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Title: Taipei Exchange Rules Governing the Trading of Emerging Stocks on the TPEx
Date: 2003.06.13 ( Announced )
Date: 2016.09.09 ( Amended )

Article Content

 
Chapter I General Provisions
Article 1     These Rules are adopted pursuant to Article 39-2 of the Taipei Exchange (TPEx) Rules Governing Securities Trading on the TPEx (the "Trading Rules").
Article 2     Except where otherwise provided by law or regulation, trading of Emerging Stocks on the TPEx shall be governed by these Rules.
Article 3     The term "Emerging Stock" in these Rules means any common stock whose issuer has filed an application for the TPEx registration and trading in accordance with the Taipei Exchange Rules Governing the Review of Emerging Stocks for Trading on the TPEx ("Emerging Stock Review Rules").
    The term "recommending securities firm" in these Rules means any securities firm that meets the qualifying conditions set forth in the Emerging Stock Review Rules, and that recommends that stock of an issuer be registered for TPEx trading in accordance with the Emerging Stock Review Rules or joins in a recommendation after TPEx trading of an emerging stock has begun, and that assumes obligations to quote for, buy, and sell the recommended Emerging Stocks in accordance with these Rules.
    The term "Emerging Stock Computerized Price Negotiation and Click System" (the "Click System") in these Rules means the computerized price negotiation and trading system deployed by the TPEx for reporting trading information by recommending securities firms, securities dealers, and securities brokers via computer linkage at their places of business, and for execution of price negotiation and click-and-trade operations by recommending securities firms.
     The term "execution of price negotiation and click-and-trade operations by recommending securities firms" in the preceding paragraph shall include computer-assisted automatic click-and-trade execution of a trading order meeting the price quoted, and click-and-trade execution by a recommending securities firm for its own account of a trading order not meeting the price quoted.
Chapter II Trading Principles
Section 1 General Principles
Article 4     Emerging Stocks may be traded through brokerage or dealership and are traded by means of price negotiation. At least one of the two trading parties shall be a recommending securities firm for such Emerging Stocks.
    The term "brokerage" in the preceding paragraph means that a securities broker accepts an order from a customer to enter the customer trade order information into the Click System according to a prescribed format and trade with a recommending securities firm through price negotiation; or based on a customer's instructions, trades with a recommending securities firm through price negotiation at the securities firm's place of business pursuant to Article 22.
    The term "dealership" in paragraph 1 means that a recommending securities firm trades through price negotiation for its own account with a securities broker or another securities dealer via the Click System, or that a recommending securities firm trades with a customer through price negotiation for its own account at its place of business.
Article 5     When trading Emerging Stocks through price negotiation for its own account at its place of business with a customer, a recommending securities firm may collect in advance the purchase price or the Emerging Stocks to be sold depending on the credit status of the customer.
    When receiving a customer order to trade Emerging Stocks, a securities broker may collect in advance the purchase price or the Emerging Stocks to be sold if an assessment shows that the credit status of the customer exceeds its investment capacity.
Article 5-1     Where any overseas Chinese or foreign national who/which has been approved or registered in accordance with the Regulations Governing Securities Investment by Overseas Chinese and Foreign Nationals trades any stock of an Emerging Stock company, if such stock is subject to any investment ratio ceiling set by the respective competent authorities for the relevant industries, it shall be traded through the Emerging Stock Computerized Price Negotiation and Click System.
    In the event that the total amount of stock of an Emerging Stock company, and securities convertible or exchangeable into such stock, invested in by overseas Chinese and foreign investors who/which have been approved or registered in accordance with the Regulations Governing Securities Investment by Overseas Chinese and Foreign Nationals exceeds the percentage set under the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals, the TPEx shall suspend the purchase of such stock by all overseas Chinese and foreign investors.
Article 6     The trading of Emerging Stocks on the TPEx shall be effected on a cash/spot basis; margin transactions are not allowed.
Article 7     A Recommending securities firm shall adopt internal operating rules for the trading of Emerging Stocks through price negotiation to guide its trading of Emerging Stocks through price negotiation.
    The TPEx shall prescribe matters required to be specified in the internal operating rules referred to in the preceding paragraph.
    The internal operating rules adopted by the recommending securities firm under paragraph 1, and any amendment thereto, shall be approved by the chairperson of the board of directors prior to being reported to the TPEx.
    Directions for assessing performance in the trading of Emerging Stocks through price negotiation by recommending securities firms shall be separately prescribed by the TPEx.
Article 8     A securities firm shall operate trading of Emerging Stocks through price negotiation in good faith.
    A securities firm shall not, from its place of business or any website belonging to it, link to or form any strategic alliance with any website illegally providing brokerage services for trading of unlisted/non-TPEx listed securities, to covertly attract customers for such website or to solicit customers to trade with it.
Article 9     The TPEx trading hours for Emerging Stocks shall be 9 a.m. to 3 p.m.. However, when the TPEx deems it necessary, it may apply to the competent authority for change of the trading hours.
Article 10     Securities firms providing quotations through the Click System shall be limited to the recommending securities firm for the given Emerging Stocks.
    Except as otherwise provided by law or regulation or by rules of the TPEx, price quotations made by a recommending securities firm through the Click System in accordance with these Rules are firm quotes.
    The term "firm quote" referred to in the preceding paragraph means a quoted price for which a quoting recommending securities firm shall execute a trade with its trading counterpart as a buyer/seller at the quoted buying/selling price and in the proposed volume.
Article 11     When a trade is executed between a firm quote made by a recommending securities firm referred to in the preceding article and a trading order meeting the price quoted, the price of the firm quote shall be the execution price.
    If a recommending securities firm for its own account clicks on a trading order not meeting the price quoted, the execution price shall be the price clicked by the securities firm.
Article 11-1      If during the trading hours for a given business day the TPEx finds that the weighted average trading price for an Emerging Stock in the Click System is 50 percent or more above or below the weighted average trading price of the preceding business day, it shall halt trading of the Emerging Stock until the close of trading hours for the given business day. However, these provisions shall not apply under any of the following circumstances:
  1. From the next business day following the TPEx’s public announcement of the termination of TPEx trading of the Emerging Stock.
  2. The given business day is the commencement date of ex-dividend or ex-rights trading of the Emerging Stock.
  3. The given business day is the date on which trading for the Emerging Stock will resume after a capital reduction.
  4. The given business day is one of the first five business days on which the Emerging Stock begins to be traded on the TPEx.
  5. The weighted average trading price of the Emerging Stock of the preceding business day is below NT$1.
Article 12     Once a recommending securities firm enters a trading quote or clicks on the "trade" link on the Click System, or once a securities broker enters a customer's trading order information, the TPEx will disclose the following information to the public through its information transmission system:
  1. The highest buy and lowest sell quotes of and the volumes quoted by the recommending securities firm, and its name and contact phone number;
  2. The trading price and volume of the latest trade of the current session, the aggregate trading volume, and the weighted average trading prices; and
    The TPEx's information transmission system provides an additional real-time search function for the trade price quotation information of all recommending securities firms, their names, and contact telephone numbers.
Article 13     After the close of daily trading hours, the TPEx shall prepare and disclose a statement displaying the names, trading volumes that day, and highest, lowest, final, and weighted average trading prices of Emerging Stocks.
Article 14     Where an error occurs in a buy or sell price quotation or execution of a trade via the Click System by a recommending securities firm, or in trade reporting by a securities dealer, or in execution of a trading order for Emerging Stock by a securities broker, the party concerned may, upon consent of the other party after the trade is executed, report to the TPEx for correction of the error or cancellation of the trade ("account change") by 3:30 p.m. of the same day; provided, however, that if a securities firm is unable to complete delivery, on the second business day after the trade date, of Emerging Stock that it sells for its own account or for the account of a customer, it may, upon consent of the other party, report cancellation of the trade to the TPEx by 10 a.m. on the second business day after the trade date.
    An account change under the preceding paragraph shall be applied for in writing by the two trading securities firms in the format prescribed by the TPEx.
Section 2 Account Opening
Article 14-1     When a recommending securities firm trades an Emerging Stock recommended by itself, it shall do so through a segregated account.
    The recommending securities firm shall authorize the central securities depository enterprise to transmit to the TPEx on a daily basis an itemized statement of the book-entry balance of the segregated account referred to in the preceding paragraph.
Article 15     A customer trading Emerging Stocks on the TPEx for the first time shall enter into an account opening contract and an Emerging Stock Risk Disclosure Statement with a securities firm and complete relevant account opening procedures.
    With respect to the Risk Disclosure Statement referred to in the preceding paragraph, which institutional investors may refrain from signing, the securities firm shall appoint a sales representative to explain the potential risks of trading Emerging Stocks. The sales representative and the customer shall sign the Risk Disclosure Statement at the time it is presented, and each shall keep one copy.
    The format and main contents of the Risk Disclosure Statement referred to in paragraph 1 shall be prescribed by the TPEx.
    "Institutional investors" in paragraph 2 means foreign and domestic banks, insurance companies, bills finance companies, securities firms, fund management companies, government investment institutions, government funds, pension funds, mutual funds, unit trusts, securities investment trust companies, securities investment consulting companies, trust enterprises, futures commission merchants, futures service enterprises, and other institutions approved by the competent authority.
Article 16     A customer trading Emerging Stocks on the TPEx by the Click System for the first time shall, in addition to following the procedures in the preceding article, establish a centralized custody account for securities and a book-entry transfer account for funds and, without exception, effect payment settlement through book-entry transfer. The same shall apply where the customer trades on its own with the recommending securities firm through price negotiation and it has been stipulated that payment settlement shall be completed through book-entry transfer.
Section 3 Price Quotation Unit, Minimum Transaction Unit, and Fluctuation Range
Article 17     The price quotation unit and the minimum transaction unit for Emerging Stocks shall be one share.
    The minimum unit for prices of trading quotes pursuant to the preceding paragraph shall be NT$0.01.
Article 18     There is no limit on the range of daily fluctuation of transaction price for trading of Emerging Stocks on the TPEx.
Article 19     If settlement and payment of a trade of Emerging Stock is made after the date on which the issuer suspends changes to entries in the shareholders' register in accordance with paragraph 2 of Article 165 of the Company Act, the trade shall be ex-dividend or ex-rights.
    The commencement date of ex-dividend or ex-rights trading of an Emerging Stock shall be publicly announced by the TPEx.
Section 4 Provisions Applicable Mutatis Mutandis
Article 20     The following provisions of the TPEx Trading Rules shall apply mutatis mutandis to the trading of Emerging Stocks on the TPEx: the provisions Chapter IV, Section I, Article 33 regarding understanding the customer; the provisions of Article 39-1 regarding information and facilities; the provisions of Chapter IV, Section II, Articles 41 and 42 regarding trading hours; and the provisions of Chapter IV, Section III regarding account opening.
Chapter III Securities Firms
Section 1 Recommending Securities Firms
Article 21     Recommending securities firms shall abide by the following provisions in trading Emerging Stocks:
  1. Report to the TPEx in accordance with the manner provided in the Emerging Stock Review Rules the volume, ratio, subscription date and price, and the basis of the calculation thereof, of the recommended Emerging Stock held by such recommending securities firm within 3 business days from the day the recommended Emerging Stock is approved by the TPEx for registration. The aforesaid subscription information will be disclosed on the TPEx website together with the company overview information. However, if the securities firm joins the recommendation after trading of such Emerging Stock on the TPEx has already begun, the recommending securities firm shall report such information to the TPEx when applying to become a recommending securities firm for such Emerging Stock.
  2. Offer buy and sell quotes for at least a certain volume of the recommended Emerging Stock through the Click System prior to the commencement of trading hours each business day; furthermore, the spread between its buy and sell quotes shall not exceed 5 percent of the sell quote.
  3. Assume the responsibility to continuously quote for the recommended Emerging Stock through the Click System during the trading hours of each business day; furthermore, the spread between its buy and sell quotes shall not exceed 5 percent of the sell quote.
  4. Respond immediately to price inquiries from customers or other securities firms.
  5. Assume the obligation to buy or sell the recommended Emerging Stock when a trading order price meets the price quoted for that stock; provided that for a trading order for 1,000 shares or an integral multiple thereof, the order shall only be executed in the volume of 1,000 shares or an integral multiple thereof.
  6. A trading order not meeting the price quoted may be executed through a click-and-trade transaction only when both sides of the two-way quote are validly existing, provided that price trade-through shall be prohibited, and the clicked trading order price shall be deemed as the changed quoted price.
  7. Assume the obligation to buy or sell the recommended Emerging Stock when a certain reasonable spread exists between buy and sell orders.
  8. Perform its obligation to make price quotations based on professional judgment, and not to give a quote that deviates from a reasonable price, thereby impairing the formation of fair prices.
    The volume of shares of a recommended securities firm held by a recommending securities firm may not exceed 1 percent of the shares of the recommended securities firm already traded on the TPEx or 500,000 shares (whichever is lower).
     The "certain volume" in paragraph 1, subparagraph 2 shall be as follows:
  1. 5,000 shares if the quoted price is less than NT$20.
  2. 3,000 shares if the quoted price is NT$20 or more but less than NT$100.
  3. 2,000 shares if the quoted price is NT$100 or more.
    The term "continuously quote" as used in paragraph 1, subparagraph 3 means that a recommending securities firm shall continuously provide buy and sell quotes for no less than the certain volume specified in the preceding paragraph, of shares of the recommended Emerging Stock to meet the purchasing and selling obligations through the Click System during trading hours. In the event that a previous quote is canceled or less than 1,000 shares remain after trading for the quoted volume has been executed through the Click System, the recommending securities firm shall enter new quote information for the stock into the Click System within 3 minutes.
    The "obligation to buy or sell when a trading order price meets the price quoted" in paragraph 1, subparagraph 5 means that when the trading order price input into the Click System by a buyer (or seller) of the Emerging Stock recommended by a recommending securities firm meets that firm's quoted selling price (or higher), or quoted buying price (or lower), the firm shall have the obligation to execute the transaction. The Click System will assist in the automatic execution of the transaction. If a trading order price meets the prices quoted by two or more recommending securities firms, the price priority principle shall apply to the prices quoted by the recommending securities firms; if the prices are the same, the time priority principle shall apply in the automatic execution of the transaction..
     When a recommending securities firm, pursuant to paragraph 1, subparagraph 6, clicks and trades a trading order not meeting the price quoted, if at the time of the click-and-trade the sell (or buy) quote price is lower (or higher) than the sell (or buy) price clicked, the transaction shall be executed in full, and price trade-through shall be prohibited. The clicked sell (or buy) order price may not be higher (or lower) than the sell (or buy) quote price, and the clicked trading order price shall be deemed as the changed quoted price. If the quantity of shares for execution in a click-and-trade transaction is lower than the certain volume in paragraph 3, the Click System will disclose the remaining volume; the buy or sell quote corresponding to the changed quoted price shall remain at the original price and quantity and continuously be disclosed..
    The "obligation to buy or sell when a certain reasonable spread exists between buy and sell orders" in paragraph 1, subparagraph 7 means that when the trading order price input into the Click System by a buyer or seller for an Emerging Stock recommended by a recommending securities firm meets the trading order spread ratio set by that firm's internal operating rules for the trading of Emerging Stocks through price negotiation, that firm shall execute click-and-trade transactions for buy or sell orders within the scope of the corresponding executable volume.
    If the recommending securities firm holds less than the minimum quoted volume of the Emerging Stock, it may be exempted from the obligation to provide sell quotes as provided in paragraph 1, subparagraphs 2 and 3 above; provided that it shall, within 1 business day, make corrections and perform the obligation to provide sell quotes.
     With respect to an Emerging Stock that it recommends, a recommending securities firm may not, within a short time after the issuer is registered for Emerging Stock trading, sell in a large volume the shares that it has subscribed. The recommending securities firm also may not, for purposes other than market making, sell in a large volume the shares of the Emerging Stock that it holds.
Article 22     A recommending securities firm shall handle the purchase and sale of the Emerging Stocks it recommends in the follow manners:
  1. Price negotiation through the Click System with securities brokers executing customer trades or with securities dealers; or
  2. Conduct the following trades for its own account through price negotiation with customers at its place of business:
    1. Price negotiation with a securities broker that is executing customer trades, with each trade having a volume of no less than 100,000 shares or a transaction amount of NT$5 million or more as well as satisfying one of the following conditions:
      1. The recommending securities firm is conducting brokerage trading of one purchase and of one sale on the same trading day, and the trading counterparty is not an insider of the issuer of the Emerging Stock.
      2. Other circumstances approved by the TPEx.
    2. Price negotiation with a securities broker that is using its error account.
    3. For price negotiations with other recommending securities firms, a description of the trade and approval procedures shall be stated in the internal operating rules pursuant to the TPEx Directions Governing the Particulars to be Recorded in the Internal Operating Rules of Recommending Securities Firms of Emerging Stocks.
    4. Price negotiation with a securities dealer, with each trade having a volume of no less than 30,000 shares.
     The spread between the execution price in subparagraph 2 of the preceding paragraph and the price quoted at that time by the recommending securities firm may not exceed 10 percent of the price quoted, provided that when a recommending securities firm conducts brokerage trading of one purchase and of one sale on the same trading day, the execution price shall fall between the buy price and the sell price quoted at that time by the recommending securities firm.
Article 23      A recommending securities firm executing trades for its own account through price negotiation with customers at its place of business may do so by the following methods:
  1. Face-to-face price negotiation;
  2. Price negotiation by telephone, letter, or telegram;
  3. Price negotiation via IC card, Internet, or other electronic means of trading.
  4. Other trading methods approved by the TPEx.
    The recommending securities firm trading Emerging Stocks at its place of business through direct price negotiation with a customer shall synchronously record price negotiations made over the telephone and keep the telephone recordings at its place of business.
    The provisions of paragraphs 6 to 7 of Article 62 of the TPEx Trading Rules regarding telephone recording affairs shall apply mutatis mutandis to the keeping of telephone recordings under the preceding paragraph and to the handling of the cases of malfunctioning of recording equipment or procedural omissions.
Article 24     A recommending securities firm shall quote prices through the Click System.
    The quotes referred to in the preceding paragraph shall be valid for that day only.
    When reporting trades, the recommending securities firm shall enter the securities firm code number, stock name, price, volume, type of trade, and other relevant information into the Click System in the prescribed format. Once the system has accepted the information, it will report it back in sequence through the transmission system in confirmation. The same shall apply to any changes thereto.
Article 25     Once a recommending securities firm completes a trade through price negotiation via the Click System, the system will promptly report the trade information back in sequence in confirmation.
    A recommending securities firm directly trading Emerging Stocks with a customer at its place of business shall, swiftly after the execution of the trade is confirmed, enter the trade information into the Click System in the format prescribed by the TPEx. If both the selling and buying parties are recommending securities firms, the selling party shall enter the information.
Article 26     A recommending securities firm buying and selling Emerging Stocks through price negotiation may not charge any handling fee from the counterparty of a trade.
Section 2 Securities Dealers
Article 27     A securities dealer trading Emerging Stocks for its own account shall enter the information such as its securities firm code number and the names, prices, and volumes of the stocks it intends to buy or sell into the Click System in the prescribed format and trade such shares through price negotiation with the recommending securities firms for the given Emerging Stocks.
    Once accepted by the Click System, the quote information in the preceding paragraph will promptly be reported back in sequence through the transmission system in confirmation. The same shall apply to any changes thereto.
Article 28     When a securities dealer trades Emerging Stocks for its own account, after the recommending securities firms for the given Emerging Stocks have executed trades through price negotiation via the Click System, the system will promptly report back the trade information in sequence.
    When a securities dealer purchases Emerging Stocks under Article 22, paragraph 1, subparagraph 2, item D, it shall, within 5 business days after the trade date, apply to become a recommending securities firm for the stocks pursuant to the applicable provisions of the TPEx Rules Governing the Review of Emerging Stocks for Trading on the TPEx.
Section 3 Securities Brokers
Article 29     Upon receiving a customer order to trade Emerging Stocks, a securities broker shall promptly enter the information such as the customer's account and the names, prices, and volumes of the stocks specified in the buy or sell order into the Click System in the prescribed format, and negotiate prices with the recommending securities firms for the given Emerging Stocks; however, this rule shall not apply if the customer requests, upon submitting the order, to negotiate prices with the recommending securities firm by the method in Article 22, paragraph 1, subparagraph 2, item A.
    Once accepted by the Click System, the customer order information in the preceding paragraph will promptly be reported back in sequence through the transmission system in confirmation. The same shall apply to any changes thereto.
Article 30     When a securities broker receives a customer order to trade Emerging Stocks, after the recommending securities firms for the given Emerging Stocks have executed trades through price negotiation via the Click System, the system will promptly report the trading information back in sequence, and the securities broker shall report the trading information back to the customer in confirmation.
Article 31     A securities broker receiving a customer order to trade Emerging Stocks shall collect a handling fee from the customer after the trade has been executed.
    A securities broker may set its standard handling fee rate based on the transaction amount, and may separately set discounts and minimum fees per order. If the fee rate set by the securities broker exceeds 0.5 percent of the transaction amount, the securities broker shall notify its customers of this fact by an appropriate method before implementing the rate, and retain a record of that notification, provided that offshore overseas Chinese and foreign nationals may be notified before clearing and settlement.
Section 4 Mutatis Mutandis Application of Provisions
Article 32     The following provisions of the TPEx Trading Rules shall apply mutatis mutandis to the trading of Emerging Stocks on the TPEx: the provisions of Chapter III, Articles 18 to 30 regarding securities firms trading on the TPEx, the provisions of Chapter V, Article 62, Article 62-2, Article 63, and Articles 66 to 68 regarding securities firms trading for the account of customers, and the provisions of Chapter VI, Article 70, Article 70-1, and Articles 74 to 78 regarding propriety trading by securities firms.
Chapter IV Payment Settlement
Article 33     A securities broker accepting a customer order to trade Emerging Stocks shall prepare a trading report and deliver the same to the customer to sign/seal by 12 noon of the business day next following the day the trade is executed. However, if the customer executes a letter of consent, the signature/seal on the trading order may be exempted, provided that before the payment settlement the securities broker shall inform the customer of any matters relevant to the trading order and keep a confirmation record.
    A securities broker shall collect the purchase price or the sold Emerging Stocks by book-entry transfer by 10 a.m. of the second business day after the trade date, provided that if the customer is an offshore overseas Chinese or foreign national, and during the trade confirmation process there are discrepancies between holidays in different time zones, interruptions in telecommunications, natural disasters, or other occurrences of force majeure, or the custodian institution fails to receive the settlement instructions or the settlement instructions and the trade report are inconsistent, and where such occurrences are verifiable, then the securities broker shall file a written report of delayed payment settlement with the TPEx by 10 a.m. of the second business day after the trade date. The counterparty recommending securities firm's approval shall be obtained in advance when filing a written report of delayed settlement for selling of Emerging Stocks, and the deadline for settlement of the price payable for the securities sold or after mutual offsetting of the prices of the securities purchases and sales may be extended to 6 p.m. of the third business day after the trade date.
    Where there is a record that the securities broker has filed a report of delayed payment settlement with the TPEx under the preceding paragraph, and the customer, by 6 p.m. of the third business day after the trade date, fulfills its payment settlement obligations for the price payable for the securities sold or after mutual offsetting of the prices of the securities purchases and sales, or the securities broker files an out-trade report, the securities broker shall promptly report in writing to the TPEx to cancel the delayed payment settlement record; if the payment settlement obligations are not fulfilled, the securities broker shall promptly take the measures set out in Article 36.
    After completing payment settlement with the recommending securities firm, a securities broker shall promptly deliver the purchased Emerging Stocks or pay the sales price to the customer by book-entry transfer.
Article 34     A securities firm trading Emerging Stocks through price negotiation via the Click System shall, by 12 noon of the second business day following the trade date, complete payment settlement with the securities firm that was the other party to the trade according to the confirmed trade information reported back by the Click System on the trade date. However, for a trade executed by a recommending securities firm, or by a securities broker through its error account, for which the payment settlement is due on the second business day after the trade date, the payment settlement may be conducted on the basis of the net balance after offsetting the purchases and sales in accordance with the rules of the central securities depository enterprise.
    Where a recommending securities firm trades Emerging Stocks through price negotiation at its place of business directly with a customer, the securities firm shall, by 12 noon of the second business day next following the day the trade is executed, complete receipt/payment of the money and securities directly with the customer or carry out payment for the securities itself pursuant to relevant regulations or rules of the central securities depository enterprise.
Article 35     A securities firm conducting payment settlement for Emerging Stock transaction shall enter into a contract with the central securities depository enterprise and handle the affairs in accordance with relevant regulations prescribed by the central securities depository enterprise.
Article 36     When a customer placing an order with a securities broker to trade Emerging Stocks fails to fulfill the payment settlement obligation, the securities broker shall complete the payment settlement for the customer, or may cancel the defaulted trade instead where so agreed by the recommending securities firm.
    Upon occurrence of an event in the preceding paragraph, the securities broker shall promptly notify the TPEx in writing with a copy to the defaulting customer, andthen pursue payment from the customer.
    When a customer trading Emerging Stocks through price negotiation with a recommending securities firm for his/her own account fails to fulfill the payment settlement obligation, the defaulted trade shall accordingly be canceled. The recommending securities firm shall promptly notify the TPEx, with a copy to the defaulting customer, and then directly pursue payment from the customer.
Article 37     Where a securities firm trading Emerging Stocks is unable to fulfill its payment settlement obligation, the TPEx may temporarily suspend its rights to trade Emerging Stocks on the TPEx and report via letter to the competent authority, and meanwhile cancel the trade; the counterparty to the trade shall pursue payment on its own behalf.
Article 38     The provisions of Chapter VII, Article 82, paragraphs 3, 5, and 6 of the Trading Rules regarding payment settlement shall apply mutatis mutandis to the trading of Emerging Stocks on the TPEx.
Chapter V Penalties
Article 39     If a securities firm violates Article 5, Article 7, Article 8, Article 14, Article 15, Article 16, Article 21, Article 22, paragraph 1 or 2 of Article 23, Article 27, paragraph 2 of Article 28, Article 29, or Article 30, the TPEx may notify such securities firm to make corrections or improvements within a specified time limit.
Article 40     Under any of the following circumstances, the TPEx may warn a securities firm and notify it to make corrections or improvements within a specified time limit:
  1. Violation of Article 10, Article 21, paragraph 3 of Article 23, Article 24, paragraph 2 of Article 25, Article 26, Article 31, Article 33, Article 34, or Article 36; or
  2. Where such securities firm has failed to make corrections or improvements within the time limit set pursuant to the preceding Article.
  3. Where, having been assessed and provided guidance by the TPEx pursuant to the directions for assessing performance referred to in Article 7, paragraph 4 herein, such securities firm still fails to make corrections or improvements.
Article 41     Under any of the following circumstances, the TPEx may impose a breach penalty of not less than NT$50,000 and not more than NT$200,000 on a securities firm, and may impose successive penalties until corrections or improvements are made; depending on the circumstances of the violation, it may also refuse to handle such securities firm's recommendations of Emerging Stocks:
  1. Violation of Article 4, Article 6, Article 21, or Article 35;
  2. Failure to make corrections or improvements within the time limit set pursuant to Article 40; or
  3. Where the TPEx has given warnings pursuant to Article 40 two or more times within the past half year.
    If any violation under any subparagraph of the preceding paragraph has occurred again with respect to a securities firm within the past half year, the TPEx may impose a breach penalty of NT$400,000.
Article 42     Under any of the following circumstances, the TPEx may dispose the matter by applying, mutatis mutandis, Article 96 of the Trading Rules:
  1. A securities firm has been punished with a breach penalty pursuant to Article 41 three times or more within the past half year; or
  2. A securities firm has failed to pay a breach penalty pursuant to Article 41.
Article 43     Dispositions made by the TPEx pursuant to this Chapter shall take effect from the time the notice is served to the securities firm.
Chapter VI Supplementary Provisions
Article 44     Business service fees paid by securities firms for trading Emerging Stocks shall be governed by the Standards Governing the Collection of Business Service Fees and Facility Use Fees for TPEx Trading by Securities Firms" promulgated by the TPEx.
Article 45     These Rules, and any amendments hereto, shall be promulgated for enforcement after ratification by the competent authority.