Operating principles for participating dealers carrying out cash creation and redemption of beneficial certificates of ETFs for its own account or on behalf of its customers
- Where a participating dealer carries out cash creation and redemption of ETF beneficial certificates through computer linkup on a TWSE centralized securities exchange market trading day, the deposit and transfer of relevant securities shall be handled via central depository and book-entry transfer service.
- A participating dealer carrying out cash creation and redemption of beneficial certificates for ETFs on behalf of customers shall comply with the following provisions:
- If the applicant uses the balance bought through a single account in ordinary trading on the previous trading day to meet the need for the beneficial certificates required for the redemption of beneficial certificates of ETFs, the participating dealer shall, on the day of application, collect in advance on the application date the price required to be paid for the balance of such ETFs bought by the applicant and other relevant charges.
- When accepting a customer's order to create ETFs in cash, the participating dealer may also collect in advance the creation price and other relevant charges as calculated according to the cash composition file published by the SITE or FTE, and will submit the application within the time limit prescribed by the TWSE. After ascertaining the actual payment due, the participating dealer should request the applicant, on the business day following the application, to make additional payment if the pre-collected payment of the creation price is insufficient or should refund the applicant if the pre-collected payment is excessive.
- The participating dealer shall open a separate segregated deposit account with its clearing bank specifically for the deposit and payment of amounts and other relevant charges collected in advance in association with the redemption operations under Point 4, paragraph 2, subparagraph 1, and of the creation price and other relevant charges in association with creation operations under Point 4, paragraph 2, subparagraph 2.
- A participating dealer carrying out cash redemption of ETF beneficial certificates for its own account or on behalf of its customers shall, according to the trust agreement of the ETF, calculate the holdings of beneficial certificates, number borrowed, balance of purchase on the previous trading day and amount obtained through creation on the previous trading day to ensure the sum total is sufficient for cash redemption, before submitting the application within the time limit prescribed by the TWSE. After the time for application ends, the TWSE will forward all application data to the CSD for handling of the earmark operation.
Where the CSD fails to complete the earmark operation, the participating dealer may proceed with a correction and make an input from 9:00 a.m. to 10:00 a.m. of the following business day.
The ETF beneficial certificates to be delivered by the applicant may not be bought on margin or reported for trading errors or correction of account numbers.
- The creation and redemption of ETF beneficial certificates by a participating dealer for its own account are governed by Point 3, paragraphs 10 of these Guidelines mutatis mutandis.