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Article NO. Content

Title:

Taiwan Stock Exchange Corporation Rules Governing Review of Call (Put) Warrant Listings  CH

Amended Date: 2019.05.03 
Categories: Primary Market > Review
Article 11     An application for TWSE listing approval for an issue of call (put) warrants shall conform to each of the following conditions:
  1. The issue shall comprise 5 million to 50 million issuance units. The price per issuance unit shall be not less than NT$0.6. The issuer itself determines the number of shares, units, index points, futures points or baskets thereof represented by one issuance unit. One index point or one futures point corresponds to NT$1. In the case of a follow-on issue of call (put) warrants, the price per issuance unit shall be the closing price on the date of the application for follow-on issue, and the number of shares, units, index points, futures points or basket thereof represented per issuance unit shall be the newest multiplier.
  2. Period of validity:
    1. Calculated inclusively from the date of listing, the period of validity shall be no less than 6 months and no more than 2 years;
    2. For issuance of call (put) warrants with futures as the underlying instrument (hereinafter "Futures Call (Put) Warrants"), callable bull contracts or callable bear contracts, the period of validity shall be no less than 3 months and no more than 2 years. If the period of validity is extended, the extension period shall be no less than 3 months and no more than 1 year, calculated inclusively from the next day following the original last trading day.
    3. In the case of a follow-on issue of call (put) warrants, the period of validity shall be calculated inclusively from the date of listing of the follow-on issue to the expiration date of the warrants.
  3. Restriction on total issuance volume of the underlying represented by a warrant:
    1. When the underlying instrument is a domestic stock, the total number of shares of the underlying security represented by the domestic warrant issuance units of the call (put) warrants and the shares of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 22 percent, or 30 percent in the event of a follow-on issuance of call (put) warrants, of the total number of outstanding shares of the domestic issuing company after deduction of each of the following types of shareholdings. Where the issuer and any of its overseas subsidiaries (whose warrant issuing operations are guaranteed or secured by the mother company) issue offshore call (put) warrants for which the underlying instrument is a domestic stock, the total number of shares of the underlying security represented by the issuance units of the offshore call (put) warrants, combined with the number of the same underlying securities represented by other existing call (put) warrants issued overseas, may not exceed three percent of the total number of outstanding shares of the issuing company after deduction of each of the following types of shareholdings:
      1. The total percentage of shares held by directors and supervisors under statutory shareholding ratio requirements.
      2. Already pledged securities.
      3. The number of centrally deposited shares mandatory for newly listed companies.
      4. Shares already repurchased under the Rules Governing Share Repurchase by TWSE Listed and GTSM Listed Companies and not yet cancelled.
      5. Shares with restrictions on listing or trading imposed by the competent authority.
    2. If the underlying instrument is a foreign stock, the combined total of the number of shares of the underlying security represented by domestic issuance units of the call (put) warrants and of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 15 percent of the total number of shares already issued by the issuer of the underlying securities.
    3. When the underlying instrument is an exchange-traded securities investment trust fund (ETF) or futures ETF announced by the TWSE, the total number of shares of the underlying security represented by the issuance units of the call (put) warrants and the shares of the same underlying security represented by other existing call (put) warrants already listed on the TWSE, combined with those issued overseas by the issuer or its correspondent institution overseas and representing the same underlying, may not exceed the total number of beneficial interest units already issued by the fund, provided that this shall not affect the validity of any call (put) warrants already issued. When the underlying instrument is an offshore ETF as announced by the TWSE, the total number of units of the underlying security represented by the issuance units of the call (put) warrants and the units of the same underlying represented by other existing call (put) warrants already listed on the TWSE may not exceed the total number of units of that fund offered and sold domestically within the ROC territory.
    4. If the underlying instrument is a foreign ETF, the combined total of the number of beneficial units of the underlying security represented by the issuance units of the call (put) warrants and the number of beneficial units of the same underlying security represented by other existing call (put) warrants already listed on the TWSE may not exceed 50 percent of the total number of the beneficial units already issued.
    5. When the underlying instrument is Taiwan Depository Receipts, the total number of units of the underlying represented by the domestic issuance units of the call (put) warrants and the units of the same underlying represented by other existing call (put) warrants already listed on the TWSE may not exceed 22 percent, or 30 percent in the event of a follow-on issuance of call (put) warrants, of the already listed units of the receipts.
    6. If the underlying instrument is a foreign depositary receipt, the combined total of the number of units of the underlying security represented by the domestic issuance units of the call (put) warrants and the number of units of the same underlying security represented by other existing call (put) warrants already listed on the TWSE, may not exceed 15 percent of the total number of the depositary receipt units already listed on the TWSE.
  4. When the underlying instrument is an index, future, ETF, futures ETF, or offshore ETF, if an authorization is required to be obtained, consent shall be obtained from the institution creating the fund's underlying index or the exchange. But this provision shall not apply to a follow-on issuance of call (put) warrants.
  5. For issues of index call (put) warrants, Futures Call (Put) Warrants, callable bull contracts and callable bear contracts, and extendable callable bull contracts and callable bear contracts, and for domestic call (put) warrants for which the underlying assets are foreign securities or foreign indexes, investors may not apply for exercise of such warrants until the maturity date. Warrants for which the underlying assets are foreign securities or foreign indexes may not be of the capped/knock-out type.
  6. The underlying settlement index of the index call (put) warrants shall be calculated based on the following methods:
    1. If the period of validity expires, it shall be calculated based on the simple arithmetic mean of the underlying index during the 30 minutes before market close. If the circumstance under Article 58-3, paragraph 5 of the TWSE Operating Rules exists, the calculation shall also incorporate the index from during the postponement period. For extendable callable bull contracts or extendable callable bear contracts, the settlement basis is adjusted based on the return rate of the underlying total return index on the warrant expiration date, through the calculation of "closing index of the underlying index on the business day preceding the date of warrant issuance × return rate." The aforementioned return rate shall be calculated as "underlying total return index on the warrant expiration date ÷ underlying total return index on the business day preceding the date of warrant issuance." If it is an extension period that expires, for the aforementioned business day preceding the date of warrant issuance, the business day preceding the extension period shall be substituted.
    2. If the closing index of the underlying index reaches the cap/knock-out point level and expires before the maturity date:
      1. For capped call warrants or capped put warrants, it shall be calculated based on the closing index of the underlying index on the last trading day of the warrants.
      2. For callable bull contracts or callable bear contracts, it shall be calculated based on the simple arithmetic mean of the underlying index on the business day following the last trading day of the warrants.
      3. For extendable callable bull contracts or extendable callable bear contracts, the settlement basis is adjusted based on the return rate of the underlying total return index on the business day following the last trading day of such warrant, through the calculation of "closing index of the underlying index on the business day preceding the date of warrant issuance × return rate." The aforementioned return rate shall be calculated as "underlying total return index on the business day following the last trading day of such warrant ÷ underlying total return index on the business day preceding the date of warrant issuance." In the event of early expiration before the maturity date of an extension period, for the aforementioned business day preceding the date of warrant issuance, the business day preceding the extension period shall be substituted.
  7. The underlying futures settlement price of futures call (put) warrants shall be calculated based on the following principles:
    1. If the validity period expires, it shall be calculated based on the simple arithmetic mean trade price of the underlying futures from 1 p.m. to 1:30 p.m.
    2. If the simple arithmetic mean trade price of the underlying futures reaches the capped call (or put) point during the last minute before 1:30 p.m., and therefore expires early:
      1. For capped call (put) warrants, the settlement price shall be calculated based on the simple arithmetic mean trade price of the underlying futures during the last minute before 1:30 p.m. on the last trading day of the warrant.
      2. For a callable bull contract or callable bear contract, the settlement price shall be calculated based on the simple arithmetic mean trade price of the underlying futures from 9 a.m. to 1:30 p.m. on the next business day after the last trading day of the warrant.
    3. With respect to the mean price referred to in the preceding two items, if during the given period there is no trade price, the settlement price shall be calculated based on the most recent trade price before the given period; if there is no trade price that day, the calculation shall be based on the opening reference price of that day.
  8. The issuance of call (put) warrants shall be handled as follows:
    1. The capped call price or point shall be set at no less than 150 percent of the strike price or point; the capped put price or point shall be set at no more than 50 percent of the strike price or point.
    2. Callable bull contracts or callable bear contracts, and extendable callable bull contracts or extendable callable bear contracts:
      1. The bull/bear contract knock-out price or point shall be set within a range between the closing price of the underlying securities, the closing index of the underlying index, or the daily settlement price of the underlying futures on the preceding business day and the strike price or the strike point (inclusive thereof)
      2. The bull contract knock-out price or point shall be set at no more than 90 percent of the closing price of the underlying securities, the closing index of the underlying index, or the daily settlement price of the underlying futures on the preceding business day; the bear contract knock-out price or point shall be set at no less than 110 percent of the closing price of the underlying securities, the closing index of the underlying index, or the daily settlement price of the underlying futures on the preceding business day.
      3. For extendable callable bull/bear contracts, the bull contract or knock-out price or point shall be set at no more than 70 percent of the closing price of the underlying securities,, the closing index of the underlying index, or the bear contract knock-out price or point shall be set at no less than 130 percent of the closing price of the underlying securities or the closing index of the underlying index.
      4. The issuer shall also set reset conditions. Any adjustment from resetting of the strike price and knock-out price, or the strike point and knock-out point, shall take effect from the first day of TWSE listing, and the price or point thereof shall still be required to conform with the requirements set out above.
    3. In the case of a follow-on issue of call (put) warrants, the knock-out price or point is the newest knock-out price or point for the warrants, and the issuer shall not set reset conditions.
    4. On the last trading day for extendable contracts, when the knock-out price or point of an extendable callable bull contract reaches no more than 80 percent of the closing price of the underlying security or the closing index of the underlying index, or when the knock-out price or point of an extendable callable bear contract reaches no less than 120 percent of the closing price of the underlying security or the closing index of the underlying index, the issuer shall extend the period of validity of such contract.
    5. The issuance price of callable bull contracts or callable bear contracts shall be calculated as follows: the difference between the price of the underlying securities, the underlying index, or the daily settlement price of the underlying futures and the strike price or the strike point × exercise ratio + funding cost.
    6. The funding cost is calculated as: funding cost annual rate × strike price or point × (days to expiration ÷ 365) × exercise ratio
    7. The principles for handling early expiration:
      1. Capped call warrants or capped put warrants: When the closing price of the underlying securities or the closing index of the underlying index reaches the cap price or point, or the simple arithmetic mean trade price of the underlying futures reaches the cap price or point during the last minute before 1:30 p.m., the current day will be deemed the last trading day for the warrants, and they will expire on the second following business day, requiring automatic settlement in cash based upon the closing price of the underlying securities, the closing index of the underlying index, or the simple arithmetic mean trade price of the underlying futures during the last minute before 1:30 p.m., on the last trading day for the warrants.
      2. Callable bull contracts or callable bear contracts, and extendable callable bull contracts or extendable callable bear contracts: When the closing price of the underlying securities or the closing index of the underlying index reaches the bull/bear contract knock-out price or point, or the simple arithmetic mean trade price of underlying futures reaches the bull/bear contract knock-out price or point during the last minute before 1:30 p.m., the current day will be deemed the last trading day of the contracts, and they will expire on the second following business day, requiring automatic settlement in cash based upon the simple arithmetic mean trade price of the underlying securities, the underlying settlement index, or the settlement price of the underlying futures on the business day next following the last trading day. If there is no trade price for the underlying securities, then it will be calculated based upon the auction reference price at market opening of the underlying securities on the expiration date of the contracts. If trading of the underlying securities, or the underlying futures is halted or suspended on the business day next following the last trading day of the warrants and on the expiration date thereof, then it will be calculated based upon the closing price of the underlying securities, or the daily settlement price of the underlying futures on the last trading day of the contracts.
      3. The underlying settlement index and the underlying futures settlement price mentioned above shall be calculated in accordance with the provisions of subparagraphs 6 and 7.
    8. The daily settlement price of the underlying futures mentioned in this subparagraph means the settlement price set by the TAIFEX based on the trading rules for the respective futures contracts.
  9. The issuance plan shall contain the following terms and conditions:
    1. The issuance date and the period of validity.
    2. Detailed information on the underlying instrument or basket of instruments. When the underlying instrument is a domestic stock and the financial statement of the issuer of such stock for the most recent period audited or attested by a certified public accountant and shows losses on the stock, there shall also be a statement of the reason for issuing warrants based on the underlying securities; when the underlying instrument is a foreign stock or a foreign depositary receipt, there shall be a statement of the status of liquidity of the foreign stock or foreign depositary receipt; when the underlying instrument is a future, there shall also be a statement of the name and delivery month of the futures contract.
    3. The type of call (put) warrant, the volume of issuance units and total value of the issue. In the case of an issue of extendable callable bull contracts or extendable callable bear contracts, the type of warrant shall be annotated with the wording "extendable". In the case of a follow-on issue of call (put) warrants, the total number of units already issued shall additionally be specified.
    4. Terms of issuance, including issuance price, strike price or strike point, exercise period, and number of shares, beneficial units, depository receipt units, index points or futures points represented per issuance unit. In the case of extendable callable bull or bear contracts the information set forth in item 4 of the preceding subparagraph shall be stated. In the case of a follow-on issue of call (put) warrants, the strike price or strike point is the newest strike price or strike point for the warrants.
    5. The method by which the issuance price is calculated, including the price or point, strike price or strike point level, the period of validity, the interest rate, the rate of fluctuation of the underlying instrument and other elements used in the calculation, and a table of comparison with other warrants in the preceding year with the same underlying instrument. In the case of an issue of callable bull contracts or callable bear contracts, the issuance price shall be calculated in accordance with item e of the preceding subparagraph. But this provision shall not apply to a follow-on issue of call (put) warrants.
    6. Issuance of capped call or put warrants (or callable bull or bear contracts) shall conform to the provisions of the preceding five items and, in addition, the issuance plan shall specify the cap or knock-out price or point and also matters prescribed in item f of the preceding subparagraph in a prominent typeface. In the case of extendable contracts, the issuance plan shall also state the matters required for extension under Article 7, subparagraph 3 of the TWSE Procedures for Review of Call (Put) Warrant Listings.
    7. Items that shall be included in the issuance plan in accordance with Article 8 of the TWSE Directions for Call (Put) Warrant Liquidity Provider Operations.
    8. Procedures for exercising the option and the terms for cancellation of already-exercised call (put) warrants.
    9. Strategies for offsetting foreseeable risks.
    10. The policy of the issuer regarding adjustment of the strike price of the call (put) warrant and related items along with the distribution of dividends and bonuses, increases or decreases in capitalization, stock splits or consolidations, and handling of other related matters by the issuing company of the underlying securities, or the distribution of dividends and handling of other matters by the securities investment trust enterprise in relation to the underlying ETF, the handling of related matters by the futures trust enterprise in relation to the underlying futures ETF, or by the offshore fund management institution or its designated institution in relation to the underlying offshore ETF. Where the issuer does not make such adjustments in accordance with the TWSE reference formula, that fact shall be noted in bold lettering in the issuance prospectus. If the underlying is a foreign security, the issuer shall itself determine the formula for adjustment.
    11. Methods of handling when there is a merger by the company issuing the underlying securities, or alteration in the stock trading method, halt of trading, suspension of sale, or de-listing; or when there is delisting when the securities investment trust enterprise of the underlying ETF, or the futures trust enterprise of the underlying futures ETF, undergoes dissolution or bankruptcy, or its approval is revoked; or when the beneficial certificates, fund shares, or investment units of the underlying offshore ETF are delisted by public announcement of the TWSE; or when the index provider announces suspension of the compilation of the underlying index; or when the underlying future is subject to a halt of trading, suspension of trading, or delisting imposed by the TAIFEX.
    12. Methods of handling market listing of the call (put) warrants, or suspension of trading, de-listing or halt of trading of the warrants by the TWSE.
    13. Definition of exercise value upon expiration of the period of validity:
      1. For call (put) warrants with domestic securities, indices or futures as the underlying instruments, there is exercise value if the simple arithmetic mean trade price of the underlying securities, underlying settlement index or settlement price of the underlying futures during the 60 minutes before market close is higher (lower) than the strike price or strike point of the call (put) warrant. If there is no trade price for the underlying securities during the 60 minutes before market close, then the calculation shall be based on the most recent trade price. If the circumstance under Article 58-3, paragraph 5 of the TWSE Operating Rules exists, the calculation shall also incorporate the trade price or index from during the postponement period. The aforementioned underlying settlement index and settlement price of the underlying futures shall be calculated in accordance with subparagraphs F and G.
      2. For call (put) warrants with foreign securities or a foreign index as the underlying, there is exercise value if the most recent closing price of the underlying securities or the most recent closing value of the underlying index is higher (lower) than the strike price or strike point of the call (put) warrant.
      3. Where the terms of exercise require cash settlement, the warrant holder shall be deemed to have exercised the warrant and to have given notice to that effect.
    14. Terms stipulating that the warrant issuer may not substitute another warrant with a period of validity longer than that of the original warrant, or any other security, for the originally issued warrant.
    15. Procedures for delivery and payment when the warrant holder exercises the option.
    16. Terms stipulating that where settlement after exercise of the option referred to in the preceding item shall be done in cash, the cash settlement amount shall be calculated based on the closing price of the underlying securities on the exercise date. If the exercise date is the expiration date of the warrants, the cash settlement amount shall be calculated on the basis of the simple arithmetic mean trade price of the underlying securities, underlying settlement index or settlement price of the underlying futures during the 60 minutes prior to market close. If there is no trade price for the underlying securities during the 60 minutes prior to market close, then the calculation shall be based on the most recent trade price. If the circumstance under Article 58-3, paragraph 5 of the TWSE Operating Rules exists, the calculation shall also incorporate the trade price or index from during the postponement period. The aforementioned underlying settlement index and settlement price of the underlying futures shall be calculated in accordance with the subparagraphs F and G. However, when the underlying asset is a foreign security or foreign index, the provisions of the TWSE Guidelines for the Exercise of Call (Put) Warrants shall be followed.
    17. Terms stipulating the methods for handling distribution of securities centrally deposited in the Taiwan Depository and Clearing Corporation account where the issuer fails to perform its delivery of the underlying securities or the cash price differential within the prescribed time period.
    18. Clarification of whether or not there are plans for a reverse issue of call (put) warrants against the same underlying instrument within the coming 3 months.
    19. Source of data and method of disclosure for the halt of trading, suspension of trading, or delisting, of foreign underlying securities by the securities exchange on which the security is traded, or for the suspension of compilation of foreign underlying foreign index as announced by the index provider.
  10. When an issuer issues domestic call (put) warrants for which the underlying assets are foreign securities or foreign indexes, it shall disclose, from the applied-for issue date through the maturity date of the warrants, on its company website and the TWSE-designated information reporting website, the up-to-date trading information of the underlying securities or indexes and the public announcements made by the issuing companies of the underlying securities. When such public announcement occurs during the trading hours [of the TWSE], the warrant issuer shall immediately enter the information; when such public announcement occurs during the non-trading hours [of the TWSE], the warrant issuer shall enter the information prior to the beginning of trading hours on the next business day following the occurrence. The warrant issuer shall enter the following information publicly announced by the issuing companies of the underlying securities:
    1. The annual and semi-annual consolidated financial reports (where the consolidated financial reports are not required, enter the individual financial reports), and the first-quarter and third-quarter financial reports prepared in accordance with the laws and regulations of the issuing company's home country or country of listing.
    2. Public announcement of dividend distribution for the current fiscal year; proposal of the dividend distribution has been passed by the board of directors and ratified at the shareholders meeting.
    3. Public announcement of acquisition or disposal of assets.
    4. Public announcement of the record date fixed for distribution of dividends, bonuses, or other benefits.
    5. Material information published by the issuing company in accordance with the laws and regulations of its home country or country of listing.
    6. Other matters that are required to be publicly announced under the rules of the TWSE.