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Article 37-1
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A securities firm operating the business of options on convertible (or exchangeable) corporate bond asset swaps ("asset swaptions") related to Taiwan equities shall do so in compliance with the following provisions:
- The securities firm shall confirm that the total of the unearned notional principal of asset swaptions with the same underlyings purchased by the customer from various financial institutions, plus the notional principal of the asset swaptions with the same underlyings currently being purchased by the customer shall not exceed 10 percent of the par value of the underlying convertible (or exchangeable) corporate bonds; the securities firm shall obtain a written statement issued by the customer of compliance with the aforesaid requirement, and shall not help the customer to evade the customer transaction ceiling in this subparagraph.
- The securities firm shall not help the customer or underwriter to evade the rules set out in Articles 27 and 43-1 of the Taiwan Securities Association Rules Governing Underwriting and Resale of Securities by Securities Firms.
- With respect to the reasonableness of the price of convertible (or exchangeable) corporate bonds purchased through OTC negotiated trading, the securities firm shall establish an internal evaluation system to analyze the difference from market prices.
- With respect to the business of convertible (or exchangeable) corporate bonds asset swaptions related to Taiwan equities, the securities firm shall establish an internal evaluation system for the prevention of illegal transactions.
The securities firm shall incorporate the provisions of the preceding paragraph into its internal control and internal audit items. It shall undertake regular review and analysis, and produce records for future audit or inspection.
Purchases made by the customer and his or her spouse, minor children, and nominees shall be included in the calculation of the ceiling set out in paragraph 1, subparagraph 1.
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