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Amendments

Title：

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

Amended Date： 2024.07.17 (Articles 9 amended,English version coming soon)
Current English version amended on 2023.08.17 
Categories： Primary Market > Review
Article Content Chapter Content Search Article No. Search Legal Basis Subordinate Legislation Amended Article Legislative History Chinese

Title： Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings(2016.08.23)
Date：
Article 1     These Rules are promulgated pursuant to Article 140 of the Securities and Exchange Act and Article 10, paragraph 1 of the Regulations Governing the Issuance of Call (Put) Warrants by Issuers ("Issuance Regulations").
Article 3     Applicants seeking approval by the Taiwan Stock Exchange Corporation (hereafter, "the TWSE") for qualification as a call (put) warrants issuer shall prepare an Application for Approval as a Qualified Call (Put) Warrants Issuer, filled out in full and with the required documents attached for submission to the TWSE. Following review and approval of the application by the TWSE in accordance with the Issuance Regulations, these Rules, and the TWSE Procedures for Review of Call (Put) Warrant Listings, the TWSE shall submit the application, along with the TWSE review opinion, to the competent authority for review.
    The TWSE Procedures for Review of Call (Put) Warrant Listings referred to in the preceding paragraph shall be adopted by the TWSE, and enforced after ratification by the competent authority.
Article 4     A domestic issuer applying to the TWSE for accreditation as a qualified issuer of call (put) warrants shall conform to Article 3, paragraph 1 and Article 5, paragraph 2 of the Issuance Regulations.
    A foreign issuer applying to the TWSE for accreditation as a qualified issuer of call (put) warrants shall conform to Article 3, and Article 5, paragraphs 3 and 4, of the Issuance Regulations.
    The TWSE may withhold approval for an application made to it for accreditation as a qualified issuer of call (put) warrants upon discovering that the application fails to conform to the preceding two paragraphs or that any of the circumstances in the subparagraphs of Article 7 of the Issuance Regulations applies.
Article 5     (Deleted)
Article 6     Where the issuer entrusts another institution with hedging operations, the risk management institution shall have a net worth of at least NT$1 billion as stated in its financial report and shall have a credit rating that conforms to Article 5, paragraph 3, subparagraph 2 of the Issuance Regulations.
Article 7     Where the issuer or the risk-management institution is a foreign institution or the subsidiary of an ROC financial holding company, it may obtain a credit rating as a group holding company, and the holding company may provide an unconditional and irrevocable guaranty, however, the credit rating of the holding company must conform to Article 5, paragraph 3, subparagraph 2 of the Issuance Regulations.
Article 8     When any circumstance set forth in the subparagraphs below occurs after an issuer obtains qualification approval, its issuance of call (put) warrants shall be suspended, and resumed only after such circumstances are rectified. The issuance of any warrants already approved but not yet issued shall be suspended, and the suspension shall be reported to the competent authority; the validity of any call (put) warrants already issued shall not be affected:
  1. The issuer fails to conform to paragraph 1 or the latter part of paragraph 2, Article 3 of the Issuance Regulations;
  2. The issuer fails to conform to Article 5, paragraph 2 or 3 of the Issuance Regulations, or its latest financial report as having been reviewed by a CPA fails to conform to the above provisions;
  3. Any of the circumstances in Article 7, subparagraphs 3 to 10 of the Issuance Regulations applies to the issuer.
    If any of the events listed in the subparagraphs below occurs after an issuer has obtained qualification approval, the issuer shall be restricted from applying for issuance of call (put) warrants for 1 year. The issuance of warrants already approved but not yet issued shall be suspended, and the suspension shall be reported to the competent authority for recordation. However, the validity of call (put) warrants already issued shall not be affected:
  1. The issuer is ranked in Level 5 for the most recent year, or in Level 4 for the most recent 2 years, in the assessment conducted pursuant to the Operational Guidelines for Assessment of Securities Firms Risk Management System.
  2. The issuer has violated Article 17, paragraph 1 herein or provisions of the TWSE Operation Directions Governing Liquidity Providers of Call (Put) Warrants, and it has been sanctioned within the most recent year by the TWSE and the Taipei Exchange ("TPEx") by imposition of penalties in a cumulative amount of NT$300,000 or more or by restriction of application for issuance of call (put) warrants two times.
  3. The issuer has been restricted by the TWSE from applying for issuance of call (put) warrants because of an irregularity in the quotation system of its call (put) warrant liquidity provider in the current year, and it still has failed to take corrective action.
     Directions for handling irregularities in the quotation system of a call (put) warrant liquidity provider shall be separately prescribed by the TWSE.
     The TWSE may report an issuer in writing to the competent authority for recordation if the issuer fails to issue any call (put) warrants for 1 year or more, or if the issuer has been under suspension from call (put) warrants issuance pursuant to paragraph 1 for 1 year or more and still fails to take corrective action.
Article 8-1      In the case of a foreign issuer, after obtaining qualification from the competent authority as an issuer of call (put) warrants, the issuer shall each year provide a written report to the TWSE, with relevant documentation attached, within 3 days after receiving its credit rating from the credit rating institution, and shall do the same at any time during the intervening periods when there is a change in its credit rating.
Article 9     After the issuer receives approval as a qualified issuer of call (put) warrants and wishes to apply to the TWSE for listing of a planned call (put) warrants issue, the issuer shall apply to the TWSE with an Application for Listing of Call (Put) Warrants (Attachment) filled out in full and with the required documents attached. Following TWSE approval of the issuer's issuance plan, the TWSE will immediately issue a letter of approval, with a copy to the competent authority, provided that depending on the issuer's financial and business condition, the status of the underlying securities or the underlying index, the number of call (put) warrants already listed on the market with identical or similar types of underlying securities and their expiration dates and distributions, the TWSE may withhold approval, limit the number of warrants to be listed, or impose other conditions.
    For listed warrants, in the event that the outstanding issuance units reach 80 percent or more of the actual total number of issuance units, the issuer may apply to the TWSE for a follow-on issue of call (put) warrants. The application shall be made within 2 business days from the next business day following the date of the event's occurrence but at least 10 business days before the last trading day for the warrants. The term "actual total number of issuance units," as used above, means the number arrived at by adding the total number of issuance units of the initial issue and the number of issuance units of each subsequent follow-on issue together and then deducting the accumulated number of issuance units cancelled and exercised.
    After receiving a TWSE approval letter and submitting a copy to the competent authority, the issuer may entrust an underwriter with underwriting of the issue or it may sell the warrants itself, and shall provide a prospectus to the subscribers. But this provision shall not apply to a follow-on issuance of call (put) warrants.
    The guidelines for information to be published in public offering prospectuses will be adopted by the TWSE in accordance with Article 13 of the Issuance Regulations and shall take force upon ratification by the competent authority.
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 5 million to 50 million issuance units. The price per issuance unit shall be not less than NT$0.6. The issuer itself determines the number of shares, units, index points, or baskets thereof represented by one issuance unit. One index point corresponds to NT$1. In the case of a follow-on issue of call (put) warrants, the price per issuance unit shall be the closing price on the date of the application for follow-on issue, and the number of shares, units, index points, or basket thereof represented per issuance unit shall be the newest multiplier.
  2. Period of validity: Calculated inclusively from the date of listing, the period of validity shall be no less than 6 months and no more than 2 years; for issuance of callable bull contracts or callable bear contracts, the period of validity shall be no less than 3 months and no more than 2 years. If the period of validity is extended, the extension period shall be no less than 3 months and no more than 1 year, calculated inclusively from the next day following the original last trading day. In the case of a follow-on issue of call (put) warrants, the period of validity shall be calculated inclusively from the date of listing of the follow-on issue to the expiration date of the warrants.
  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, or 30 percent in the event of a follow-on issuance of call (put) warrants, 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:
      1. The total percentage of shares held by directors and supervisors under statutory shareholding ratio requirements.
      2. Already pledged securities.
      3. The number of centrally deposited shares mandatory for newly listed companies.
      4. Shares already repurchased under the Rules Governing Share Repurchase by TWSE Listed and GTSM Listed Companies and not yet cancelled.
      5. 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 (ETF) or futures ETF 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 ETF 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 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, or 30 percent in the event of a follow-on issuance of call (put) warrants, 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 ETF, futures ETF, or offshore ETF, 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. But this provision shall not apply to a follow-on issuance of call (put) warrants.
  5. For issues of index call (put) warrants, callable bull contracts and callable bear contracts, and extendable callable bull contracts and callable bear contracts, and for domestic call (put) warrants for which the underlying assets are foreign securities or foreign indexes, investors may not apply for exercise of such warrants until the maturity date. Warrants for which the underlying assets are foreign securities or foreign indexes may not be of the capped/knock-out type.
  6. The underlying settlement index of the index call (put) warrants shall be calculated based on the following methods:
    1. If the period of validity expires, it shall be calculated based on the simple arithmetic mean of the underlying index during the 30 minutes before market close. If the circumstance under Article 58-3, paragraph 5 of the TWSE Operating Rules exists, the calculation shall also incorporate the index from during the postponement period. For extendable callable bull contracts or extendable callable bear contracts, the settlement basis is adjusted based on the return rate of the underlying total return index on the warrant expiration date, through the calculation of "closing index of the underlying index on the business day preceding the date of warrant issuance × return rate." The aforementioned return rate shall be calculated as "underlying total return index on the warrant expiration date ÷ underlying total return index on the business day preceding the date of warrant issuance." If it is an extension period that expires, for the aforementioned business day preceding the date of warrant issuance, the business day preceding the extension period shall be substituted.
    2. If the closing index of the underlying index reaches the cap/knock-out index level and expires before the maturity date:
      1. For capped call warrants or capped put warrants, it shall be calculated based on the closing index of the underlying index on the last trading day of the warrants.
      2. For callable bull contracts or callable bear contracts, it shall be calculated based on the simple arithmetic mean of the underlying index on the business day following the last trading day of the warrants.
      3. For extendable callable bull contracts or extendable callable bear contracts, the settlement basis is adjusted based on the return rate of the underlying total return index on the business day following the last trading day of such warrant, through the calculation of "closing index of the underlying index on the business day preceding the date of warrant issuance × return rate." The aforementioned return rate shall be calculated as "underlying total return index on the business day following the last trading day of such warrant ÷ underlying total return index on the business day preceding the date of warrant issuance." In the event of early expiration before the maturity date of an extension period, for the aforementioned business day preceding the date of warrant issuance, the business day preceding the extension period shall be substituted.
  7. 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 attested 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. In the case of an issue of extendable callable bull contracts or extendable callable bear contracts, the type of warrant shall be annotated with the wording "extendable". In the case of a follow-on issue of call (put) warrants, the total number of units already issued shall additionally be specified.
    4. Terms of issuance (including issuance price, strike price or strike index, exercise period, and number of shares, beneficial units, depository receipt units, or index points represented per issuance unit). On the last trading day for extendable callable bull contracts, or extendable callable bear contracts, when the knock-out price or index of an extendable callable bull contract reaches no more than 80 percent of the closing price of the underlying security or the closing index of the underlying index, or when the knock-out price or index of an extendable callable bear contract reaches no less than 120 percent of the closing price of the underlying security or the closing index of the underlying index, the issuer shall extend the period of validity of such contract. In the case of a follow-on issue of call (put) warrants, the strike price or strike index is the newest strike price or strike index for the warrants.
    5. The method by which the issuance price is calculated, including the price of the underlying security or underlying index, the strike price or strike 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." But this provision shall not apply to a follow-on issue of call (put) warrants.
    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:
      1. For a capped call warrant or capped put warrant:
        1. "the capped call (or put) price or index" and "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" shall be printed in conspicuous typeface.
        2. 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.
      2. For a callable bull contract or callable bear contract, or a callable bull/bear contract whose period of validity may be extended:
        1. "the knock-out price or index level" and "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 underlying settlement 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 underlying settlement index shall be calculated in accordance with Article 10, subparagraph 6 of the TWSE Rules Governing Review of Call (Put) Warrant Listings" shall be printed in conspicuous typeface.
        2. 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. For callable bull/bear contracts whose period of validity may be extended, the bull contract or index knock-out price or index level shall be set at no more than 70 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 130 percent of the closing price of the underlying securities or the closing index of the underlying index.
        3. The issuer shall also set reset conditions. Any adjustment from resetting of the bull/bear contract strike price and knock-out price, or of 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. For callable bull/bear contracts whose period of validity may be extended, the issuer shall specify the matters to be conducted under Article 7, subparagraph 3 of the TWSE Procedures for Review of Call (Put) Warrant Listings.
      3. In the case of a follow-on issue of call (put) warrants, the cap/knock-out price or index is the newest cap/knock-out price or index for the warrants.
    7. (deleted)
    8. Items that shall be included in the issuance plan in accordance with Article 8 of the TWSE 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 ETF, the handling of related matters by the futures trust enterprise in relation to the underlying futures ETF, or by the offshore fund management institution or its designated institution in relation to the underlying offshore ETF. 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 ETF, or the futures trust enterprise of the underlying futures ETF, undergoes dissolution or bankruptcy, or its approval is revoked; or when the beneficial certificates, fund shares, or investment units of the underlying offshore ETF are delisted by public announcement of the TWSE; 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. Definition of exercise value upon expiration of the period of validity:
      1. For call (put) 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 or the underlying settlement index during the 60 minutes before market close is higher (lower) than the strike price or strike index of the call (put) warrant. If there is no trade price for the underlying securities during the 60 minutes before market close, then the calculation shall be based on the most recent trade price. If the circumstance under Article 58-3, paragraph 5 of the TWSE Operating Rules exists, the calculation shall also incorporate the trade price or index from during the postponement period. The aforementioned underlying settlement index shall be calculated in accordance with the preceding subparagraph.
      2. For call (put) 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 (lower) than the strike price or strike index of the call (put) warrant.
      3. 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 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 or the underlying settlement index during the 60 minutes prior to market close. If there is no trade price for the underlying securities during the 60 minutes prior to market close, then the calculation shall be based on the most recent trade price. If the circumstance under Article 58-3, paragraph 5 of the TWSE Operating Rules exists, the calculation shall also incorporate the trade price or index from during the postponement period. The aforementioned underlying settlement index shall be calculated in accordance with the preceding subparagraph. 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.
  8. 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, attested or audited by a certified public accountant, shall show no losses, or shall show no accumulated deficit if losses exist.
    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 shall reach 20 percent or more.
    Conformance of underlying securities with the standards of the preceding two 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 of paragraph 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 attested 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 ETFs, futures ETFs, offshore ETFs, TWSE Capitalization-Weighted Stock Index, or sector 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, subparagraph 3 of the Issuance Regulations and may not include TAIEX and related financial instruments as created by domestic or foreign institutions, unless such index is one created by the TWSE or TPEx jointly with a foreign institution not with Taiwan stock as the major component. 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 12     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 percent or more of the issuer's shares, or any of the above hold 10 percent 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 percent or more in the issuing company of the underlying security or any of the issuing companies of the basket of underlying listed securities. But this provision shall not apply to a follow-on issue of call (put) warrants.
  5. When the combined total of the issue price of the currently listed, GTSM listed, and GTSM 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. For a domestic issuer:
      1. For an issuer assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems and given a level 1 rating, when its combined total exceeds 70 percent of its net eligible regulatory capital.
      2. For an issuer assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems and given a level 2 rating, when its combined total exceeds 60 percent of its net eligible regulatory capital.
      3. For an issuer assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems and given a level 3 rating, when its combined total exceeds 40 percent of its net eligible regulatory capital.
      4. For an issuer assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems and given a level 4 rating, when its combined total exceeds 30 percent of its net eligible regulatory capital.
      5. For an issuer that has not been assessed under the Operation Directions for Securities Firm Risk Management Assessment Systems, when its combined total exceeds 40 percent of its net eligible regulatory capital.
    2. A foreign issuer's combined total exceeds 60 percent 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.
    The aforesaid eligible net regulatory capital of a foreign issuer is calculated by (the allocated operating capital in the most recent financial reports of its branch office(s) within the Republic of China ("ROC") or branch office(s) established within the ROC by its wholly owned subsidiaries) x (net available funds multiplier).
  6. When a foreign issuer applies for issuing call (put) warrants, the dollar amount of the hedging funds required to be remitted to the ROC (i.e. the remittance amount less the amount not required for the current hedging) or the collateral supplied to provide a guarantee of performance, in a form such as certificates of deposit or government bonds pledged to the TWSE or a performance guaranty agreement issued by a financial institution, is less than 20 percent of the market value of the underlying securities represented by the non-matured listed or GTSM 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.
  7. There are irregular fluctuations in the price of the underlying security within the 3 months prior to the date of application, and a penalty has been imposed in accordance with the TWSE Rules Governing Implementation of the Stock Market Monitoring System, or the underlying security has been the subject of a notice of attention by the TWSE on 2 of the preceding 6 business days.
  8. 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.
  9. On the day of application, any financial or business indicator of the issuer of the underlying securities is marked with a warning in the Key Financials Section of the TWSE Market Observation Post System (MOPS), provided that this does not apply in the case of a follow-on issue of call (put) warrants.
Article 13     In the case of a call (put) warrant listing where the issuer has obtained approval documents from the TWSE, the issuer shall sign a listing agreement with the TWSE, and shall announce market listing of the warrants after the listing agreement has taken effect.
    After the listing agreement referred to in the preceding paragraph has taken effect, the TWSE may, under the following conditions, void the agreement, and report to the competent authority for recordation:
  1. Where, prior to market listing, there is a discovery by the the TWSE of any of the circumstances under the subparagraphs of Article 7 of the Issuance Regulations.
  2. The issuer applies to void the agreement.
    For call (put) warrants already issued pursuant to the preceding paragraph, the issuer shall return the price with statutory interest included within 10 days from receipt of TWSE notice of approval for voidance of the listing agreement.
Article 14     Issuers shall apply to the TWSE to open a segregated account at the time of their initial issue of domestic call (put) warrants and offshore call (put) warrants for which the underlying security is a domestic security. Where the issuer will be self-hedging or partially self-hedging, the account shall be used exclusively for establishing a hedge position after issuance of the warrants and for future performance of obligations when the investors exercise the warrants. Where the issuer entrusts another institution with hedging, the account shall be used for performance of obligations when the investors exercise the warrants, and the risk management institution is also required to open a segregated account with the issuer for the purpose of establishing a hedge position after issuance of the warrants.
    The segregated accounts of issuers referred to in the preceding paragraph shall without exception be opened under securities dealer accounts. The account number of the aforesaid account of a domestic issuer shall be 888888-8, provided a foreign issuer applying to issue warrants through a branch office established in the territory of the ROC by a subsidiary which is either directly or indirectly wholly-owned shall open such account in the securities brokerage department of that branch office; the segregated hedge account opened with the issuer by the risk management institution shall be opened in the securities brokerage department. The above-mentioned accounts shall be reported to the TWSE in advance, and may only be used for trading in financial hedging instruments for hedging purpose and in call (put) warrants issued by the issuer itself. In addition, the securities in the segregated hedging account without exception may not be pledged.
Article 17     Trading conducted by the dealing department of the issuer for its own account and hedge trading conducted by it in connection with call (put) warrants issued by it may not affect the fairness of market prices or harm shareholder equity, and an effective internal control system shall be established and executed in connection with such trading.
    An issuer of call (put) warrants shall issue a letter of report to the TWSE by the 5th of each month, providing information on purchases and sales of the underlying securities of its issued warrants by its dealing department for the preceding month (including the trading day, the name of the security and the volume of the transaction).
    The provisions of the preceding two paragraphs will apply mutatis mutandis to the risk management institutions engaged by issuers using outsourced risk management, and, in the event of a foreign issuer, to the dealing department of its branch office within ROC territory or the dealing department of a branch office established within ROC territory by a directly or indirectly wholly-owned subsidiary of such a foreign institution.
    Except where regulations provide otherwise, during the duration of the call (put) warrants, there may be no inter-account transfers of the warrants' underlying security between the issuer's dealing department and positions in the security held in the issuer's hedge accounts.
    The "dealing department" referred to in the preceding four paragraphs includes any unit or trading account that is equivalent to a dealing department.
Article 26     Where the TWSE issues a letter to an issuer requiring attention and rectification, imposes a breach penalty on an issuer, restrains an issuer from applying for issuing warrants for a prescribed period of time, or suspends issuance, the TWSE shall submit a copy to the competent authority. An issuer subject to suspension may not resume its issuance until it completes rectification and obtains the written approval of the TWSE with a copy submitted to the competent authority.
    Where a breach penalty is imposed by the TWSE, the issuer shall remit the payment to the Finance Department of the TWSE within 5 days from the date on which it receives notification thereof.