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Article 1     These Rules are specially prescribed to maintain orderly trading of the MSCI Taiwan Stock IndexSM Options Contract (referred to as "the Contract" hereunder), so as to ensure security and fairness in its trading.
Article 2     Futures commission merchants that engage in trading of the Contract shall observe these Trading Rules in addition to the Futures Trading Act and applicable acts and regulations. Matters on which these Trading Rules are silent shall be handled in accordance with the applicable bylaws and rules, public announcements, and circulars of the TAIFEX.
Article 3     The Contract is abbreviated as "MSCI Taiwan IndexSM Options"with the ticker symbol "MSO".
Article 4     The underlying index of the Contract is the MSCI Taiwan IndexSM (referred to as "underlying index" hereunder). The calculation formula, component stocks, base period, adjustments and other relevant matters of the underlying index shall follow the determinations of Morgan Stanley Capital International Inc.
    The Contracts are not sponsored, endorsed, sold or promoted by Morgan Stanley Capital International Inc. (“MSCI”), any affiliate of MSCI or any other party involved in, or related to, making or compiling any Indexes (the “MSCI Parties”). The Contracts have not been passed on by any of the MSCI Parties as to their legality or suitability with respect to any person or entity. None of the MSCI Parties guarantees the originality, accuracy and/or completeness of the underlying index or any data included therein. None of the MSCI Parties makes any express or implied warranties, and expressly disclaim all warranties of merchantability and fitness for a particular purpose or use with respect to the Contract, the underlying index or any data included therein. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages, claims, losses or expenses relating to any futures or options contracts or the underlying index, including, without limitation, any such damages, claims, losses or expenses caused by any errors or delays in calculating or disseminating the underlying index. None of the MSCI parties has any obligation to take the needs of the issuers of the Contracts, the owners of the Contracts or the Exchange into consideration in determining, composing or calculating the Indexes. None of the MSCI Parties is responsible for or has participated in the determination of the timing, prices, or quantities of the Contracts to be issued or in the determination or calculation of the equation by which the Contracts are settled.
    The underlying index of the Contract is the MSCI Taiwan IndexSM (referred to as "underlying index" hereunder). The calculation formula, component stocks, base period, adjustments and other relevant matters of the underlying index shall follow the determinations of Morgan Stanley Capital International Inc.
    The Contracts are not sponsored, endorsed, sold or promoted by Morgan Stanley Capital International Inc. (“MSCI”), any affiliate of MSCI or any other party involved in, or related to, making or compiling any Indexes (the “MSCI Parties”). The Contracts have not been passed on by any of the MSCI Parties as to their legality or suitability with respect to any person or entity. None of the MSCI Parties guarantees the originality, accuracy and/or completeness of the underlying index or any data included therein. None of the MSCI Parties makes any express or implied warranties, and expressly disclaim all warranties of merchantability and fitness for a particular purpose or use with respect to the Contract, the underlying index or any data included therein. Without limiting any of the foregoing, in no event shall any MSCI Party have any liability for any direct, special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages, claims, losses or expenses relating to any futures or options contracts or the underlying index, including, without limitation, any such damages, claims, losses or expenses caused by any errors or delays in calculating or disseminating the underlying index. None of the MSCI parties has any obligation to take the needs of the issuers of the Contracts, the owners of the Contracts or the Exchange into consideration in determining, composing or calculating the Indexes. None of the MSCI Parties is responsible for or has participated in the determination of the timing, prices, or quantities of the Contracts to be issued or in the determination or calculation of the equation by which the Contracts are settled.
Article 5     The Contract comes in call options and put options.
    A call options 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 options 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 US$20 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. below 0.5 points: 0.005 points.
  2. 0.5 -- 2.5 points: 0.025 points.
  3. 2.5 -- 25 points: 0.05 points.
  4. 25 -- 50 points: 0.25 points.
  5. above 50 points: 0.5 points.
Article 8     The daily price limit of premium for the Contract shall be seven percent of the underlying index based on the closing value from the previous day.
Article 9     Delivery months for the Contract shall be the spot month and the next two calendar months and the two nearest of the quarter months of March, June, September, and December, for a total of five periods, listed and traded concurrently. The last trading day for contracts of any delivery month shall be the third Wednesday of the month in which such contract reaches expiration; trading of contracts reaching expiration shall cease at close of market on the last day of trading, and the last trading day shall be the final settlement day for a contract at expiry.
    If the last trading day referred to in the preceding paragraph falls on a holiday or if trading cannot proceed on that day due to a force majeure event, the next following business day shall be the last trading day.
    The next business day following the final settlement day of an expiring contract shall be the first trading day for contracts in the new delivery month.
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 Taiwan Stock Exchange, 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 underlying index;
  2. the next two quarter months, with the highest and lowest strike prices covering 20 percent above and below the underlying index. Also, based on the above-stated strike price, five other series shall be listed for the three near months beginning with the spot month, each with in-the-money and out-of-the-money strike prices at intervals of the strike price interval. Three other series shall be listed for the next two quarter-months, each with in-the-money and out-of-the-money strike prices at intervals of the strike price interval.
    The "strike price interval" referred to in the preceding paragraph is determined by the following method:
  1. Strike price less than 150 points: 2.5 points interval for near-month contracts, 5 points interval for quarter-month contracts;
  2. Strike price of 150 points or higher but less than 500 points: 5 points interval for near-month contracts, 10 points interval for quarter-month contracts;
  3. Strike price of 500 points or higher: 10 points interval for near-month contracts, 20 points 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.
    In addition to listing contracts of different strike prices as described in paragraph 1, TAIFEX may, according to market status, offer contracts with other strike prices.
Article 11     The trading days of the Contract are the business days of the Taiwan Stock Exchange. The trading hours of the Contract are 8:45 am to 1:45 pm. On the last trading day of the month in which a contract reaches expiration, the trading hours are 8:45 am to 1:30 pm. However, when business on the Taiwan Stock Exchange is suspended for any reason or trading of the Contract is affected by any other factor, the TAIFEX may announce a temporary suspension of trading based on the circumstances at the time, and shall promptly report the suspension to the Competent Authority for recordation.
    The TAIFEX may change the trading days and trading hours referred to in the preceding paragraph after reporting to the competent authority and obtaining its approval.
Article 12     Trading orders for the Contract are matched by call auction at the opening of market, and then by continuous matching during market hours.
Article 13     Before accepting an order to buy the Contract, a futures commission merchant shall collect from the buyer the premium required for the total trading volume.
    When accepting an order to sell the Contract, a futures commission merchant shall collect from the seller the initial margin required for the total trading 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. A short position that is to offset an earlier long position does not require margin.
    If the balance in the principal's margin account falls below the maintenance margin level, the futures commission merchant shall immediately notify the principal to deposit in cash the difference between the margin account balance and the required margin for all open positions within a prescribed time period. If the principal fails to deposit the margin within the prescribed time limit, the futures commission merchant may proceed to liquidate the principal's positions.
    The trading margin and the maintenance margin referred to 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.
    Payment and receipt of the premiums and margins referred to in paragraphs 1 through 3 may be effected in New Taiwan Dollars in accordance with to the agreement between the client and the futures commission merchant. The futures commission merchant shall conduct the required currency conversions in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions prescribed by the Central Bank of China.
    Before accepting an order to buy the Contract, a futures commission merchant shall collect from the buyer the premium required for the total trading volume.
    When accepting an order to sell the Contract, a futures commission merchant shall collect from the seller the initial margin required for the total trading 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. A short position that is to offset an earlier long position does not require margin.
    If the balance in the principal's margin account falls below the maintenance margin level, the futures commission merchant shall immediately notify the principal to deposit in cash the difference between the margin account balance and the required margin for all open positions within a prescribed time period. If the principal fails to deposit the margin within the prescribed time limit, the futures commission merchant may proceed to liquidate the principal's positions.
    The trading margin and the maintenance margin referred to 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.
    Payment and receipt of the premiums and margins referred to in paragraphs 1 through 3 may be effected in New Taiwan Dollars in accordance with to the agreement between the client and the futures commission merchant. The futures commission merchant shall conduct the required currency conversions in accordance with the Regulations Governing the Reporting of Foreign Exchange Receipts and Disbursements or Transactions prescribed by the Central Bank of China.
Article 14     Prior to closing of the last trading day, a futures trader may settle rights and obligations under the contracts by selling or buying back on the TAIFEX centralized exchange market part or all of the volume originally bought or sold.
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 fifteen 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 arithmetic mean price of the underlying index during the last 30 minutes of trading hours before market close of the Taiwan Stock Exchange on the final settlement day, as provided by Reuters. The method for calculation of the final settlement price shall be separately prescribed by the TAIFEX.
Article 17     The Contract may be exercised on the expiration date only. An open position that is in-the-money on expiration date 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 options position when the final settlement price is higher than the strike price, or a put options position when the final settlement price is lower than the strike price. Writers with in-the-money positions shall pay the aforesaid difference in cash, while buyers 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 the 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     The net long or short position a trader holds at any time may not exceed the TAIFEX's announced limit standards.
    The net long or short position referred to in the preceding paragraph means the total position of call options bought and put options sold or the total position of call options sold and put options bought.
    Every three months, or as occasioned by market conditions, the TAIFEX will announce the applicable position limit standards under the preceding paragraph, according to the levels given below, based on the higher of the daily average trading volume or the volume of open positions in the Contracts for that period, with the benchmark set at 5 percent thereof for natural persons and 10 percent thereof for institutional investors:
  1. When the benchmark is less than 2,000 Contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 200 Contracts.
  2. When the benchmark is 2,000 or more Contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 500 Contracts.
  3. When the benchmark is 5,000 or more Contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 1,000 Contracts.
  4. When the benchmark is 10,000 or more Contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 2,000 Contracts.
  5. When the benchmark is 20,000 or more Contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 4,000 Contracts.
  6. The position limit shall be no lower than 1,000 Contracts for natural persons and 2,000 Contracts for institutional investors.
    The aggregate total of a futures proprietary merchant's open positions in the Contract shall be limited to three times the institutional investor limit as given in paragraph 3. The TAIFEX, however, may adjust this limit for market makers of the Contracts as it deems necessary in view of market conditions.
    When the TAIFEX examines the applicable position limit levels, if there has been no more than a 2.5 percent increase or decrease in the daily average trading volume or open volume for the period as compared with the time of the previous adjustment, no adjustment shall be made even if the level for adjustment has been reached.
    When the contract position limit changes due to adjustment of the MSCI Taiwan IndexSM Futures Contract position limit, 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.
    Any raising of the position limit will take effect from the TAIFEX announcement date. 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.
    The combined aggregate of open positions in the contracts held in omnibus accounts are not subject to the limits in paragraph 3.
    Institutions may apply for an increased position limit on trading accounts for hedging purpose
    In addition to conforming to the provisions of this article, the limits on open positions in the Contract held by traders shall also conform to the Taiwan Futures Exchange Corporation Regulations Governing Surveillance of Market Positions.
Article 21     The maximum order size allowable for a futures commission merchant to accept is 200 contracts.
    The aforesaid maximum order size is subjected to change if deemed necessary by the TAIFEX.
Article 22     Where any circumstance exists requiring suspension of trading or de-listing of the Contract as enumerated in Article 31 of the Operating Regulations of the Taiwan Futures Exchange Corporation, the TAIFEX shall make a public announcement 30 days before implementation. If MSCI stops compiling MSCI Taiwan IndexSM or ceases authorizing TAIFEX to use the index, TAIFEX shall, after obtaining approval from the regulatory authorities, make public announcement of suspension of trading or de-listing of the Contract.
    All open positions shall be liquidated by the announced implementation date of suspension of trading or de-listing. Any positions still open on the implementation date will be settled at the settlement price for the trading day immediately preceding the implementation date.
Article 23     These Trading Rules and any amendments hereto shall be implemented following ratification by the competent authority.