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Article 3
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For the purposes of these Directions, "underlying index" refers to the index tracked, simulated, or replicated by an ETF that an issuer applies to have listed and traded on the TWSE.
The compiler of the underlying index shall meet all the following qualifications:
- Has five years or more experience in index compilation, and the ability to establish and review index compilation rules, and to maintain or update on a daily basis the files for the components of the index. If the index compiler is a securities firm, bank, or an interested party of the issuer, the compiler must establish an internal firewall system for the index compilation rules, file maintenance, and related operations.
- Has the ability to calculate intraday real-time index value, or enter into contracts with market information suppliers to calculate index value.
- Has the ability to transmit the intraday real-time index value to make it known throughout the market, or enters into contracts with two or more market information suppliers for the transmission of the index value.
The components of the underlying index shall meet all the following qualifications:
- Meet one or more of the following qualifications:
- Listed for trading on the TWSE.
- Listed for trading on the GreTai Securities Market.
- Listed and traded on a foreign centralized securities market or over-the-counter market approved by the competent authority, and compliant with regulations regarding the types and scope of foreign securities invested by the securities investment trust fund.
- Listed for trading on the Taiwan Futures Exchange.
- Being spot commodities that are traded in futures trading or are related to futures, are traded on a foreign futures exchange or approved by the competent authority, and furthermore comply with the regulations governing the scope of utilization of futures trust funds.
- Being other instruments approved by the competent authority.
- The components of the underlying index shall have the following properties:
- The components of the index shall be sufficiently dispersed; the component accounting for the highest share of market capitalization of the index may not exceed 30 percent of the total market capitalization of the index, and the cumulative portion of the top five component securities may not exceed 65 percent of the index of the total market capitalization of the index. This requirement, however, does not apply to a fund investment for which the characteristics of the underlying index meet the conditions set forth in Article 10-1, paragraph 3, subparagraph 3 of the Regulations Governing Futures Trust Funds.
- The components of the index shall have a definite degree of liquidity. The TWSE may set required liquidity standards depending on the characteristics of the components of the index.
- If the components of the index include both stocks and bonds, the term "balanced" shall be indicated in the index name. The index compilation rules shall specify a fixed allocation ratio of stocks and bonds, or establish benchmark conditions and the applicable stock and bond allocation ratios under each benchmark condition.
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Article 6
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If the underlying index of the ETF under application for listing is compiled by the TWSE or Taiwan Index Plus Corporation, a wholly owned company of the TWSE solely, or jointly with other institutions, the issuer shall submit the following documentation to the TWSE for recordation before applying for or filing the offering of the fund:
- Profiles of ETF managers and the product development team.
- Introduction of and licensing agreement with respect to the underlying index.
- Planning structure.
- Initial minimum asset scale.
- List of participating securities firms.
- Proposed ETF listing schedule.
- ETF product design and subscription and redemption procedures.
- Fund investment portfolio management (including an outline on how to track index performance in fund operation, using methods such as full replication, optimization, stratified sampling, or otherwise, and the simulated index of the fund investment).
- Marketing and promotion plans.
The TWSE may, subject to the circumstances, request the issuer to provide supplementary information and explanations in connection with the documentation listed in the preceding paragraph.
The other institutions that compile the index jointly with Taiwan Index Plus Corporation, a wholly owned company of the TWSE, as mentioned in paragraph 1, shall meet the qualification requirements in Article 3, paragraph 2.
An issuer shall apply for or file the offering of the ETF within six months of the date of the TWSE approval letter for recordation. Where there is good cause for applying prior to the expiration of the time limit for an extension, the time limit may be extended for six months, subject to the consent of the TWSE. Such extension is granted once only and shall be notified to the competent authority.
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