||Taiwan Stock Exchange Corporation Rules Governing Trading of Beneficial Certificates (2015.04.07)
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.
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:
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.
- 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 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.