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Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings(2010.08.06) |
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Article 10
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An application for TWSE listing approval for an issue of call (put) warrants shall conform to each of the following conditions:
1. The issue shall comprise 10 million to 50 million issuance units. The price per issuance unit shall be not less than NT$0.6. For non-index warrants, the issuer itself determines the number of shares (or units) or baskets thereof represented by one issuance unit, within a range that is from one issuance unit representing one share (one unit) or basket thereof to 100 issuance units representing one share (one unit) or basket thereof. For index warrants, the issuer itself determines the index points represented by each issuance unit; one index point corresponds to NT$1.
2. Period of validity: Calculated from the date of listing, the period of validity shall be from six months to two years, inclusive.
3. Restriction on total issuance volume of the underlying represented by a warrant:
(1) When the underlying security is a domestic stock, the total number of shares of the underlying security represented by the domestic warrant issuance units of the call (put) warrants and the shares of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 22% of the total number of outstanding shares of the domestic issuing company after deduction of each of the following types of shareholdings. Where the issuer and any of its overseas subsidiaries (whose warrant issuing operations are guaranteed or secured by the mother company) issue offshore call (put) warrants for which the underlying security is a domestic stock, the total number of shares of the underlying security represented by the issuance units of the offshore call (put) warrants, combined with the number of the same underlying securities represented by other existing call (put) warrants issued overseas, may not exceed three percent of the total number of outstanding shares of the issuing company after deduction of each of the following types of shareholdings:
(i.) The total percentage of shares held by directors and supervisors under statutory shareholding ratio requirements.
(ii.) Already pledged securities.
(iii.) The number of centrally deposited shares mandatory for newly listed companies.
(iv.) Shares already repurchased under the Rules Governing Share Repurchase by Listed and OTC Companies and not yet cancelled.
(v.) Shares with restrictions on listing or trading imposed by the competent authority.
(2) If the underlying security is a foreign stock, the combined total of the number of shares of the underlying security represented by domestic issuance units of the call (put) warrants and of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 15% of the total number of shares already issued by the issuer of the underlying securities.
(3) When the underlying security is an exchange-traded securities investment trust fund announced by the TWSE, the total number of shares of the underlying security represented by the issuance units of the call (put) warrants and the shares of the same underlying security represented by other existing call (put) warrants already listed on the TWSE, combined with those issued overseas by the issuer or its correspondent institution overseas and representing the same underlying, may not exceed the total number of beneficial interest units already issued by the fund, provided that this shall not affect the validity of any call (put) warrants already issued. When the underlying security is an offshore exchange-traded fund as announced by the TWSE, the total number of units of the underlying security represented by the issuance units of the call (put) warrants and the units of the same underlying represented by other existing call (put) warrants already listed on the TWSE may not exceed the total number of units of that fund offered and sold domestically within the ROC territory.
(4) If the underlying security is a foreign exchange-traded fund (ETF), the combined total of the number of beneficial units of the underlying security represented by the issuance units of the call (put) warrants and the number of beneficial units of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 50 percent of the total number of the beneficial units already issued.
(5) When the underlying security is Taiwan Depository Receipts, the total number of units of the underlying represented by the domestic issuance units of the call (put) warrants and the units of the same underlying represented by other existing call (put) warrants already listed on the TWSE may not exceed 22 percent of the already listed units of the receipts.
(6) If the underlying security is a foreign depositary receipt, the combined total of the number of units of the underlying security represented by the domestic issuance units of the call (put) warrants and the number of units of the same underlying security represented by other existing call (put) warrants already listed on the TWSE, may not exceed 15 percent of the total number of the depositary receipt units already listed on the TWSE.
4. When the underlying security is an exchange-traded securities investment trust fund or offshore exchange-traded fund, if an authorization is required to be obtained, consent shall be obtained from the institution creating the fund's underlying index; for the underlying index, consent shall be obtained in advance from the institution creating the given underlying index.
5. The issuance plan shall contain the following terms and conditions:
(1) The issuance date and the period of validity.
(2) Detailed information on the underlying index, security, or basket of securities (when the underlying securities of the warrants issued are domestic stocks, if the financial statement of the most recent period audited or certified by a certified public accountant and shows losses on the stock, there shall also be a statement of the reason for issuing warrants based on the underlying securities; when the underlying security is a foreign stock or a foreign depositary receipt, there shall be a statement of the status of liquidity of the foreign stock or foreign depositary receipt).
(3) The type of call (put) warrant, the volume of issuance units and total value of the issue.
(4) Terms of issuance (such terms, including issuance price, strike price or exercise index level, exercise period and number of shares, beneficial units, depository receipt units, or index points represented per issuance unit; conditions regarding upper and lower price caps or index levels for knock-out call or put warrants; and the fact that when the closing price of the underlying security reaches the upper or lower price cap or the closing level of the underlying index reaches the exercise index level, it will be the final trading day for the given warrant, which will be deemed to be at maturity on the following business day, with automatic cash settlement taking place uniformly at the closing price of the underlying security or the closing level of the underlying index on the last day of trading, shall be set out in a prominent typeface). For a call warrant, the strike price or exercise index level referred to may not exceed 150% of the underlying security's price or the closing level of the underlying index at market close on the date of application; for a put warrant, the strike price may not be lower than 50% of the underlying security's price or the closing level of the underlying index at market close on the date of application, provided that the above ratios may be exceeded when the strike price and the closing price of the underlying security differ by less than NT$30. There shall be reasonable cause and explanation for any terms of issuance that do not conform to the above standards, and full disclosure shall be given to investors.
(5) The method by which the issuance price is calculated, including the price of the underlying security or underlying index, the strike price or exercise index level, the period of validity, the interest rate, the rate of fluctuation of the underlying security and other elements used in the calculation, and a table of comparison with other warrants in the preceding year with the same listed security or index as the underlying security.
(6) Detailed information on the guarantor and the guaranty agreement or collateral.
(7) Items that must be included in the issuance plan in accordance with Article 8 of the Taiwan Stock Exchange Corporation Directions for Call (Put) Warrant Liquidity Provider Operations.
(8) Procedures for exercising the option and the terms for cancellation of already-exercised call (put) warrants.
(9) Strategies for offsetting foreseeable risks.
(10) The policy of the issuer regarding adjustment of the strike price of the call (put) warrant and related items along with the distribution of dividends and bonuses, increases or decreases in capitalization, stock splits or consolidations, and handling of other related matters by the issuing company of the underlying securities, or the distribution of dividends and handling of other matters by the securities investment trust enterprise in relation to the underlying exchange-traded securities investment trust fund or by the offshore fund management institution or its designated institution in relation to the underlying offshore exchange-traded fund. Where the issuer does not make such adjustments in accordance with the TWSE reference formula, that fact shall be noted in bold lettering in the issuance prospectus. If the underlying is a foreign security, the issuer shall itself determine the formula for adjustment.
(11) Methods of handling when there is a merger by the company issuing the underlying securities, or alteration in the trading method, suspension of sale, or de-listing of the securities; or when there is delisting when the securities investment trust enterprise of the underlying exchange-traded securities investment trust fund undergoes dissolution or bankruptcy, or its approval is revoked; or when the beneficial certificates, fund shares, or investment units of the underlying offshore exchange traded fund are delisted by the TWSE after approval by the competent authority; or when the index provider announces suspension of the compilation of the underlying index.
(12) Methods of handling market listing of the call (put) warrants, or suspension of trading or de-listing of the warrants by the TWSE.
(13) Terms stipulating that upon expiration of the period of validity, where the market price of the underlying securities or the closing level of the underlying index is higher than the strike price or the exercise index level of a call warrant (or the strike price or exercise index level of a put warrant is higher than the market price of the underlying securities or the closing level of the underlying index) and where there is value in the exercise of the option and the terms of exercise require cash settlement, the warrant holder shall be deemed to have exercised the warrant and to have given notice to that effect.
(14) Terms stipulating that the warrant issuer may not substitute another warrant with a period of validity longer than that of the original warrant, or any other security, for the originally issued warrant.
(15) Procedures for delivery and payment when the warrant holder exercises the option.
(16) Terms stipulating that where settlement after exercise of the option referred to in the preceding paragraph shall be in cash, the cash settlement amount shall be calculated based on the closing price of the underlying securities or the closing level of the underlying index on the exercise date. However, when the underlying asset is a foreign security or foreign index, the provisions of the TWSE Guidelines for the Exercise of Call (Put) Warrants shall be followed.
(17) Terms stipulating the methods for handling distribution of securities centrally deposited in the Taiwan Depository and Clearing Corporation account where the issuer fails to perform its delivery of the underlying securities or the cash price differential within the prescribed time period.
(18) Clarification of whether or not there are plans for a reverse issue of call (put) warrants against the same underlying securities or underlying index within the coming three months.
6. Domestic call (put) warrants for which the underlying assets are foreign securities or foreign indexes may not be of the knock-out type, and investors may not apply for exercise of such warrants until the maturity date.
7. When an issuer issues domestic call (put) warrants for which the underlying assets are foreign securities or foreign indexes, it shall disclose, from the applied-for issue date through the maturity date of the warrants, on its company website and the TWSE-designated information reporting website, the up-to-date trading information of the underlying securities or indexes and the most recent financial reports of the issuing companies of the underlying securities.
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Article 11
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For applications for TWSE approval for listing of call (put) warrants, when the underlying securities are domestic stocks, they shall conform to each of the following conditions:
1. Market value of underlying security: NT$10 billion or more.
2. The volume of shares traded during the most recent three calendar months shall account for 20% of the total of outstanding shares, or the average monthly volume of shares traded in the most recent three months shall reach 100 million shares or more.
3. The financial report for the most recent period, certified or audited by a certified public accountant, shall show no losses, or shall show no accumulated deficit if losses exist.
Conformance of underlying securities with the standards of the preceding paragraph shall be based on quarterly TWSE announcements, provided that if during the period for announcement the financial report required under Article 36 of the Securities and Exchange Act does not conform with Subparagraph 3 of the preceding paragraph, the TWSE will announce cancellation of the given security's qualification as the underlying of a call (put) warrant.
In applications to the TWSE for approval for listing of call (put) warrants, when the underlying security of the warrants is a domestic stock and the financial statement of the most recent period audited or certified by a certified public accountant shows losses on the stock, there shall also be a statement of the reason for issuing warrants based on the underlying security.
When the underlying security in an application for TWSE approval for listing of call (put) warrants is Taiwan Depository receipts, each of the following conditions must be met:
1. 100 million units or more must be listed.
2. The ratio of the number units transacted during each the preceding three months to the number of units listed must be 20 percent or more.
In applications to the TWSE for approval for listing of call (put) warrants, when the underlying of the warrants is a domestic beneficial certificate or a domestic index, such underlying shall be limited to exchanged-traded securities investment trust funds, offshore exchanged-traded funds, or indexes as announced by the TWSE.
In applications to the TWSE for approval for listing of call (put) warrants, if the underlying of the warrants is a foreign security or a foreign index, the underlying shall comply with the requirements prescribed in Article 8, paragraph 1, subparagraph 3, items 1 and 2, of the Regulations Governing Applications for Issuance of Call (Put) Warrants by Issuers. If the underlying is a foreign stock, the market capitalization of the issuing company of the underlying security may not be equal to or less than US$500 million, and the volume of shares traded during the most recent 3 calendar months shall reach 20 percent or more of the total issued shares, or the average monthly volume of shares traded in the most recent 3 months shall reach 100 million shares or more. If the underlying is a foreign depositary receipt, the volume of units traded during the most recent 3 calendar months shall reach 20 percent or more of the listed units.
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Article 12
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Where any of the following conditions apply, the TWSE may withhold approval for an application for market listing of a projected issue of call (put) warrants:
1. The required application documents submitted by the issuer are incomplete, and it has failed to supplement the required documents by the deadline prescribed by the TWSE.
2. The particulars of the issuer's application do not conform to laws and regulations, or the issuer has made false and misleading presentations in the application.
3. The issuer or an affiliated company of the issuer has, during the month preceding application, released information or predictions relating to the price of the underlying securities or the underlying index of its projected warrants issue.
4. When the underlying security of the projected issue of warrants is a domestic stock, and the issuer or its directors, supervisors, managers, employees, or shareholders hold 10% or more of the issuer's shares, or any of the above hold 10% or more of the shares of another company, and are at the same time a director, supervisor, manager, or shareholder with a stake of 10% or more in the issuing company of the underlying security or any of the issuing companies of the basket of underlying listed securities.
5. The issuer's CPA audited and attested or CPA reviewed financial report for the most recent period is not in compliance with the standards of Article 4, paragraph 2, subparagraphs 1 and 2, provided that this shall not apply where there is non-conformance with the standards of Article 4, paragraph 2, subparagraph 1, but the measures provided in Article 5 are followed.
6. When the combined total of the issue price of the currently listed, OTC-listed, and OTC contract-based call (put) warrants issued domestically by the issuer whose term of validity has not yet expired, and the call (put) warrants issued overseas whose term of validity has not yet expired, and the projected issue of call (put) warrants, together with the amount of the guarantee or the assets provided as collateral for the overseas subsidiary's offshore call (put) warrant issuing business is subject to any of the following conditions:
(1) The issuer's credit rating is a Taiwan Ratings Corporation Class A rating or above, a Fitch Ratings Limited, Taiwan Branch rating of A (twn) or above, a Moody's Investors Service rating of A.tw or above, a Moody's Investors Service Class A rating or above, a Standard & Poor's Corp. Class A rating or above, or a Fitch Inc. Class A rating or above, and the combined total exceeds 60% of its eligible net regulatory capital adequacy requirement.
(2) The issuer's credit rating is a Taiwan Ratings Corporation Class BBB- rating or above, a Fitch Ratings Limited, Taiwan Branch rating of BBB- (twn) or above, a Moody's Investors Service rating of Baa1.tw, Baa2.tw, Baa3.tw or above, a Moody's Investors Service Class Baa1, Baa2, Baa3 rating or above, a Standard & Poor's Corp. Class BBB- rating or above, or A Fitch Inc. Class BBB- or above, and the combined total exceeds 50% of its eligible net regulatory capital adequacy requirement.
(3) The issuer's credit rating is a Taiwan Ratings Corporation Class BB+ rating or above, a Fitch Ratings Limited, Taiwan Branch rating of BB+ (twn) or above, a Moody's Investors Service rating of Ba1.tw or above, a Moody's Investors Service Class Ba1 rating or above, a Standard & Poor's Corp. Class BB+ rating or above, or a Fitch Inc. Class BB+ or above, and the combined total exceeds 30% of its eligible net regulatory capital adequacy requirement.
(4) The issuer's credit rating is a Taiwan Ratings Corporation Class BB rating or above, a Fitch Ratings Limited, Taiwan Branch rating of BB (twn) or above, a Moody's Investors Service rating of Ba2.tw or above, a Moody's Investors Service Class Ba2 rating or above, a Standard & Poor's Corp. Class BB rating or above, or a Fitch Inc. Class BB rating or above, and the combined total exceeds 20% of its eligible net regulatory capital adequacy requirement.
(5) The issuer's credit rating is a Taiwan Ratings Corporation Class BB- rating or above, a Fitch Ratings Limited, Taiwan Branch rating of BB- (twn) or above, a Moody's Investors Service rating of Ba3.tw or above, a Moody's Investors Service Class Ba3 rating or above, a Standard & Poor's Corp. Class BB- rating or above, or a Fitch Inc. Class BB- rating or above, and the combined total exceeds 10% of its eligible net regulatory capital adequacy requirement.
The above-mentioned eligible net regulatory capital adequacy requirement shall be calculated based on the methods set forth within the Rules Governing Securities Firms, for Taiwan issuers.
If the issuer is a foreign institution, the aforesaid eligible net regulatory capital is calculated by (the net worth on the most recent financial reports of its branch(es) within the Republic of China or branch(es) established within the Republic of China by its wholly owned subsidiaries) x (net available funds multiplier).
7. The issuer is a foreign institution, and at the time of application to issue call (put) warrants, the inward remittance of capital required for a hedge on the issue (the amount remitted into Taiwan minus the amount not required for a hedge on the issue) is less than 20% of the market value of the underlying securities represented by the non-matured listed or OTC-listed call (put) warrants (including the current issue). In addition, where a letter of undertaking stating that the premiums collected for the given issue of warrants will only be remitted into Taiwan after the expiration of the period of validity of the warrant or proof of an existing line of credit at a Taiwan bank in an amount equivalent to the premiums collected on the given issue have not been issued.
8. There are irregular fluctuations in the price of the underlying security within the three months prior to the date of application, and a penalty has been imposed in accordance with the Taiwan Stock Exchange Corporation Rules Governing Implementation of the Stock Market Monitoring System.
9. There is any other factor arising out of the nature of the enterprise or exceptional circumstances that may be deemed to adversely affect the applicant's performance of the option or the price of the underlying securities.
10. There are any of the conditions set forth in Article 8 of these Rules.
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Article 13-1
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When an underlying foreign security represented by listed call (put) warrants is announced as delisted by the securities exchange on which the security is traded, or when an underlying foreign index represented by the warrants is announced by the index provider as suspended from compilation, the issuer shall immediately report by letter to the TWSE, and the TWSE shall delist the call (put) warrants after reporting to the competent authority and obtaining its approval.
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Article 20
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Except where the circumstances set forth under Article 10, subparagraph 5, item 18 exist, when an issuer, prior to application to the TWSE for issuance of call (put) warrants, releases or divulges information on its own initiative about the application or the warrants issue, the TWSE may bar the issuer from any subsequent application for a period of three months.
When the media have made a concrete announcement or disclosure of information related to the underlying securities of a particular warrants issue in the week prior to the issuer's application, the TWSE will not approve the application for issuance and market listing.
Where an issuer or a risk management institution engaged by it produces a defective report, public announcement, or disclosure of required matters with regard to an application for qualification as a call (put) warrant issuer, issuance of warrants, or relevant matters during or subsequent to the warrant duration period, the TWSE may issue a letter requesting the issuer to make rectification, and when the circumstances are serious, may restrict it from subsequent applications for issuance of warrants for a period of one month.
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