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GreTai Securities Market Rules Governing Over-the-Counter Trading of Financial Derivatives by Securities Firms(2006.09.25) |
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Article 4-1
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A securities firm engaging in financial derivatives trading business whose trading counterparty is a qualified institutional investor is not subject to the provisions of Article 11, Article 26, paragraph 1, Article 26-1, Article 26-2, and Article 43 of these Rules.
"Qualified institutional investor" as used in the preceding paragraph shall mean domestic and foreign banks, insurance companies, bills finance companies, securities firms, fund management companies, government investment institutions, government funds, pension funds, mutual funds, unit trusts, securities investment trust companies, securities investment consulting companies, trust enterprises, and futures commission merchants.
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Article 42
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A securities firm engaging in business related to Taiwan equity may not engage in financial derivatives trades with any of the following related parties:
1. A director, supervisor, or officer of the securities firm, or a shareholder that directly or indirectly holds 10 percent or more of its total shares.
2. A spouse, minor child, or nominee of any of the persons referred to in subparagraph 1.
3. Any investee company in which 10 percent or more of total shares are directly or indirectly held by any person referred to in the preceding two subparagraphs.
4. The issuer of the stocks underlying conversion securities, linked securities, or equity options, or any person related to the issuer as set out in the preceding subparagraph.
Before a securities firm engages in a financial derivatives trade referred to in the preceding paragraph with a trading counterparty, the counterparty shall sign an undertaking stating that it is not a related party as set out in paragraph 1.
A securities firm may trading with a qualified institutional investor as defined in Article 4-1 shall not be subject to the restrictions of paragraph 1, subparagraphs 1 through 3, and when engaging in hedging transactions therewith shall not be subject to the restrictions of any subparagraph under paragraph 1. The terms accorded thereto, however, may not be more favorable than those accorded to others in the same class of counterparties, and may be undertaken only after passage of a resolution by three-fourths or more of the company directors in attendance at a director's meeting with a two-thirds quorum.
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Article 43
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A securities firm that undertakes a financial derivatives transaction with a trading counterparty shall provide the counterparty with a risk disclosure statement, and in that statement, or in individual trade confirmations, it shall indicate in boldface or other prominent typeface the maximum possible risk or principal protection percentage, along with a description of the major risks involved, such as liquidity risk, foreign exchange risk, interest rate risk, tax risk, and cancellation risk.
The securities firm is exempt from the requirement to provide a risk disclosure statement if the trading counterparty of the preceding paragraph is an institutional juristic person such as a banking, insurance, securities, or offshore investment institution.
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