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Article 1     These Rules are specially adopted to maintain orderly trading of TAIFEX USD/CNH FX Options Contracts ("the Contracts") on the Taiwan Futures Exchange (TAIFEX), to ensure security and fairness in trading of the Contracts.
Article 2      Futures commission merchants that engage in trading of the Contracts shall observe these Rules in addition to the Futures Trading Act and applicable acts and regulations. Matters on which these Rules are silent shall be handled in accordance with the bylaws and rules, public announcements, and circulars of the TAIFEX.
Article 3     The English name of the Contracts is abbreviated as "USD/CNH FX Options," and their trading code is "RHO."
Article 4     The underlying of the Contracts is the US Dollar/Renminbi exchange rate which is quoted in Renminbi and in units of 1 US Dollar. The size of each contract is 100,000 US Dollars.
Article 5     The Contracts come 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 settlement value of the Contracts on the expiration date shall be equal to the difference between the final settlement price and the strike price, multiplied by the strike price multiplier.
    The strike price multiplier under the preceding paragraph shall be 100,000.
Article 7     The premium prices for the Contracts shall be quoted in points. The premium multiplier shall be 100,000 RMB. The minimum price fluctuations (tick size) for quoting shall be 0.0001 point.
Article 8     Trading days for the Contracts are the same as TAIFEX business days. Trading hours are as follows:
  1. Regular trading session: 8:45 a.m. to 4:15 p.m. On the last trading day of the month in which a contract reaches expiration, the trading hours shall be from 8:45 a.m. to 11:00 a.m.
  2. After-hours trading session: 5:25 p.m. to 5:00 a.m. of the following day.
    If any other factors hinder trading of the Contracts, then TAIFEX, on the basis of circumstances at the time, may declare a temporary halt to trading and report the matter to the competent authority for recordation on the following business day.
    TAIFEX may change the trading days and trading hours of paragraph 1 after reporting to and receiving approval from the competent authority.
Article 9     The price limit in each trading session of the premium for the Contracts shall be 7 percent of the daily settlement price in the previous regular trading session of the corresponding USD/CNH FX Futures with the same expiration month. On the first trading day of a new expiration month, the daily price limit of the premium for the Contracts shall be 7 percent of the opening reference price of the corresponding USD/CNH FX Futures with the same expiration month. TAIFEX may adjust the daily price limit of the Contracts as it deems necessary based on market conditions.
Article 10     Expiration months for the Contracts are the spot month and the following calendar month, and the four immediately succeeding quarterly months from among the quarterly months of March, June, September, and December, for a total of six contract months, listed and traded concurrently. The last trading day for contracts of a particular expiration month is the third Wednesday of the expiration month of the contract. Trading of contracts at expiry will halt at the close of the regular trading session on the last trading day, and the last trading day is the final settlement day for a contract at expiry.
    If any of the circumstances listed below occurs on the last trading day referred to in the preceding paragraph, then the next business day shall be the last trading day; however, TAIFEX may adjust the date in the event there is a change in circumstances or there is any other special circumstance that could impact fairness and justice in the market:
  1. The last trading day falls on a TAIFEX holiday, or trading cannot proceed due to a force majeure event.
  2. The last trading day falls on a Hong Kong Treasury Markets Association holiday or closure day.
  3. There are other factors that affect the trading or settlement of the Contracts.
    The trading of contracts of the new expiration month will begin from the regular trading session on the business day following the last trading day of a contract in the expiration month.
    The TAIFEX may change the expiration months, first trading days, last trading days, and final settlement days of the preceding three paragraphs as it deems necessary after reporting to and receiving approval from the competent authority.
Article 11     For listing contract series of new expiration months or contracts with new strike prices for existing expiration dates, TAIFEX shall, based on the daily settlement price of the previous regular trading session of the corresponding USD/CNH FX Futures with the same expiration month (hereinafter, the "base price", nevertheless on the first trading day of new expiration month, the base price shall be the opening reference price of the corresponding USD/CNH FX Futures), consecutively introduce contracts with in-the-money and out-of-the money strike prices at intervals of the strike price interval during the regular trading session, until the following conditions are satisfied:
  1. Two consecutive near months beginning with the spot month, with the highest and lowest strike prices covering 2 percent above and below the base price.
  2. The next 4 quarter months, with the highest and lowest strike prices covering 4 percent above and below the base price.
    The "strike price interval" referred to in the preceding paragraph is 0.02 RMB for near-month contracts and 0.04 RMB for quarter-month contracts.
    When a quarter-month contract becomes a near-month contract, based on the strike price interval of the near-month contract, contracts shall be introduced to supply all the required strike prices covering 2 percent above and below the base price.
    In addition to listing contracts of different strike prices as described in paragraphs 1 and 2, TAIFEX may, according to market status, offer contracts with other strike prices.
Article 12     Trading quotes for the Contracts, unless otherwise provided, will be matched automatically by computer. Matching is done by call auction at market opening, followed by continuous trading during market hours.
Article 13     When accepting an order to buy the Contracts, a futures commission merchant shall first collect from the buyer the premium required for the total transacting volume.
    When accepting an order to sell the Contracts, 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 Contracts to the Client Margin Account of the principal after the transaction, and mark to market the margins required for the short positions of the principal on a daily basis. A short position that is to offset an earlier long position does not require margin.
    When the margin account balance of a principal falls below the required maintenance margin during the regular trading session, a futures commission merchant shall immediately notify the principal to pay in cash the difference between the margin account balance and the initial margin required for the principal's 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 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 TAIFEX.
    The initial margin and maintenance margin announced by TAIFEX shall be based on the clearing margin calculated according to the "TAIFEX Standards and Methods for Receipt of Clearing Margins" plus a percentage prescribed by TAIFEX.
    Payment/receipt of the principal's margins referred to in paragraph 3 may be in New Taiwan Dollars or in a foreign currency publicly announced by TAIFEX, as stipulated between the principal and the futures commission merchant, with the futures commission merchant acting as foreign exchange settlement agent. The futures commission merchant shall conduct the required exchange settlements in accordance with the Regulations Governing the Declaration of Foreign Exchange Receipts and Disbursements or Transactions prescribed by the Central Bank of China.
Article 14     Before expiration, a holder of the Contract may liquidate the contractual rights and obligations by selling or buying back part or all of his positions in the exchange.
Article 15     The daily settlement price of the Contract shall be determined based on the trading information of the regular trading session and the following:
  1. The last transaction price on the given day; or
  2. To be determined by TAIFEX if there is no transaction price in the last 15 minutes before the close of market on the given day or the settlement price referred to in the preceding subparagraph is deemed unreasonable.
Article 16     The final settlement price of the Contracts is set at the spot USD/CNY (Hong Kong) exchange rate published by the Hong Kong Treasury Markets Association at 11:30 a.m. on the same calendar day as the last trading day.
    If for any reason the exchange rate of the preceding paragraph is not announced at 11:30 a.m., the final settlement price for the Contracts will be set based on the following:
  1. The final settlement price is the spot USD/CNY (Taiwan) fixing announced by the Taipei Foreign Exchange Market Development Foundation on the same calendar day as the last trading day.
  2. If a final settlement price cannot be determined by the foregoing method, or if the final settlement price so determined is obviously unreasonable, then the settlement price will be determined by TAIFEX with reference to the market USD/CNY exchange rates published through major financial information systems.
Article 17     The contract may be exercised on the expiration date only. Open position that is in-the-money on the 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 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 Contracts shall make a declaration on the expiration date. An in-the-money option, however, shall be automatically exercised if the difference between the final settlement price and the strike price falls in the range announced by 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 TAIFEX indicating exercise or waiver of right.
Article 19     All exercised options are assigned to the holders of short positions by TAIFEX through an automatic random procedure.
Article 20     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 TAIFEX.
    The "total open positions on either the long or short side of the market" under the preceding paragraph means the total positions of call options bought and put options sold or the total positions of call options sold and put options bought.
    Every three months, or as occasioned by market conditions, TAIFEX will announce the applicable position limits referred to in paragraph 1 according to the levels given below, based on the higher of the daily average trading volume or open interest in the Contracts for that period, with the benchmark set at 5 percent thereof for individuals and 10 percent thereof for institutional investors. However, the lowest position limit shall be 2,000 contracts for individuals, and 6,000 contracts for institutional investors:
  1. 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.
  2. 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.
  3. 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.
  4. When the benchmark is 20,000 or more contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 5,000 contracts.
    The aggregate total of a futures proprietary merchant's open positions in the Contracts shall be limited to three times the institutional investors limit as given in paragraph 3. TAIFEX, however, may adjust this limit for market makers of the Contracts as it deems necessary in view of market conditions.
    When TAIFEX examines the applicable position limit levels, if the daily average trading volume or open interest for a given period, as compared to that at the time of the previous adjustment, does not increase or decrease by more than 2.5 percent, no adjustment shall be made even if the level for adjustment has been reached.
    Any raising of the position limit will take effect from the regular trading session on the business day following the TAIFEX announcement date; any lowering of the position limit will take effect from the regular trading session on the business day following the expiration of the second nearby month contract already listed as of the announcement date. TAIFEX, however, 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 limits may be held until the expiration date with respect to that position. However, no new position may be added until the lowered limits have been complied with.
    The combined aggregate of open positions in the Contract held in omnibus accounts are not subject to the limits in paragraph 3, 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 TAIFEX for a relaxation of the position limit.
    In addition to the provisions of this Article, the limits on open positions in the Contracts held by traders shall also conform to the TAIFEX Rules Governing Surveillance Of Market Positions.
Article 21     Unless otherwise provided, a futures commission merchant engaging in proprietary or brokerage trading of the Contracts shall be subject to a limit of 200 contracts per trading quote.
    TAIFEX may make appropriate adjustments to the limit on the quantity per trading quote in the preceding paragraph in view of market trading conditions.
Article 22     Where any circumstance exists requiring suspension of trading or delisting of the Contracts as stipulated in Article 31 of the TAIFEX Operating Rules, TAIFEX shall make a public announcement to the effect 30 days prior to implementation.
    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 shall be settled at the settlement price for the implementation date.
Article 23     These Rules shall be publicly announced and implemented following the approval of the competent authority. The same provision applies to subsequent amendments.