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Chapter I General Principles
Article 1     These Rules are adopted pursuant to Article 35, paragraph 6 and Articles 71 and 71-1 of the Taipei Exchange (TPEx) Rules Governing Securities Trading on the TPEx (hereinafter, the "Trading Rules").
Article 2     A securities dealer (hereinafter, "securities firm") participating in bond trading and when-issued trading of central government bonds through the TPEx Electronic Bond Trading System (EBTS) shall do so in uniform compliance with these Rules. Matters on which these Rules are silent shall be subject to other relevant provisions of the TPEx.
    The EBTS comprises a Computerized Negotiation System and a Comparison System.
    The Computerized Negotiation System is a system whereby securities firms enter quotes for outright transactions and repo-style transactions and negotiate prices for and execute such trades on-line.
    The Comparison System is a system whereby securities firms enter information on price negotiations in outright transactions conducted at their business premises and confirm the contents of such transactions.
    The term "when-issued trading of central government bonds" in paragraph 1 refers to outright transactions of underlying government bonds during the period beginning from the fifteenth and concluding on the first business day prior to the date of issue, following the announcement of the quarterly plan for bond issuance by the Ministry of Finance. Provided, if EBTS trading is suspended under applicable regulations on the business day prior to the originally scheduled date of issue of the government bonds because of a natural disaster or force majeure, the when-issued trading period will be extended to the date of issue of the bonds.
    The repo-style transactions referred to in paragraph 3 include the following transactions:
  1. Designated-bond repo-style transactions: Borrowing and lending of book-entry central government bonds is the main purpose. A particular series of bonds must be designated as the underlying securities at the time of a quote.
  2. Ordinary-collateral repo-style transactions: Cash financing shall be the sole purpose. It is not necessary to designate a particular series of bonds as the underlying securities at the time of a quote.
    When a securities firm undertakes a bond derivatives transaction, it may use the Comparison System during the two business days preceding the settlement and clearing date to check information on trading in the underlying bonds.
    If the when-issued trading period as calculated in accordance with paragraph 5 does not reach 15 business days, the commencement day of the when-issued trading shall be the business day next following the announcement by the Ministry of Finance.
Article 3     Only book-entry central government bonds, local government bonds, corporate bonds, financial bonds, and other bonds designated and publicly announced by the TPEx may be traded through the EBTS. The date of termination of trading of such bonds shall be publicly announced by the TPEx.
    The coupon rate of the local government bonds, corporate bonds, and financial bonds referred to in the preceding paragraph shall be a fixed rate, and the calculation of their prices shall be subject to the formula for yield-to-maturity/price-per-hundred conversion publicly announced by the TPEx.
Article 4     A securities firm participating in bond trading through the EBTS shall sign a Contract for Participation by Securities Firm in Trading Through the Electronic Bond Trading System, submit a Securities Firm and Personnel Registration Application Form therewith, and deposit a bond payment settlement reserve (hereinafter, "reserve") with the TPEx.
    The deposit, supplementation, and application for withdrawal of the reserve referred to in the preceding paragraph shall be done in compliance with the TPEx Rules Governing Bond Payment Settlement Reserves for the Electronic Bond Trading System.
    The Contract for Participation by Securities Firm in Trading Through the Electronic Bond Trading System and the Securities Firm and Personnel Registration Application Form referred to in paragraph 1 shall be separately prescribed by the TPEx.
Article 4-1     A securities firm may accept the application of a specified institutional juristic person to participate, after being approved by the TPEx, in EBTS trading under the security firm's name, and with the securities firm to be responsible for performance of the relevant settlement obligations.
    An institutional juristic person referred to in the preceding paragraph must be a government agency, labor pension fund management institution, or a central government bond dealer or securities investment trust fund not qualified as a securities firm, and shall sign a Consent Form for Use of the Electronic Bond Trading System by a Securities Firm Customer.
    An institutional juristic person that participates in the EBTS under the names of different securities firms shall limit the number of such firms to three. In the instance of the first application, the trading counterparty shall be a primary government bond dealer. In all subsequent instances, the trading counterparties must meet the Central Bank's qualifications for a general designated dealer for open market transactions or be eligible to engage in the business of over-the-counter trading of financial derivatives.
    Prior to accepting an institutional juristic person to participate in EBTS trading, a securities firm shall retain a photocopy of its registration certificate, and set a limit on its trading amount based on its financial and fund utilization status.
    On the transaction date of each transaction or transactions executed by the institutional juristic person through the EBTS, the securities firm shall on a transaction-by-transaction basis execute an opposite transaction or transactions with that institutional juristic person on the over-the-counter market at its place of business, and carry out settlement and clearing and transaction reporting in accordance with applicable TPEx trading rules.
    The Consent Form for Use of the Electronic Bond Trading System by a Securities Firm Customer shall be separately drawn up by the TPEx.
Chapter II Trading Principles
Article 5     With the Computerized Negotiation System, trading hours are 9 a.m. to 1:30 p.m. for outright transactions and 9 a.m. to 1:30 p.m. and 2 p.m. to 3 p.m. for designated-bond repo-style transactions; the service hours for the Comparison System are 1:30 p.m. to 4 p.m.
    As required by market trading of when-issued central government bonds, the TPEx may, on the tender date of the government bonds, extend the trading hours of the Computerized Negotiation System under the preceding paragraph to 4 p.m.
Article 6     A securities firm shall quote its outright transactions and repo-style transactions in terms of yield and interest rate respectively, with a tick size of 1/10,000 of a percentage point; provided, outright transactions of exchangeable government bonds shall be quoted on a price-per-hundred basis, with a tick size of 1/10,000 of a New Taiwan Dollar.
    For quotes placed through the Computerized Negotiation System, quote size is one trading unit or an integral multiple thereof. An individual quote may not be placed in an amount of more than nine trading units. Except for the trading as specified in Article 6-2, a trading unit is NT$50 million par value.
    For quotes placed through the Comparison System, quote size is one trading unit or an integral multiple thereof. A trading unit is NT$100,000 par value.
    Where the repo-style transactions referred to in paragraph 1 are designated-bond repo-style transactions, each price quote shall simultaneously quote the interest rate for cash financing and the fee rate for bond lending.
Article 6-1     The initial dollar amount of a designated-bond repo-style transaction is the price receivable/payable calculated on the basis of the next day's reference yield or price-per-hundred of the underlying asset, and the dollar amount at maturity shall be calculated as the initial dollar amount plus cash financing interest and minus bond lending fee; for an ordinary-collateral repo-style transaction the initial dollar amount is the price receivable/payable calculated on the basis of the current day's reference yield or price-per-hundred of the underlying asset plus or minus the collateral market value adjustment amount negotiated between the two parties to the transaction.
    Designated-bond repo-style transactions are divided into transaction periods of one, five, or ten business days, while ordinary-collateral repo-style transactions are divided into transaction periods of one, five, ten, or twenty business days. However, the resale date shall not fall on any day during the period from five business days before the date of repayment of principal and payment of interest for the underlying property to the date of repayment of principal and payment of interest.
    The term "transaction period" in the preceding paragraph means a period beginning on the day on which the seller delivers the underlying asset to the buyer and ending on the resale date.
    The asset underlying a repo-style transaction shall remain the property of the buyer until the resale date. The buyer may engage in outright sales of bonds acquired in a repo-style transaction.
    Where a securities firm acquires benchmark government bonds through the EBTS in a designated-bond repo-style transaction, unless the acquisition is for the purpose of meeting short sale delivery needs, the firm shall by the transaction date place an ask quote for such bonds or otherwise place an ask quote for a designated-bond repo-style transaction in a manner consistent with Article 7, paragraph 2. However, if the securities firm already holds benchmark government bonds, it may not acquire bonds of that same issue through the EBTS in a designated-bond repo-style transaction.
    The collateral market value adjustment amount referred to in paragraph 1 may not exceed 10 percent of the current day's reference yield or price-per-hundred.
Article 6-2     An outright transaction of book-entry central government bonds may be a transaction of baskets of on-the-run and off-the-run bonds, or baskets of long-term and short-term bonds, and the quote shall be placed on a long-short spread basis, with a tick size of 1/10,000.
    Each trading unit of baskets of on-the-run and off-the-run bonds shall be quoted and traded in accordance with the following rules:
  1. A purchase of baskets of on-the-run and off-the-run bonds shall mean a purchase of on-the-run bonds with face value of NT$50 million at the last traded yield of the on-the-run bonds, and concurrently a sale of off-the-run bonds with the same maturity with face value of NT$50 million at such yield plus the quoted spread.
  2. A sale of baskets of on-the-run and off-the-run bonds shall mean a sale of on-the-run bonds with face value of NT$50 million at the last traded yield of the on-the-run bonds, and concurrently a purchase of off-the-run bonds with the same maturity with face value of NT$50 million at such yield plus the quoted spread.
    Each trading unit of baskets of long-term and short-term bonds shall be quoted and traded in accordance with the following rules:
  1. A purchase (or sale) of baskets of 10-year bonds and 5-year bonds shall mean a sale (purchase) of on-the-run 10-year bonds with face value of NT$50 million at the last traded yield of the on-the-run 10-year bonds, and concurrently a purchase (sale) of on-the-run 5-year bonds with face value of NT$100 million at such yield minus the quoted spread.
  2. A purchase (or sale) of 20-year bonds and 10-year bonds shall mean a purchase (sale) of on-the-run 10-year bonds with face value of NT$100 million at the last traded yield of the on-the-run 10-year bonds, and concurrently a sale (purchase) of on-the-run 20-year bonds with face value of NT$50 million at such yield plus the quoted spread.
    The term "on-the-run bonds" as used in this Article means the most recent issue of book-entry central government bonds of each maturity, which are separately marked on the system with 02Y, 05Y, 10Y, and 20Y to conform to their maturity at 2 years, 5, years, 10 years and 20 years; "off-the-run bonds" mean the book-entry central government bonds with the same maturity in the two issues preceding the on-the-run bonds, and which are marked on the system with 01 and 02.
    The term "last traded yield" in paragraphs 2 and 3 mean the latest quote for which the counterparties number over 70 on the same day in the TPEx Electronic Bond Trading System, and that has been executed.
Article 7     To place a quote, a securities firm shall enter all information required on the EBTS interface screen for each item. The EBTS will then confirm accepted quotes sequentially through a transmission system. The same applies to any change made thereto.
    The TPEx will, at 1:40 p.m. each day, compile statistics on current-day net long positions in benchmark government bonds taken by each securities firm on the Computerized Negotiation System, and the EBTS will quote such positions for sale in designated-bond repo-style transactions with the conditions of anonymity, zero interest rate, and one business day maturity. Notwithstanding the foregoing, a securities firm may change a quoted interest rate; where it has already sold bonds of that issue by price negotiation at its business premises, or where a demand for performance so requires, it also may change or cancel a sell quote by 2 p.m. by annexing relevant substantiating documentation.
    Once quotes placed in accordance with paragraphs 1 and 2 are executed through the EBTS, the execution details will be confirmed sequentially via a transmission system. The TPEx may, via the Internet and through an information enterprise, publicly disclose information regarding the six best buy and sell quotes on the Computerized Negotiation System and the name of the entity providing each such quote, together with the prevailing execution prices. Nevertheless, where a securities firm provides quotes anonymously, the TPEx will disclose only the quotation information.
    The information enterprise referred to in the preceding paragraph shall duly enter into a Contract for Supply and Use of Trading Information with the TPEx.
Article 8     A securities firm may in its sole discretion provide quotation to or execute a transaction with a selected trading counterparty, except that a transaction may not be executed between the head office and a branch unit, or between two branch units of a securities firm.
Article 9     With the exception of quotes in transactions under Article 6-2, which shall be firm quotes, when a securities firm conducts outright transactions through the Computerized Negotiation System, each quote shall first be identified as either a firm quote or a nominal quote and then be executed as follows:
  1. Where a trading order is provided with a firm quote, the transaction is executed upon execution confirmation by another securities firm.
  2. Where a quote is a nominal quote, upon confirmation by another securities firm, the securities firm that made the original quote may respond within 20 seconds as to whether the transaction is executed. Where the securities firm that made the original quote confirms execution of the transaction, the transaction is thereupon promptly executed; where it confirms non-execution of the transaction, or where no response is made within 20 seconds, the transaction is deemed not executed, and the EBTS will cancel the quote directly. Nevertheless, the other securities firm may cancel its confirmation at any time before the securities firm that made the original quote has responded as to whether the transaction is executed.
    A securities firm may ask another securities firm to provide a quote. The quote provided in response by the other securities firm is a firm quotation, and is executed as follows:
  1. Where the securities firm that asked for the quotation confirms within 20 seconds the execution of the transaction at the price quoted by such other securities firm, the transaction is thereupon promptly executed.
  2. The securities firm that provides the quotation may cancel its quotation at any time before the securities firm that asked for the quotation has confirmed the execution of the transaction.
    For designated-bond repo-style transactions carried out by a securities firm through the Computerized Negotiation System, each such quote is a firm quotation and is promptly executed upon the confirmation of execution by the other securities firm. Notwithstanding the foregoing, transactions to which any of the following circumstances applies cannot be executed:
  1. Where the cumulative unexpired balance of repo-style transactions of an individual issue of bonds amounts to more than one-half of the total balance of such bond issue, the EBTS will suspend confirmation and execution by securities firms of quotes for such bond issue.
  2. Where the cumulative unexpired balance of reverse repo transactions of an individual issue of bonds by a single securities firm amounts to more than one-tenth of the balance of a given bond issue, the EBTS will suspend confirmation and execution by securities firms of quotes for that bond issue, provided that a primary dealer in central government bonds need not observe this restriction when it carries out reverse repo transactions for purposes of meeting its settlement needs or selling government bonds it does not hold.
  3. A securities firm whose sell quote for a repo-style transaction remains on the EBTS after 2 p.m. may neither place a buy quote for a repo-style transaction of the same issue of bonds nor confirm execution of any repo-style transaction with another securities firm that has placed a sell quote for such bond issue.
    When a securities firm uses the Computerized Negotiation System to carry out ordinary-collateral repo-style transactions, each quote is firm. Once another securities firm hits the trade button, the seller shall by 9:45 a.m. on the transaction date individually report each trading unit sold and the collateral market value adjustment. A single trading unit is limited to a single bond. Once a system check confirms there is no error, the transaction is executed.
    The Computerized Negotiation System will execute each transaction one trading unit at a time.
Article 9-1     Where an error has occurred in a bid or ask quote and the transaction has been executed under Article 9, upon consent of the counterparty, the securities firm may report a correction of the error or cancellation of the transaction (hereinafter, "account change") to the TPEx by 4 p.m. on that day. Notwithstanding the foregoing, however, an account correction for an ordinary-collateral repo-style transaction shall be reported by 10 a.m. on that day.
    In an account change under the preceding paragraph, both parties shall provide written substantiating documentation.
Article 9-2     If any of the following circumstances applies to a central government bond during the when-issued trading period, the EBTS will directly cancel all its when-issued transactions:
  1. Cancellation of issuance.
  2. Change in the issue date, unless because of a duly handled postponement of the issue due to a natural disaster.
  3. Change in the period or method for repayment of the principal.
  4. Change in other terms and conditions of issuance that the TPEx deems to have a material effect influence on the value of the when-issued bond.
Article 10     Securities firms using the Comparison System shall enter transaction or performance information in the format prescribed by the TPEx. The execution of a transaction is confirmed when an EBTS comparison shows a match between bid and ask data.
Article 11     The daily reference yield or price-per-hundred for book-entry central government bonds traded through the EBTS shall be calculated as follows:
  1. The reference yield of a bond on the first day it is traded through the EBTS is as per the coupon rate stated on the bond; however, the reference price of an exchangeable government bond on the first trading day is NT$100.
  2. Per the weighted average yield or price-per-hundred based on transactions for the previous business day shown in the TPEx Table of Fair Value of Bonds.
  3. If there is no transaction record for the previous business day: per the theoretical yield or price-per-hundred for the previous business day shown in the TPEx Table of Fair Value of Bonds.
     The daily reference yield or price-per-hundred for local government bonds, corporate bonds, and financial bonds traded through the EBTS shall be calculated as follows:
  1. The reference yield of a bond on the date of issue is as per the coupon rate stated on the bond.
  2. As per the weighted average yield or price-per-hundred based on transactions through both the EBTS and price negotiations at the business premises of securities firms for the preceding business day.
  3. As per the reference yield or price-per-hundred for the preceding business day.
  4.     The TPEx shall calculate and publicly announce on a daily basis the reference yield or price-per-hundred referred to in the preceding two paragraphs.
Article 12     The net daily trading positions of a securities firm engaging in outright transactions through the EBTS may not exceed 60 times the net value of its reserve; the net daily trading positions of a primary dealer in central government bonds authorized by the Central Bank may not exceed 90 times the net value of its reserve. Notwithstanding the foregoing, in the case of a securities firm whose regulatory capital adequacy ratio has fallen below 200 percent in the most recent month, its net daily trading positions may not exceed 20 times the net value of its reserve.
    The net value of the reserve under the preceding paragraph is calculated by the amount of reserve deposited by the securities firm less value at risk and plus trading income or less trading loss.
    Where a securities firm engages in when-issued trading of a central government bond, its net trading positions on such bond shall be subject to Article 79-1 of the Trading Rules.
Chapter III Settlement and Clearing
Article 13     A securities firm participating in the EBTS to trade bonds shall separately open a book-entry central government securities account or custodial book-entry account and a money settlement account, and report the same with the TPEx before it begins to trade. The same shall apply to any change thereto.
    The money settlement account under the preceding paragraph shall be opened with a financial institution designated by the TPEx.
Article 14     The EBTS settlement and clearing date shall be set in accordance with the following provisions:
  1. The EBTS settlement and clearing date for outright transactions through the Computerized Negotiation System is the second business day after the transaction date; the EBTS settlement and clearing date for transactions through the Comparison System may be the first business day after the transaction date or the second business day after the transaction date, as stipulated by the two parties. However, the settlement and clearing date for when-issued trading of government bonds shall be the bond issue date, and if EBTS trading is suspended under applicable regulations on the business day prior to the originally scheduled date of issue of the government bonds because of a natural disaster or force majeure, the settlement and clearing date for when-issued trading shall be the next business day following the date of issue of the bonds.
  2. The EBTS settlement and clearing date for designated-bond repo-style transactions is the second business day after the transaction date.
  3. The EBTS settlement and clearing date for ordinary-collateral repo-style transactions is the second business day after the transaction date.
    On the settlement and clearing date, a securities firm shall carry out settlement and clearing with the TPEx in accordance with the following provisions, based on the net amount of receivables against payables for the traded bonds and prices as set out in the Settlement and Clearing Statement:
  1. Where there is a net amount of money payable, the securities firm shall directly deposit (transfer) such amount into the money settlement account for the TPEx Electronic Bond Trading System by 1:30 p.m. on the settlement and clearing date. The time may be extended to by 3 p.m. if the date is also a settlement and clearing date of when-issued trading.
  2. Where there is a net amount of bonds payable, the securities firm shall directly transfer such amount into the bond payment account for the TPEx Electronic Bond Trading System before 1:30 p.m. on the settlement and clearing date. The time may be extended to by 3 p.m. if the date is also a settlement and clearing date of when-issued trading.
  3. Where there is a net amount of money receivable, after verification by the TPEx pursuant to subparagraph 2, such amount will be directly deposited (transferred) into the securities firm's money settlement account at any time starting from 1:30 p.m. on the settlement and clearing date.
  4. Where there is a net amount of bonds receivable, after verification by the TPEx pursuant to subparagraph 1, such amount will be directly transferred into the securities firm's book-entry central government securities account or custodial book-entry account at a clearing bank at any time starting from 1:30 p.m. on the settlement and clearing date.
    For EBTS bond trading by branch units of a securities firm, the head office shall compile the transaction details and carry out the operations under the preceding paragraph.
Article 15     Failure by a securities firm to fulfill its settlement obligation constitutes default. Upon occurrence of default by a securities firm, the TPEx may temporarily suspend its participation in EBTS trading.
Article 16     Upon occurrence of default by a securities firm which has insufficient money available to satisfy a pending settlement obligation, the TPEx may take the following measures with respect to the corresponding purchased bonds:
  1. Dispose of the corresponding bonds purchased by the securities firm.
  2. First contact another securities firm to carry out repo/reverse repo trading, and then take the measure under the preceding subparagraph.
  3. First contact another financial institution to arrange a loan of the money, and then take the measure under subparagraph 1.
Article 17     Upon occurrence of default by a securities firm which has insufficient bonds available to satisfy a pending settlement obligation, the TPEx may take the following measures with respect to the monies obtained from the corresponding sale of such bonds, or with respect to other bonds purchased by the securities firm:
  1. Dispose of the money obtained from the corresponding sale by the securities firm.
  2. First contact another securities firm to carry out repo/reverse repo trading, and then take the measure under the preceding subparagraph.
  3. First contact another financial institution to arrange a loan of the bonds, and then take the measure under subparagraph 1.
  4. If there are any corresponding purchased bonds of other kinds, they may be disposed of in accordance with the provisions of the preceding article.
Article 18     In addition to being responsible for the price difference and relevant fees incurred by any measures taken by the TPEx under Articles 16 or 17 hereof to handle a default event, a defaulting securities firm shall pay the TPEx a default penalty of one percent of the insufficient portion of money or bonds owed toward the pending settlement obligation.
Article 19     Where upon calculation the TPEx determines that the reserve deposited by a defaulting securities firm is insufficient to pay the price difference and relevant fees incurred by any measures taken by the TPEx under Articles 16 and 17 to handle the default event, and where the defaulting securities firm fails to make up the calculated deficiency on the same day in accordance with the notice by the TPEx, the TPEx may, based on the percentages shown in the original transaction records, distribute among all corresponding buyers and sellers the insufficient portion of the money or bonds owed toward the pending settlement obligation, and offset that portion of the money or bonds by means of cash settlement. The defaulting securities firm shall pay all corresponding buyers and seller a compensatory sum of one percent of the insufficient part of the money or bonds.
    The price for the cash settlement under the preceding paragraph shall be calculated based on the next day's reference yield of bonds of that issue.
Article 20     The TPEx may employ or dispose of the reserve deposited by a defaulting securities firm and interest accrued thereon to pay a default penalty payable by a securities firm and to pay the price difference and relevant fees incurred by measures taken by the TPEx under Articles 16 to 18.
    When handling a default event, the TPEx may, pursuant to the Contract for Participation by Securities Firm in Trading Through the Electronic Bond Trading System, designate a securities firm to assist in carrying out the settlement and clearing operations. The defaulting securities firm may not refuse or raise any objection to the price for or manner in which the TPEx coordinates disposal of the relevant money or bonds.
Article 21     Upon satisfying its settlement obligations and making up any shortfall in the reserve, a defaulting securities firm may be reinstated for participation in EBTS trading, subject to approval by the TPEx.
Chapter IV Supplementary Provisions
Article 22     A securities firm trading bonds through the EBTS in violation of any provisions hereof may additionally be punished under the TPEx Trading Rules.
Article 22-1     Where a securities firm reports an account change under Article 9-1, unless there is reasonable cause that has been recognized by the TPEx, the TPEx may take measures under applicable provisions:
  1. Where any of following circumstances applies to a securities firm, the TPEx may notify it to make corrections within a specified time limit:
    1. It has reported two or more individual account changes on a given day.
    2. It has reported four or more individual account changes in a given month.
    3. It has reported account changes three times or more in a given month.
  2. Where any of following circumstances applies to a securities firm, the TPEx may issue a warning to the securities firm:
    1. It has reported three or more individual account changes on a given day.
    2. It has reported six or more individual account changes in a given month.
    3. It has reported account changes four times or more in a given month.
    4. It has failed to make corrections within the time limit specified under the preceding subparagraph.
  3. Where any of following circumstances applies to the securities firm, in addition to notifying the securities firm to issue a warning to the negligent personnel and manager, the TPEx may impose a default penalty of not less than NT$50,000 but not more than NT$200,000:
    1. It has reported five or more individual account changes on a given day.
    2. It has reported eight or more individual account changes in a given month.
    3. It has reported account changes six times or more in a given month.
    4. The TPEx has issued a warning under the preceding subparagraph two or more times within the last half year.
  4. Where any of following circumstances applies to the securities firm, the TPEx may handle the matter by mutatis mutandis application of Article 96 of the Trading Rules:
    1. A default penalty has been imposed on the securities firm under the preceding paragraph three times or more within the last half year.
    2. It has failed to pay the default penalty under the preceding paragraph.
  5. If the securities firm makes any false statement when reporting an account change, the TPEx may handle the matter under Article 97 of the Trading Rules.
Article 23     These Rules, and any amendments hereto, shall enter into force by public announcement upon ratification by the competent authority after passage by the TPEx board of directors.