaged, and the account number shall be 888888-6. The aforementioned segregated accounts shall be used only for the trading of warrants issued by the liquidity provider or of warrants for which it has been engaged to provide liquidity, and buy and sell quotes from the same account may not be executed against each other. No warrant in the segregated account may be made the subject of a pledge.
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5. An issuer shall, prior to the listing of call (put) warrants, shall transfer the unsold warrants into the segregated account established by the liquidity provider, and the hedge account for call (put) warrants that the issuer has opened pursuant to Article 14 of the TWSE Rules Governing Review of Call (Put) Warrant Listings may not be used for the trading of call (put) warrants issued by the issuer.
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6. A liquidity provider shall, starting from 5 minutes after the TWSE centralized exchange market opens until the market closes, perform its quoting obligations by means of "responding to quote requests" or "voluntary quoting"; the operational guidelines are as follows:
(1) Responding to quote requests
1. A liquidity provider shall, within 5 minutes after receiving an investor's price inquiry, respond with a quote, and this quote shall remain posted for at least 1 minute.
2. If the order price per unit of warrants is less than NT$10, each single quote may not be for less than 10 trading units; if the order price per unit of warrants is from NT$10 to NT$20, each single quote may not be for less than 5 trading units; if the order price per unit of warrants is more than NT$20, each single quote may not be for less than 1 trading unit.
3. A liquidity provider shall make a synchronous recording of the phone call with which an investor requests a quote, and the recording shall be preserved for at least 2 months.
(2) Voluntary quoting:
1. The price quote by a liquidity provider shall include a bid price and an ask price.
2. A liquidity provider shall on its own initiative provide quotes at least once every 5 minutes, and such quotes shall remain posted for at least 30 seconds, provided that this 30-second restriction shall not apply when quotes are updated due to price fluctuations of the underlying securities.
3. A liquidity provider shall prescribe a maximum price fluctuation between the highest bid price and the lowest ask price.
4. If the order price per unit of warrants is less than NT$10, each single quote may not be for less than 10 trading units; if the order price per unit of warrants is from NT$10 to NT$20, each single quote may not be for less than 5 trading units; if the order price per unit of warrants is more than NT$20, each single quote may not be for less than 1 trading unit.
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7. A liquidity provider need not provide quotes at the following times:
(1) during the initial 5 minutes after opening of the centralized securities exchange market;
(2) during any suspension of trading of the underlying securities of the warrants;
(3) when the number of warrants in the liquidity provider's segregated account cannot meet the minimum number of units required for a single ask quote, the liquidity provider may only provide a bid quote.
(4) other times as prescribed by the issuer at its own initiative.
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8. An issuer shall specify on the issuance plan, sale notice, public sale prospectus, and listing notice of call (put) warrants the name of the liquidity provider, the method of performing price quoting obligations, and the times when quotes are not provided. If the liquidity provider performs its quoting obligation by means of "responding to quote requests, " the telephone number of the liquidity provider and the required particulars under Article 6, paragraph 1, subparagraph 1, items 1 and 2 shall also be specified. If the liquidity provider performs its quoting obligation by means of "voluntary quoting," the required particulars under Article 6, paragraph 1, subparagraph 2, items 2, 3, and 4 shall also be specified
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9. If the liquidity provider does not comply with the price quoting rules, or if on the given day it is discovered that in trading of the warrants there has arisen any circumstance that meets a standard of "irregularity" under Article 2 of the TWSE Directions for Announcement or Notice of Attention to Trading Information and Dispositions, the TWSE will immediately request an explanation by the liquidity provider and may conduct an on-site inquiry. If the liquidity provider's explanations are found obviously unreasonable, one demerit will be issued. If three cumulative demerits have been issued to a liquidity provider, the TWSE shall notify the liquidity provider to make corrections within a specified time. If the circumstances of breach or irregularity are serious, the TWSE may at its sole discretion notify and restrict the issuer from issuing warrants during the following one to three months. The TWSE may also notify the issuer to change liquidity providers.
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10. These Directions, and any amendments hereto, shall be implemented following submission for the competent authority's approval.
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