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GreTai Securities Market Regulations Governing Over-the-Counter Trading of Financial Derivatives by Securities Firms(2013.09.25) |
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Article 3
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"Competent authority," as used in these Regulations, means the Financial Supervisory Commission.
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Article 16-1
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A securities firm shall handle customer complaint cases in a fair, reasonable, and effective manner, with the goal of protecting customer rights and interests.
A securities firm that enters into financial derivatives trades with ordinary customers shall adopt procedures for the handling of customer complaints, which shall include the following:
- Establishment of a channel for customer opinions and customer complaints.
- Adoption of appropriate methods and procedures for investigation of complaints.
- Establishment of a unit or personnel with responsibility and authority for investigations.
- Establishment of methods and procedures for responding to complaints, and procedures for follow-up management. The methods and procedures must conform to the requirements of the Financial Consumer Protection Act.
When there is a cumulative total of five unresolved customer complaints under the preceding paragraph, the general manager shall convene an internal meeting to propose methods of resolving the cases and produce a concrete plan for reducing the number of customer complaints. A record shall also be made at the meeting of related matters, the status of implementation, and an assessment of effectiveness, which shall be reported to the board of directors. Within 2 weeks after reporting to the board, the record shall be submitted by letter to the GTSM.
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Article 41
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A securities firm undertaking structured instrument transactions shall allocate 3 percent of the total outstanding balance of its structured instrument contracts each month and pay that sum to the GTSM as a performance bond. A securities firm whose regulatory capital adequacy ratio is below 250 percent, however, shall pay 5 percent of the above balance to the GTSM as a performance bond.
A securities firm may pay the performance bond of the preceding paragraph in cash, bank certificates of deposit, or central government bonds, and shall supplement the bond amount or obtain a refund from the GTSM on or before the tenth of each month in accordance with monthly changes in the outstanding balance of the structured instrument and its regulatory capital adequacy ratio.
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Article 45
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Except where law or regulation provides otherwise, the two parties may stipulate the manner in which equity derivatives linked to Taiwan stocks are to be exercised, either by settlement in cash or by physical delivery of the linked underlying securities by the securities firm or another institution approved by the competent authority to perform physical settlement; the provisions of Article 33, paragraph 2 shall apply mutatis mutandis. For equity derivatives linked to foreign equity products, the two parties may stipulate settlement in cash settlement or by physical delivery according to the practices of the relevant market.
When the underlying of the equity derivatives of the preceding paragraph is a stock index, the method of exercise shall be settlement in cash.
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Article 57
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Sales and related managerial personnel engaged in financial derivatives products business shall be qualified as securities firm associated persons, and shall also possess one of the following qualifications:
- Graduation from a finance or finance-related department at the university level or higher, along with completion of six credit hours in courses in financial derivatives and risk management or participation in 20 or more hours of course work in financial derivatives and risk management at a foreign or domestic financial training institute.
- The qualifications required for senior agent of a securities firm under Article 5 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms.
- Participation in 30 hours or more of courses in financial derivatives and risk management offered by a foreign or domestic financial training institute.
- Holding a financial derivatives-related license.
- A half year or more of actual experience in financial derivatives business at a foreign or domestic financial institution.
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Sales and managerial personnel under the preceding paragraph that handle financial derivatives products involving foreign exchange must also possess the qualifications required under Article 12 of the Regulations Governing the Foreign Exchange Business of Banking Enterprises.
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Article 61
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A securities firm that undertakes OTC financial derivatives trading shall calculate the market risk equivalent and counterparty risk equivalent for its trading positions as prescribed in the Regulations Governing Securities Firms in order to reflect those components in the calculation of its regulatory capital adequacy ratio.
In accordance with the calculation of market risk equivalents for financial derivatives positions under relevant provisions of the Regulations Governing Securities Firms, the amount traded by a securities firm engaging in financial derivatives trading may not exceed 30 percent of its net eligible regulatory capital.
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Article 62
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When the regulatory capital adequacy ratio of a securities firm that has obtained qualification to engage in OTC trading of financial derivatives falls below 200 percent, it may not undertake any new trades even if its operational risk equivalent does not exceed the aggregate total amount of new trades; new trades may not be undertaken until its regulatory capital adequacy ratio reaches 200 percent.
The GTSM may require the securities firm to submit relevant documents and undergo a special audit, and when necessary may place a limit on the aggregate total amount of trades undertaken by the firm.
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Article 67
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When any of the following circumstances applies to a securities firm, the GTSM may suspend or terminate its financial derivatives trading, provided that such action shall not affect the validity of an already-transacted derivatives product:
- Imposition of a penalty pursuant to subparagraph 2 of the preceding article three or more times during the preceding half-year.
- Failure to pay a penalty imposed pursuant to subparagraph 2 of the preceding article.
- Noncompliance with the conditions of Article 5, paragraph 2, subparagraph 1 or 2.
- The head office of a foreign securities firm fails to meet the standards under Article 10, paragraph 1, subparagraphs 1 or 2, or businesses operated by the subsidiary of a foreign securities firm or by its branch unit in ROC territory fail to meet the standards under Article 10, paragraph 1, subparagraph 1.
- The regulatory capital adequacy ratio of the securities firm has remained below 200 percent for 3 consecutive months.
- Receipt of a sanction from the competent authority under Article 66, subparagraph 2 of the Securities and Exchange Act due to financial derivatives business.
- Violation of Article 51 or Article 52.
- A violation of these Regulations or of related GTSM Regulations that has a material effect on the rights and interests of investors or orderly trading in the market.
- A material instance of inability to perform on a financial derivatives trade.
- Assessment, in accordance with the Directions for Risk Management Assessment Systems of Securities Firms, finding that the securities firm was Grade 5 during the most recent period or Grade 4 during the two most recent periods, or failure to conduct an assessment.
- The securities firm has failed to engage in financial derivative product trading business for 1 year after becoming qualified to engage in such business.
When a securities firm's qualification for trading of financial derivatives has been suspended or terminated due to circumstances under any subparagraph of the preceding paragraph, upon the extinguishment of the cause and in the absence of a cause under any other subparagraph of that paragraph, the securities firm may apply for restoration of its qualification by submitting relevant evidentiary documentation. The GTSM may restore the firm's qualification after performing a verification review and reporting to and receiving the consent of the competent authority.
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