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Amendments

Title:

Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings  CH

Amended Date: 2021.06.11 (Articles 10 amended,English version coming soon)
Current English version amended on 2020.12.24 
Categories: Primary Market > Review

Title: Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings(2011.06.03)
Date:
Article 10 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 6 months to 2 years, inclusive; for issuance of callable bull contracts or callable bear contracts, the period of validity shall be from 3 months to 2 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 percent 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 TWSE Listed and GTSM Listed 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 percent 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 showslosses 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.
(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. In the case of an issue of callable bull contracts or callable bear contracts, the issuance price shall be calculated as the “difference between the price of the underlying security or underlying index and the strike price or strike index × multiplier + funding cost”, wherein the funding cost shall be calculated as “funding cost annual rate × strike price or strike index × (days to maturity ÷ 365) × multiplier.”
(6) Issuance of capped call or put warrants (or callable bull or bear contracts) shall, in addition to the provisions of the preceding five items, comply with the following requirements:
i. For a capped call warrant or capped put warrant, the day on which the closing price of the underlying securities or the closing index of the underlying index reaches the capped call (or put) price or index is deemed the warrant’s last trading day; such warrants reach maturity on the second business day thereafter, and without exception the automatic cash settlement performance method is adopted based on the closing price of the underlying securities or the closing index of the underlying index on the last trading day of the warrant; the aforementioned conditions shall be printed in conspicuous typeface. The capped call price or index level shall be set at no less than 150 percent of the strike price or strike index; the capped put price or index level shall be set at no more than 50 percent of the strike price or strike index.
ii. For a callable bull contract or callable bear contract, the day on which the closing price of the underlying securities or the closing index of the underlying index reaches the knock-out price or index is deemed the contract’s last trading day. Such contract reaches maturity on the second business day thereafter, and the automatic cash settlement performance method is adopted based on the simple arithmetic mean trade price of the underlying securities or the simple arithmetic mean of the underlying index on the first business day following the last trading day of the contract. If there is no trade price for the underlying security, the base auction price for the opening of trading of the underlying security on the expiration date of the contracts shall be used. If the trading of underlying security is halted or suspended on the first business day following the last trading day of the contracts or on the expiry date, the closing price of the underlying security on the last trading day of the contracts shall be used. The aforementioned conditions shall be printed in conspicuous typeface. The bull/bear contract knock-out price or index level shall be set within a range between the closing price of the underlying securities or the closing index of the underlying index and the strike price or the strike index (inclusive thereof), and the bull contract or index knock-out price or index level shall be set at no more than 90 percent of the closing price of the underlying securities or the closing index of the underlying index, or the bear contract or index knock-out price or index level shall be set at no less than 110 percent of the closing price of the underlying securities or the closing index of the underlying index. The issuer shall also specify that in the event that any of the terms of issuance is re-set, any adjustment to the bull/bear contract strike price and knock-out price, or to the bull/bear contract strike index and knock-out index level, shall take effect from the first day of TWSE listing, and the price or index level thereof shall still be required to conform with the requirements set out above.
(7) Detailed information on the guarantor and the guaranty agreement or collateral.
(8) 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.
(9) Procedures for exercising the option and the terms for cancellation of already-exercised call (put) warrants.
(10) Strategies for offsetting foreseeable risks.
(11) 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.
(12) Methods of handling when there is a merger by the company issuing the underlying securities, or alteration in the stock trading method, halt of trading, suspension of sale, or de-listing; 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.
(13) Methods of handling market listing of the call (put) warrants, or suspension of trading, de-listing or halt of trading of the warrants by the TWSE.
(14) Terms stipulating that upon expiration of the period of validity, for call warrants with domestic securities or a domestic index as the underlying, there is exercise value if the simple arithmetic mean trade price of the underlying securities during the 60 minutes before market close or the simple arithmetic mean value of the underlying index during the 30 minutes before market close is higher than the strike price or strike index of the call warrant (or for put warrants, the strike price or strike index is higher than the simple arithmetic mean trade price of the underlying securities during the 60 minutes before market close or the simple arithmetic mean value of the underlying index during the 30 minutes before market close); if there is no trade price during that period, then the calculation shall be based on the most recent trade price. For call warrants with foreign securities or a foreign index as the underlying, there is exercise value if the most recent closing price of the underlying securities or the most recent closing value of the underlying index is higher than the strike price or strike index of the call warrant (or for put warrants, the strike price or strike index is higher than the most recent closing price of the underlying securities or the most recent closing value of the underlying index). Where 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.
(15) 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.
(16) Procedures for delivery and payment when the warrant holder exercises the option.
(17) Terms stipulating that where settlement after exercise of the option referred to in the preceding paragraph shall be done 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. If the exercise date is the expiration date of the warrants, the cash settlement amount shall be calculated on the basis of the simple arithmetic mean trade price of the underlying securities during the 60 minutes prior to market close, or the simple arithmetic mean value of the underlying index during the 30 minutes prior to market close; if there is no trade price during that period, then the calculation shall be based on the most recent trade price. 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.
(18) 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.
(19) 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 3 months.
(20) Source of data and method of disclosure for the halt of trading, suspension of trading, or delisting, of foreign underlying securities by the securities exchange on which the security is traded, or for the suspension of compilation of foreign underlying foreign index as announced by the index provider.
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 public announcements made by the issuing companies of the underlying securities. When such public announcement occurs during the trading hours [of the TWSE], the warrant issuer shall immediately enter the information; when such public announcement occurs during the non-trading hours [of the TWSE], the warrant issuer shall enter the information prior to the beginning of trading hours on the next business day following the occurrence. The warrant issuer shall enter the following information publicly announced by the issuing companies of the underlying securities:
(1) The annual and semi-annual consolidated financial reports (where the consolidated financial reports are not required, enter the individual financial reports), and the first-quarter and third-quarter financial reports prepared in accordance with the laws and regulations of the issuing company's home country or country of listing.
(2) Public announcement of dividend distribution for the current fiscal year; proposal of the dividend distribution has been passed by the board of directors and ratified at the shareholders meeting.
(3) Public announcement of acquisition or disposal of assets.
(4) Public announcement of the record date fixed for distribution of dividends, bonuses, or other benefits.
(5) Material information published by the issuing company in accordance with the laws and regulations of its home country or country of listing.
(6) Other matters that are required to be publicly announced under the rules of the TWSE.
Article 11 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 3 calendar months shall account for 20 percent of the total of outstanding shares, or the average monthly volume of shares traded in the most recent 3 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.
The underlying securities in applications for TWSE approval for listing of callable bull contracts or callable bear contracts shall be limited, among the stocks meeting the conditions in the preceding paragraph, to those 30 stocks that have had the highest average number of shares traded monthly in the most recent 3 months
When the underlying securities in an application for TWSE approval for listing of call (put) warrants are Taiwan depositary receipts, they shall meet each of the following requirements:
1. Units listed: 100 million units or more.
2. In the most recent 3 months the ratio of the number units traded to the number of units listed must reach 20 percent or more.
Conformance of underlying securities with the standards of the preceding three paragraphs 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 ofparagraph 1, 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.
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. However, the indices that may be taken as underlyings for callable bull contracts and callable bear contracts shall be limited to the Taiwan Stock Exchange Corporation Capitalization-Weighted Stock Index, the Taiwan Stock Exchange Electronic Sector Index, and the Taiwan Stock Exchange Finance Sector Index.
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.
Article 20 Except where the circumstances set forth under Article 10, subparagraph 5, item 19 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 of the warrants issue, the TWSE may send a letter requiring the issuer to give attention and make rectification. Where, due to the circumstance set forth in this paragraph, the issuer has been required by a letter from the TWSE to give attention and make rectification in the past year, the TWSE may additionally impose a breach penalty of NT$30,000; where the violation is serious in nature, the TWSE may also restrict the issuer from applications for issuance of warrants for a period of 1 month.
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 requiring the issuer to give attention and make rectification. Where, due to the circumstance set forth in this paragraph, the issuer has been required by a letter from the TWSE to make rectification in the past year, the TWSE may additionally impose a breach penalty of NT$30,000; where the violation is serious in nature, the TWSE may also restrict the issuer from applications for issuance of warrants for a period of 1 month.