1
    These Operating Directions are prescribed in accordance with Article 12 of the Rules Governing Trading of Exchange Traded Notes of the Taiwan Stock Exchange Corporation (TWSE).

2
    An issuer shall serve as its own liquidity provider or engage another securities firm as a liquidity provider, to provide liquidity on trading days of the TWSE's centralized securities exchange market for the exchange traded notes (ETNs) that it issues.

3
    A liquidity provider engaged by an issuer shall meet the following qualifications, after reviewing of which the TWSE will issue an approval letter:

1. Qualifying as a securities firm that conducts proprietary securities trading business.
2. A securities firm whose adequacy ratio of equity capital has constantly been above 150% for the last 6 months, except that for a securities firm concurrently operated by a financial institution, stipulations regarding capital adequacy ratio prescribed in Article 44 of the Banking Act shall apply. However, the above does not apply to a Taiwan branch of a foreign securities firm whose home-country head office takes into account the operation risk of the Taiwan branch when calculating the equity capital adequacy ratio as required by the local laws, and has met relevant standard and granted by the Financial Supervisory Commission an exemption from regulations on equity capital applicable to domestic securities firms.
3. A long-term credit rating of a certain level or higher from a credit rating agency shall be obtained: Taiwan Ratings Corporation rating as twBBB- or above, Moody's Investors Service, Inc. rating as Baa3 or above, Standard & Poor's Ratings Services rating as BBB- or above, Fitch Ratings Ltd. rating as BBB- or above, or Fitch Australia Pty Ltd, Taiwan Branch rating as BBB- (twn) or above. For a financial institution acting concurrently as a securities firm, the credit rating of the financial institution may apply. For a Taiwan branch of a foreign securities firm, the credit rating of the holding company of the group may apply.

    A securities firm can only become a liquidity provider after entering into a related agreement with an issuer of ETNs within three months of receiving the approval letter from the TWSE.
    A securities firm which acts as a liquidity provider after approved by the TWSE or which has obtained the approval but not yet signed any agreement shall desist from acting as a liquidity provider if its equity capital adequacy ratio has fallen below 150% for two consecutive months, and shall not reinstate the business unless it has met the requirements governing the equity capital adequacy ratio for 3 consecutive months and has reported to and approved by the TWSE.

4
    An issuer shall engage a liquidity provider meeting the following requirements, which shall be reviewed and approved by the TWSE:

1. Having been approved by TWSE to operate the business of providing liquidity for ETNs.
2. Having entered into a contract with an issuer of ETNs to provide market liquidity for ETNs (Liquidity Contract).

5
    If a liquidity provider engaged by an issuer fails to meet any of the following requirements, the TWSE may deny approval for its operation of liquidity provision business for ETNs, however, the restriction may not apply to any non-conformance to requirements of subparagraphs 2 to 6 if the non-conformance has been substantially improved and recognized by the competent authority:

1. Its most recent financial report audited and attested by certified public accountant showing book value per share not less than par value, and financial status meeting the requirements under the Regulations Governing Securities Firms;
2. Having not received any warning issued by the competent authority pursuant to subparagraph 1 of Article 66 of the Securities and Exchange Act in the last 3 months;
3. Having not been subject to any disposition of the competent authority ordering the securities firm to remove from office any of its directors, supervisors, or managerial officers or to replace any of its responsible persons or other relevant personnel in the last 6 months.
4. Having not been subject to any sanction imposed by the competent authority involving suspension of business activities in the last 1 year.
5. Having not been subject to any sanction imposed by the competent authority involving revocation of any part of its business permission in the last 2 year.
6. Having not been subject to any measures taken by the TWSE, the Taipei Exchange (TPEx) or the Taiwan Futures Exchange Corporation pursuant to the bylaws or rules thereof involving suspension of or restriction on its trading activities in the last 1 year.
7. Other requirements prescribed by the competent authority.

    If the TWSE denies approval for a liquidity provider engaged by an issuer to operate the business of providing liquidity for ETNs because the liquidity provider does not meet the requirements of subparagraphs 1 to 7 of the preceding paragraph, or because the circumstance under paragraph 3 of Article 3 occurs, the TWSE may issue an letter prescribing a time limit for the issuer to take over by itself or engage another liquidity provider to provide liquidity in the centralized securities exchange market. If the issuer fails to take corrective measures within the time limit, the TWSE may impose a breach penalty in an amount of NT$30,000 to NT$100,000 on the issuer and the penalty may be imposed in succession until the breach is corrected.

6
    A liquidity provider shall apply with the TWSE to establish a segregated account. If an issuer serves as its own liquidity provider, the segregated account shall be established under its proprietary trading account, of which the account number shall be 888888-5 if it is a domestic securities firm or 998888-5 if it is a Taiwan branch established by foreign securities firm. If an issuer engages another securities firm to serve as its liquidity provider, the segregated account shall be established under the proprietary trading account of the engaged securities firm, of which the account number shall be 888888-6 if it is a domestic securities firm or 998888-6 if it is a Taiwan branch established by foreign securities firm.
    A liquidity provider shall provide liquidity for ETNs through the segregated account referred to in the preceding paragraph. No pledge shall be created over the ETNs in its securities depository account.
    An issuer issuing ETNs shall hedge its risk through a segregated account established under its proprietary trading account, of which the account number shall be 888888-4 if it is a domestic securities firm or 998888-4 if it is a Taiwan branch established by foreign securities firm.

7
    An issuer shall transfer into liquidity provider's securities depository account the units of ETNs that are not sold prior to listing and those stocked for making market.

8
     Operating principles for a liquidity provider providing liquidity during the trading period of the TWSE's centralized securities exchange market:

1. The price quoted by a liquidity provider shall include a bid price and an ask price, and the period of validity may not be "canceled if the trade is not immediately satisfied" or "canceled if not all trades are immediately satisfied."
2. A liquidity provider shall provide quotes at least once every 5 minutes, and such quotes shall remain posted for at least 30 seconds, provided that this 30-second restriction shall not apply when quotes are updated due to fluctuations in the indicative value.
3. A liquidity provider shall prescribe the highest bid price and the lowest ask price in accordance with the following:
1. If the components of the ETN's underlying index are domestic, the best bid/ask spread shall not be more than 1%. The calculation formula for the range of best bid/ask spread is (the best bid/ask spread) = [(lowest unexecuted ask quote) - (highest unexecuted bid quote)]/( lowest unexecuted ask quote).
2. If one or more component of the ETN's underlying index is foreign, the best bid/ask spread shall not be more than 3%. The calculation formula for the range of best bid/ask spread is (the best bid/ask spread) = [(lowest unexecuted ask quote) - (highest unexecuted bid quote)]/( lowest unexecuted ask quote).
4. Every single bid/ ask quote for ETNs shall be of more than 100 trading units or of a total amount more than NT$1,000,000. However, this restriction will not apply under any of the following circumstances, provided that the quote may not be of less than 10 trading units:
1. If the underlying index consist of foreign components and during the trading hours of the TWSE's centralized securities exchange market, the foreign trading market for the index components weighing 30% or more is closed.
2. 5 minutes prior to market close.
5. The premium/discount spread between the closing price and index value announced after market close of that ETN on the same day shall conform to the following:
1. If the components of the ETN's underlying index are domestic, the daily premium/discount spread shall not be more than 3%. The calculation formula for the range of premium/discount spread is (closing price - index value announced after market close)/ (index value announced after market close).
2. If one or more component of the ETN's underlying index is foreign, the best bid/ask spread shall not be more than 6%. The calculation formula for the range of best bid/ask spread is (the best bid/ask spread) = [(lowest unexecuted ask quote) - (highest unexecuted bid quote)]/( lowest unexecuted ask quote).
6. If an ETN is a stock placed under disposition measures, liquidity provider needs not to provide quotes.

9
     A liquidity provider may adopt netting method for the regular trades, after-hours fixed-price trades and block trades on the same day, of the same kind of ETNs. If there remains a balance of sale trades after netting, no later than the second business day following the transaction day, the liquidity provider shall apply for securities borrowing to perform settlement pursuant to Article 109 of the TWSE Operating Rules.
    A liquidity provider that applies for securities borrowing to perform settlement pursuant to Article 109 of the TWSE Operating Rules, the dispositions on its general manager, managerial officer, and responsible staff member may be exempted.

10
     If a liquidity provider is in breach of the quoting related stipulations under Article 8 for more than 2 days (inclusive) in a month, the TWSE may issue a letter to the issuer requiring attention and rectification with a copy to the competent authority, and may impose a breach penalty in an amount of NT$30,000 to NT$100,000 which may be imposed in succession until the breach is corrected. If the circumstance of breach is serious, the TWSE may reject any submission of application for recognizing eligibility of an index or for listing ETNs for one year from the occurrence of that fact.

11
    These Directions shall take effect after having been announced and approved for recordation by the competent authority. Ssubsequent amendments thereto shall be effected in the same manner.