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Title:

Rules Governing Rating of Issuers of Call (Put) Warrants  CH

Amended Date: 2020.09.24 (Articles 3, 4, 5 amended,English version coming soon)
Current English version amended on 2018.02.14 
Categories: Primary Market > Review
Securities Exchange Market > Trading > Call (Put) Warrants

Title: Rules Governing Ratings and Incentives to Issuers of Call (Put) Warrants(2014.06.16)
Date:
Article 1     These Rules are established according to Article 12-1 of the Taiwan Stock Exchange Corporation (hereinafter referred to as "TWSE") Rules Governing Review of Call (Put) Warrant Listings and Article 12-1 of the Taipei Exchange (hereinafter referred to as "TPEx") Rules Governing the Review of Call (Put) Warrants forTrading on the TPEx.
Article 2     For the purposes of discrepancy management of issuers of call (put) warrants, when the average value of warrants on the centralized securities exchange market and the over-the-counter market on the day of trade reaches a certain standard per quarter, the TWSE and TPEx will give a rating according to the market scale and the quality of market making as the two major indicators.
    The TWSE may adjust according to the circumstance the standard of the average value of warrants on the warrant at centralized securities exchange market and the over-the-counter market on the day of trade in total in the preceding paragraph.
Article 3     The indicators and weight of ratings of issuers of call (put) warrants are as follows:
  1. Indicator and weight of market scale:
    1. The transaction amount of the issuer's listed (TWSE/TPEx) warrants per quarter reaches 15%.
    2. The growth rate of the transaction amount of the issuer's listed (TWSE/TPEx) warrants per quarter reaches 20%.
    3. The average monthly turnover rate of the issuer's listed (TWSE/TPEx) warrants reaches 15%.
  2. Indicators and weight of the quality of market making:
    1. The maximum variation value of the implied volatility of each day's two-week best warrant in a purchase order (hereinafter referred to as "Maximum Variance Value of TWBIV") reaches 17%.
    2. The price difference ratio of buy and sell of the best warrant in a purchase and sale order each day (hereinafter referred to as "Daily Price Difference Ratio of Buy and Sell") reaches 17%.
    3. The amount of the best warrant in a purchase order (hereinafter referred to as "Daily Best Buy Amount") reaches 16%.
Article 4     The source and scope of ratings of issuers of call (put) warrants include the following:
  1. The transaction amount of of the issuer's listed (TWSE/TPEx) warrants.
  2. The total amount of issuance of the issuer's listed (TWSE/TPEx) warrants.
  3. From the information on the platform of warrant information, select the warrants that are 10% in the money to 20% out of the money, with the TWSE listings (over-the-counter trades) of each object totaling 10 or more.
Article 5     Issuers of call (put) warrants are rated as follows:
  1. On the last business day of each quarter, the TWSE may, according to the following principle, calculate the issuers' scores in each indicator of the market scale and quality of market making of the specific quarter:
    1. Score of each indicator of market scale: calculate first the transaction amount of each issuer in the particular quarter; then calculate the quarterly growth rate of the transaction amount based on the difference between such season and the previous season; and then calculate the monthly turnover rate of the transaction amount by dividing the transaction amount of the current month of the warrants issued by the issuer at the end of each month of such quarter by the total market value of listed (TWSE/TPEx) warrants at the end of the month, then calculate the turnover rate of the average monthly transaction amount of the season. The percentage rate number (hereinafter referred to as "PR Value") of each indicator of the issuer is the score of each indicator.
    2. Score of each indicator of quality of market making: calculate first the Maximum Variance Value of TWBIV, 1 divided by the Daily Price Difference Ratio of Buy and Sell minus the PR Value, and the PR Value of the Daily Best Buy Amount, of the warrants of the same object each day; then calculate the quarterly average value of the above-mentioned three values of each type of issuer. The PR value of the quartery average value of each indicator of the issuer is the score of each indicator.
  2. The total quarterly score of the issuer is the weighted total score of the score of each indicator of market scale and the quality of market making.
  3. The TWSE will classify the issuers into three levels from high to low, A, B and C, based on their quarterly total average scores. The TWSE will select five issuers as Class A, five as Class B, and the remaining issuers as Class C.
Article 6     According to the rating results in the preceding paragraph, subject to Article 7, issuers in Class A and Class B may be entitled to the following incentives in the following quarter:
  1. The issuance amount of Class A issuers, apart from the applicable percentage of eligible net self-owned capital according to the risk management evaluation level, will increase by 30% of eligible net self-owned capital; the issuance amount of Class B issuers by 20%.
  2. Where a Class A issuer issues warrants based on domestic stocks and Taiwan Depository Receipts as the underlying warrants, the transaction amount of the underlying warrants, unless in the case of limits under Subparagraph 3, Article 10 of the TWSE Rules Governing Review of Call (Put) Warrant Listings or Subparagraph 3, Paragraph 1, Article 10 of the Taipei Exchange Rules Governing Review of Call (Put) Warrants forTrading on the TPEx, each issuer may increase the percentage of the number of securities of the call (put) object represented by the warrant issuance unit, of the total issued shares of the company issuing the underlying securities minus 0.5% of the unit of shares specified in that subparagraph and listed (TWSE/TPEx) depository receipts.
  3. Class A issuers may, in addition to applying for issuing warrants on the underlying securities announced per quarter by the TWSE and TPEx, further apply for issuing warrants on the additional underlying securities that result from either of the following: in relation to the TWSE, , a change of the value of the listed securities to NTD 8 billion according to Paragraph 1, Article 11 of the TWSE Rules Governing Review of Call (Put) Warrant Listings, and in relation to the TPEx, a change of the value of TPEx listed securities to NTD 3 billion according to Paragraph 1, Article 11 of the Taipei Exchange Rules Governing Review of Call (Put) Warrants forTrading on the TPEx. The additional underlying securities shall be as specified in the quarterly announcement of the TWSE and the TPEx.
  4. The listing (TWSE/TPEx) fee of each warrant is reduced by NTD2,000 for Class A issuers and by NTD1,000 for Class B issuers.
Article 7     An issuer rated as Class A and B according to Article 5 on the last business day of each quarter by the TWSE shall not be entitled to the incentives set forth in the preceding paragraph if the following occurs in respect of such issuer in the relevant quarter:
  1. According to the Directions for the Handling of Malfunctions in the Quotation System for Liquidity Providers of Call (Put) Warrants, the accumulated number of times a malfunction in the quotation system is entered reaches five or more.
  2. In violation of the TWSE Rules Governing Review of Call (Put) Warrant Listings, the Taipei Exchange Rules Governing Review of Call (Put) Warrants forTrading on the TPEx, the TWSE and the TPEx Directions Governing Liquidity Providers of Call (Put) Warrants for two times or more.
Article 8     These Rules shall be drafted by the TWSE and the TPEx jointly, and take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.