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Article 5
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"Financial derivatives," as used in these Regulations, means trading contracts and structured instruments, whose value, in conformity with regulations or common practice on domestic or foreign OTC markets, is derived from an interest rate, exchange rate, equity, index, commodity, credit event, or other interest, or from a combination thereof.
"Structured instruments" in the preceding paragraph means hybrid contracts, combining fixed-income products or gold and financial derivatives, that a securities firm enters into as counterparty with a customer.
Except where otherwise provided in these Regulations, the financial derivatives trading business operated by a securities firm may not be linked to any of the following underlying products:
- Securities privately placed domestically or abroad.
- Certificates of beneficial interest that are issued overseas by domestic securities investment trust enterprises and are not listed and traded on a securities market.
- Any Taiwan stock index compiled by a domestic or foreign institution and related financial commodities, provided that this restriction shall not apply to an index compiled by the TPEx or the Taiwan Stock Exchange Corporation, either singly or in cooperation.
A securities firm that conducts foreign exchange financial derivative business shall comply with the Regulations Governing Foreign Exchange Business of Securities Enterprises, and shall copy the TPEx when it applies to the Central Bank for permission or reports to the Central Bank by letter for recordation.
A securities firm that provides customers other than professional institutional investors and high net worth juristic person investors with a complex high-risk product that has not been approved by the competent authority or has been approved for less than half a year and that furthermore does not involve foreign exchange shall submit an application with the relevant documents to the TPEx, and the TPEx will submit them to the competent authority for approval. After the competent authority has granted approval for the first securities firm to conduct transactions in the product and half a year has elapsed, other securities firms shall submit the relevant documentation to the TPEx for recordation within 7 days after their first transaction of the product, and may conduct subsequent transactions only after having received a letter of consent for recordation from the TPEx.
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