Search Result

Article Content

 
Article 1     These Rules are prescribed to uphold the market order of "Taiwan Securities Exchange Stock Index Option Contract" (referred to as "the Contract" hereunder) so as to safeguard the secure and fair trading of the Contract.
Article 2     In carrying out trading of the Contract, futures commission merchants shall observe these Rules in addition to the Futures Trading Law and relevant regulations, the Operating Rules, public announcements, and circulars of Taiwan Futures Exchange Corporation (the TAIFEX hereunder).
Article 3     The Contract is abbreviated as "TAIEX Option" with ticker symbol "TXO."
Article 4     The underlying of the Contract is Taiwan Stock Exchange Capitalization Weighted Stock Index (referred to as the "underlying index" hereunder). The calculation formula, index components, base period, adjustment and other relevant matters of the underlying index shall follow the determinations of the Taiwan Stock Exchange Corporation.
Article 5     The Contract comes in call options and put options.
    A call option is a contract giving the buyer the right to purchase a specified quantity of the underlying or clear and settle the right by cash on the expiration date at the strike price under specified trading terms.
    A put option is a contract giving the buyer the right to sell a specified quantity of the underlying or clear and settle the right by cash on the expiration date at the strike price under specified trading terms.
Article 6     The multiplier of the Contract shall be NT$50 per index point.
    The settlement value of the Contract on expiration date shall be equal to the difference between the final settlement price and the strike price multiplied by the contract multiplier.
Article 7     The premium of the Contract shall be quoted in index points. The value per point shall be the contract multiplier depicted in the preceding article.
    The minimum fluctuation of the premium quotation shall be as follows:
  1. Under 10 points: 0.1 point.
  2. 10 points and above but under 50 points: 0.5 point.
  3. 50 points and above but under 500 points: 1 points.
  4. 500 points and above but under 1,000 points: 5 points.
  5. 1,000 points and above: 10 points
Article 8     Daily change of premium for the contract (upside and downside limits) shall be capped at 10 percent of the previous day's closing of underlying index on the Taiwan Stock Exchange (TWSE).
Article 9     The expiration months of the Contract, unless otherwise provided, are respectively spot month, next two calendar months and the next two quarter months on March, June, September and December cycle such that there are 5 expiration months listed at one time. The last trading day for the individual contract months shall be the third Wednesday of the expiration month, and the last trading day shall be the expiration day. The next business day following the expiration day of an expiring contract shall be the initial trading day for contracts in the new delivery month.
    The TAIFEX may, on the Wednesday in a given trading week, add contracts for which the initial trading day is the given Wednesday and the last trading day is the next Wednesday. The exception is the second Wednesday of each month; the last trading day for that contract is the expiration day.
    The trading of the Contract shall end at the close of the last trading day. Where the last trading day falls on a holiday or the trading cannot take place due to force majeure, the closest next business day shall be the last trading day and initial trading day.
Article 10     For listing contract series of new expiration months or contracts with new strike prices for existing expiration dates, the TAIFEX shall, based on the previous business day's closing price of the underlying index on the TWSE (hereinafter, the "base index"), consecutively introduce contracts with in-the-money and out-of-the money strike prices at intervals of the strike price interval, until the following conditions are satisfied:
  1. Three consecutive near months beginning with the spot month, with the highest and lowest strike prices covering 15 percent above and below the base index.
  2. The next 2 quarter months, with the highest and lowest strike prices covering 20 percent above and below the base index.
    The "strike price interval" referred to in the preceding paragraph is determined by the following method:
  1. Strike price less than 3,000 points: 50 point interval for near-month contracts, 100 point interval for quarter-month contracts.
  2. Strike price of 3,000 points or higher but less than 10,000 points: 100 point interval for near-month contracts, 200 point interval for quarter-month contracts.
  3. Strike price of 10,000 points or higher: 200 point interval for near-month contracts, 400 point interval for quarter-month contracts.
    When a quarter-month contract becomes a near-month contract, the unlisted contracts with strike prices set based on the strike price interval of the near-month contract shall be made up.
    Contracts with strike prices may be added pursuant to Article 10-1, paragraph 2 starting from the Wednesday before the expiration day for the individual contract months.
    In addition to listing contracts of different strike prices as described in paragraph 1, the TAIFEX may, according to market status, offer contracts with other strike prices.
Article 10-1     With respect to contracts listed pursuant to Article 9, paragraph 2, the TAIFEX shall consecutively introduce contracts with in-the-money and out-of-the money strike prices at the strike price intervals of near-month contracts under paragraph 2 of the preceding article, until the highest and lowest strike prices cover 7 percent above and below the base index.
    In addition to adding new strike prices for an existing contract pursuant to the preceding paragraph, the TAIFEX may, in the range of 3 percent above and below the base index, add contracts with strike prices at half the strike price intervals of the near-month contracts, and may, depending on market conditions, offer other contracts with other strike prices.
Article 11     The trading hours for the Contract are 8:45 a.m. to 1:45 p.m. on the TAIFEX regular business days. On the last trading day of the month in which the Contracts reaches expiration, the trading hours are 8:45 am to 1:30 pm.
    The trading days of the Contract are the same as those of Taiwan Stock Exchange. Where the TWSE halts trading of all securities on a trading day, the TAIFEX may announce the same based on then circumstances.
    The trading hours and trading days are subject to change with the approval of the competent authority.
Article 12     Buy and sell orders, unless otherwise provided, are matched by automated computer matching. Matching shall be done by call auction at the opening of market and on a continuous basis after the opening of market.
Article 13     When accepting customer order to buy the Contract, a futures commission merchant shall first collect from the buyer the premium required for the total transacting volume.
    When accepting customer order to sell the Contract, a futures commission merchant shall first collect from the seller the initial margins required for the total transacting volume. The futures commission merchant shall credit the proceeds of premium received from selling the Contract to the Client Margin Account of said customer after transaction, and mark to market the margins required for the short position of the customer on a daily basis. Short position that is to offset an earlier long position does not require margin.
    When the margin account balance of a customer falls below the required maintenance margin, a futures commission merchant shall immediately notify the customer to pay in cash the difference between his margin account balance and the initial margin required for his open position within a prescribed time period. Where the customer fails to comply accordingly, the futures commission merchant may proceed to liquidate the customer's open position.
    The initial margin and maintenance margin specified in the preceding two paragraphs shall not be lower than the initial margin and maintenance margin requirements announced by the TAIFEX.
    The initial margin and maintenance margin announced by TAIFEX shall be based on the clearing margin calculated according to the "Taiwan Futures Exchange Standards and Methods for Receipt of Clearing Margins" plus a percentage prescribed by the TAIFEX.
Article 14     Position holders of the Contract may, prior to the last trading day, sell or buy back one or all positions originally bought or sold on the Exchange to end his contractual rights and obligations.
Article 15     The daily settlement price of the Contract shall be determined based on the following:
  1. The last transaction price of the day; or
  2. To be determined by the TAIFEX if there is no transaction price in the last 15 minutes before the close of market or the closing price depicted in the preceding item is deemed unreasonable.
Article 16     The final settlement price of the Contract shall be set based on the simple average price of the underlying index during the 30 minutes of trading before market close on the expiration day as provided by the TWSE. If the TWSE postpones market closing or matching, the TAIFEX may extend the aforementioned 30-minute sampling time.
    The calculation method under the preceding paragraph shall be separately prescribed by the TAIFEX.
Article 17     The contract may be exercised on the expiration date only. Open position that is in-the-money on expiration day shall be settled in cash by the net difference between the final settlement price and the strike price.
    The in-the-money position referred to in the preceding paragraph means a call option position when the final settlement price is greater than the strike price, or a put option position when the final settlement price is less than the strike price. Writers with in-the-money positions shall pay the aforesaid difference in cash, while buyer will receive the difference.
Article 18     Buyers who intend to exercise the Contract shall make a declaration on the expiration date. An in-the-money option shall be automatically exercised if the difference between the final settlement price and the strike price falls in the range announced by the TAIFEX, unless the buyer declares waiver of right to exercise in advance.
    Futures commission merchants shall submit notice within the prescribed time set out by the TAIFEX indicating exercise or waiver of right.
Article 19     All exercised options are assigned to the holders of short positions by the TAIFEX through an automatic random procedure.
Article 20     Unless otherwise provided, the total open positions in the Contracts held on either the long or short side of the market by a trader at any time may not exceed the limits announced by the TAIFEX.
    The "total open positions...on either the long or short side of the market" in the preceding paragraph means the combined total position in call options bought and put options sold, or the combined total position in call options sold and put options bought.
    Every three months or based on market conditions, the TAIFEX will announce the applicable position limits under paragraph 1. The position limits are defined, in a bracketed scale set out below, relative to benchmarks pegged to the daily average trading volume or open interest volume (whichever is higher) in the Contracts during the period in question. The benchmarks are 5 percent thereof for natural persons and 10 percent for juristic persons. However, the lowest position limit shall be 2,000 contracts for natural persons, and 6,000 contracts for institutional investors:
  1. When the benchmark is 2,000 contracts or more, the position limit shall be the benchmark rounded down to the nearest integral multiple of 500 contracts.
  2. When the benchmark is 5,000 contracts or more, the position limit shall be the benchmark rounded down to the nearest integral multiple of 1,000 contracts.
  3. When the benchmark is 10,000 contracts or more, the position limit shall be the benchmark rounded down to the nearest integral multiple of 2,000 contracts.
  4. When the benchmark is 20,000 contracts or more, the position limit shall be the benchmark rounded down to the nearest integral multiple of 5,000 contracts.
    The limit on the total number of open Contract positions held by a futures dealer shall be three times the position limit of a natural person under paragraph 3, provided that for a market maker of the Contract, TAIFEX may adjust that limit depending on market conditions.
    When the TAIFEX examines the scale of applicable position limits, if the increase or decrease in the daily average trading volume or open interest volume for the given period compared to the time of the previous adjustment does not exceed 2.5 percent, no adjustment shall be made even though the level for adjustment has been reached.
    Any raising of the position limit will take effect from the TAIFEX announcement date, and any lowering of the position limit will take effect from the expiration of the next-nearest month contract that is already listed on the announcement date; provided, the TAFIEX may adjust this according to circumstances.
    When the position limit is lowered under the preceding paragraph, a position held by a trader prior to the effective date that surpasses the lowered limit may be held until the expiration date of the contract; provided, no new position may be added until the lowered limit has been complied with.
    The limit set forth in paragraph 3 does not apply to the aggregate open positions in the Contract held by omnibus accounts, with the exception of undisclosed omnibus accounts, which accounts are subject to the limits for institutional investors.
    As required for their hedging needs, institutional investors may apply to the TAIFEX for a relaxation of the position limit.
    The open position of a customer shall also observe TAIFEX Rules Governing Market Position Monitoring Operation in addition to the provisions set forth hereof.
Article 21     An FCM engaging in proprietary or brokerage trading of the Contracts shall, unless otherwise provided, be subject to a limit of 200 contracts on the quantity of each trading quote.
    The TAIFEX may make adjustments to the limit on the quantity of trading quotes in the preceding paragraph in view of market trading conditions.
Article 22     Where the contract must stop trading or be delisted due to any of the conditions stipulated in Article 31 of the Operating Rules of Taiwan Futures Exchange Corporation, the TAIFEX shall make public announcement to the effect 30 days before implementation.
    In such event, all open positions shall be liquidated before the implementation day for cessation of trade or termination of listing as announced. All open positions not liquidated before the aforesaid implementation day shall be settled based on the settlement price on the day of implementation.
Article 23     These Rules shall be implemented following the approval of the competent authority. The same provision applies to subsequent amendments.