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Amended Article

Title：

Rules Governing the Proprietary Trading of Foreign Bonds by Securities Firms  CH

Amended Date： 2022.06.08 
Article Content Content Search Article No. Search Legal Basis Amended Article Legislative History Chinese
Article 4     For the purposes of these Rules, the following terms shall have the following meanings:
  1. "Foreign bonds": means any foreign currency denominated bonds, mortgage-backed securities, or collateralized debt obligations issued outside the Republic of China by a local or a foreign issuer.
  2. "Derivative-based hedging": means any transactions involving financial derivatives that are engaged in by securities firms for hedging purposes, as needed in connection with proprietary trading of foreign bonds.
  3. "Professional Investor": means a professional investor as defined in Article 3, paragraph 3 of the Regulations Governing Offshore Structured Products.
  4. "Non-professional investor": means an investor other than a professional investor as defined in the preceding subparagraph.
  5. "Professional institutional investor": means a professional institutional investor as defined in Article 3, paragraph 3 of the Regulations Governing Offshore Structured Products.
  6. "High net worth juristic person investor": means a high net worth juristic person investor as defined in Article 3, paragraph 3 of the Regulations Governing Offshore Structured Products.
  7. "Professional investor juristic person or fund": means a professional investor juristic person or fund as defined in Article 3, paragraph 3 of the Regulations Governing Offshore Structured Products.
  8. "High-asset customer ": means a high-asset customer as defined in Article 3-1 of the Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities.
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Article 6-4     When securities firms trade mortgage-backed securities or collateralized debt obligations over the counter, the counterparties of such transactions shall be limited to professional institutional investors and high net worth juristic person investors. The subject matter of such trades shall conform to the provisions regarding the credit ratings of foreign securitized products for which securities firms may accept brokerage trading orders from professional investors as set out in Article 6 of the Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities.
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Article 7     Securities firms may conduct proprietary trading of foreign bonds outright or under repurchase or reverse repurchase agreements.
    When securities firms buy or sell foreign bonds over the counter, the counterparties of such transactions shall be limited to professional investors. However, this restriction does not apply to repo transactions.
    When a securities firm engages in foreign bond repo transactions with non-professional investors, the credit rating of the subject bonds shall comply with the provisions of Attachment 1, and the subject bonds also shall meet the following conditions:
  1. The bonds may not be structured bonds, bonds with equity characteristics, subordinated bonds, mortgage-backed securities, or collateralized debt obligations.
  2. The interest shall be calculated by a fixed rate (which may be zero interest) or a positive floating rate.
Article 11     A securities firm that will conduct proprietary trading of foreign bonds and engage in derivative-based hedging shall adopt a set of handling procedures in accordance with Article 31-2 of the Regulations Governing Securities Firms.
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Article 15     A securities firm conducting proprietary trading of foreign bonds and engaging in derivative-based hedging shall conduct trading and perform its settlement obligations in accordance with the local laws or market practices.