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Taiwan Stock Exchange Corporation Rules Governing Trading of Call (Put) Warrants(2018.02.14) |
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Article 4-1
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Where the call (put) warrants for which the underlying security is a domestic single stock are subject by law to maximum limits on the ratio of investment by foreigner nationals and overseas Chinese, the exercise of such call (put) warrants invested by foreigner nationals or overseas Chinese shall be limited to cash settlement. The same shall apply where any one of the underlying securities of basket call (put) warrants are subject to the above-mentioned legal restrictions.
The exercise of index call (put) warrants, of futures call (put) warrants, of call (put) warrants invested in by a mainland area investor, and of call (put) warrants for which the underlyings are foreign securities, is limited to cash settlement.
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Article 7
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Daily fluctuation limits on call (put) warrants shall be calculated in the following manner based upon the class of the underlying securities:
- Limits on call (put) warrants for which the underlying is a domestic single stock, an exchange-traded securities investment trust fund (ETF), or an exchange-traded futures trust fund (futures ETF) announced by the TWSE shall be calculated as follows:
- For call warrants
Limit-up price = Auction reference price at market opening for the given day + (Limit-up price of the underlying security for the given day -Auction reference price at market opening for the underlying security for the given day) × Exercise ratio
Limit-down price = Auction reference price at market opening for the given day - (Auction reference price at market opening for the underlying security for the given day - Limit-down price of the underlying security for the given day) × Exercise ratio
- For put warrants
Limit-up price = Auction reference price at market opening for the given day + (Auction reference price at market opening for the underlying security for the given day - Limit-down price of the underlying security for the given day) × Exercise ratio
Limit-down price = Auction reference price at market opening for the given day - (Limit-up price of the underlying security for the given day - Auction reference price at market opening for the underlying security for the given day) × Exercise ratio
- Fluctuation limits on call (put) basket warrants shall be calculated for each underlying security within the basket using the following formulas: (1) (Limit-up price of each underlying security in the basket for the given day -Auction reference price at market opening for each underlying security for the given day) × Sum of exercise ratios for each underlying security in the basket; and (2) (Auction reference price at market opening for each underlying security for the given day - Limit-down price of each underlying security for the given day) × Sum of the exercise ratios for each underlying security in the basket. The larger of these two figures shall be plugged into the formulas in the preceding sub-paragraph to calculate the daily fluctuation limits.
- Limits on index call (put) warrants for which the underlying is an index as announced by the TWSE shall be calculated using one of the following two formulas:
- Limit-up price for call (put) warrants = Auction reference price at market opening for the given day + (Closing index of the underlying index on the previous day × corresponding monetary value per index point × multiplier × 10%).
- Limit-down price for call (put) warrants = Auction reference price at market opening for the given day － (Closing index of the underlying index on the previous day × corresponding monetary value per index point × multiplier × 10%).
- Limits on futures call (put) warrants for which the underlying is futures shall be calculated using one of the following two formulas:
- Limit-up price for call (put) warrants = Auction reference price at market opening for the given day + (Daily settlement price of the underlying futures on the previous day × corresponding monetary value per point × multiplier × maximum price increase for the underlying futures).
- Limit-down price for call (put) warrants = Auction reference price at market opening for the given day － (Daily settlement price of the underlying futures on the previous day × corresponding monetary value per point × multiplier × maximum price decrease for the underlying futures).
- The range of price increase and decrease of the underlying futures as mentioned above shall be determined based on the trading contract specifications. In case of three-phase fluctuations, the highest limit shall be used in the calculation.
- No price fluctuation limit is imposed on call (put) warrants for which the underlying is an ETF with foreign component securities, a futures ETF that tracks a foreign futures index, an offshore ETF, a foreign security, or a foreign index.
The provisions of Article 58-3, paragraph 2, subparagraphs 1 and 2 of the TWSE Operating Rules shall apply mutatis mutandis to the "auction reference price at market opening for the given day" referred to in the preceding paragraph. With respect to an initial issue of call (put) warrants, however, the reference price on the first day of listing shall be determined according to Article 6 and by the principles below; if it is a follow-on issue of call (put) warrants, the reference price on the first day of listing shall be the auction reference price at market opening for the given day:
- For the call (put) warrants for which the underlying asset is a domestic single stock, an ETF, and a futures ETF as announced by the TWSE:
- For call warrants
Reference price on the first day of listing = Issue price of the call warrant × (Auction reference price at market opening for the underlying security on the day of listing of the call warrants ÷ Auction reference price at market opening for the underlying security on the day of issue of the call warrants) × (Exercise ratio for the call warrant on the day of its listing ÷ Exercise ratio for the call warrant on the day of its issue).
- For put warrants
Reference price on the first day of listing = Issue price of the put warrant × (Auction reference price at market opening for the underlying security on the day of issue of the put warrants ÷ Auction reference price at market opening for the underlying security on the day of listing of the put warrants) × (Exercise ratio for the put warrant on the day of its issue ÷ Exercise ratio for the put warrant on the day of its listing).
- For the call (put) warrants for which the underlying asset is an index as announced by the TWSE:
- For call warrants:
Reference price on the first day of listing = Call warrant issue price × (Closing index of the underlying index on the day before the call warrants are listed ÷ Closing index of the underlying index on the day before the call warrants were issued) × (Multiplier on the listing date of the call warrants ÷ Multiplier on the issuance date of the call warrants).
- For put warrants:
Reference price on the first day of listing = Put warrant issue price × (Closing index of the underlying index on the day before the put warrants were issued ÷ Closing index of the underlying index on the day before the put warrants are listed) × (Multiplier on the issuance date of the put warrants ÷ Multiplier on the listing date of the put warrants).
- For the call (put) warrants for which the underlying asset is futures:
- For call warrants:
Reference price on the first day of listing = Call warrant issue price × (Daily settlement price of the underlying futures on the second day before the call warrants are listed ÷ Daily settlement price of the underlying futures on the second day before the call warrants were issued) × (Multiplier on the listing date of the call warrants ÷ Multiplier on the issuance date of the call warrants).
- For put warrants:
Reference price on the first day of listing = Put warrant issue price × (Daily settlement price of the underlying futures on the second day before the put warrants were issued ÷ Daily settlement price of the underlying futures on the second day before the put warrants are listed) × (Multiplier on the issuance date of the put warrants ÷ Multiplier on the listing date of the put warrants).
- The reference price for a callable bull contract or callable bear contract on the first day of listing is as follows:
- Where a security is the underlying: the difference between the reset adjusted strike price and the underlying security's auction reference price at market opening for the given day of listing of the contract × multiplier + funding cost.
- Where an index is the underlying: the difference between the reset adjusted strike point and the closing index of the underlying index for the given day preceding the day of listing of the contract × multiplier + funding cost.
- Where futures is the underlying: the difference between the reset adjusted strike point and the daily settlement price of the underlying futures for the second day preceding the day of listing of the contract × multiplier + funding cost.
- The funding cost as referred to above shall be calculated pursuant to Article 11, subparagraph 8, item 5 of the TWSE Rules Governing Review of Call (Put) Warrant Listings.
- For a call (put) warrant for which the underlying is a foreign security or a foreign index, its reference price on the first day of exchange listing is the issue price.
The "auction reference price at market opening for the underlying securities for the given day" as referred to in paragraphs 1 and 2 shall be determined pursuant to Article 58-3 of the TWSE Operating Rules; and the "daily settlement price for the underlying futures" shall be determined pursuant to Article 11, subparagraph 8, item 7 of the TWSE Rules Governing Review of Call (Put) Warrant Listings.
The limit-up and limit-down prices referred to in paragraph 1 shall without exception be calculated in positive numbers. In the event of any negative number, the calculation shall be based on the minimum tick size as set forth in Article 6.
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Article 14
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When a principal wishes to exercise a warrant right, it shall submit an application via its securities firm to the TWSE. After the TWSE accepts the application, it will request that the issuer honor the exercise of the warrant. In such cases, or where, upon expiration of a call (put) warrant that is to be settled in cash, the TWSE has calculated and deemed that there is exercise value in the warrant and has notified the securities firm to exercise the warrant on behalf of the principal, fees shall be collected according to the provisions of the preceding article. If the principal applies to exercise the warrant by delivery of shares, the formula shall be -- "Strike price of the call (put) warrant x number of underlying shares". If the principal applies to exercise the warrant by cash settlement, or for automatic cash settlement if in the money at expiration, the formula for index call (put) warrant shall be -- "The difference between the strike point and settlement index × corresponding monetary value per point × number of units of warrants × exercise ratio"; the formula for futures call (put) warrant shall be -- "The difference between the strike point and settlement price × corresponding monetary value per point × number of units of warrants × exercise ratio"; and the formula for others shall be -- "The difference between the strike price and the settlement price x number of underlying shares".
When a liquidity provider of call (put) warrants hired to provide liquidity buys back any warrant on a centralized securities exchange market, it shall deliver such warrants in full to the centralized custody account which it previously notified the TWSE of in writing. The exercise of warrants held in such an account may not be requested.
The term "exercise value" in paragraph 1 means the positive difference between the strike price or point of the underlying of a call (put) warrant and the settlement price or the index at settlement of the call (put) warrant at its expiration date, as calculated under Article 11, subparagraph 9, item 16 of the Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings.
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