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Title: Taipei Exchange Rules Governing the Review of Exchange-Traded Notes for Trading on the TPEx
Date: 2018.09.10 ( Announced )
Date: 2021.01.11 ( Amended )

Article Content

 
Chapter I General Principles
Article 1     These Rules are adopted pursuant to Article 8 of the Regulations Governing Securities Trading on the Taipei Exchange and Article 14, paragraph 2 of the Regulations Governing the Issuance of Exchange Traded Notes by Securities Firms (the "ETN Issuance Regulations").
Article 2     For the purposes of these Rules, the following terms shall have the following meanings:
  1. Competent authority: means the Financial Supervisory Commission (FSC).
  2. Exchange-traded note (ETN): means a security, issued by a securities firm, that at maturity pays investors returns linked to the performance of the underlying index it tracks and that is traded on a securities exchange market, with investors' subscriptions and redemptions settled in cash.
  3. Underlying index: means the index tracked by an ETN.
  4. Indicative value: means a value for an ETN, calculated by the issuer based on movements in the underlying index, accrued dividends, investor fees, and other relevant data.
  5. Number of units already issued: means the number of market-making inventory units plus the number of units held by investors.
Article 3     The name of an ETN shall clearly indicate the index or index performance that is being tracked.
    Where an ETN tracks a multiple of the performance or inverse performance of an index, the name of the ETN shall clearly indicate the multiple of the daily performance or inverse performance of the underlying index that is being tracked.
Chapter II Qualifications of Issuers
Article 4     An ETN issuer ("issuer") shall be an integrated securities firm that concurrently engages in securities brokerage, underwriting, and dealership business.
Article 5     A securities firm filing for registration to issue or to reopen (that is, to issue an additional amount of) ETNs shall meet the requirements listed below:
  1. Its CPA (certified public accountant) audited and attested financial report for the most recent period shows net worth not less than 10 billion New Taiwan Dollars (NT$) and not less than paid-in capital, and its financial condition meets the requirements of Articles 13, 14, 16, 18, 18-1, and 19 of the Regulations Governing Securities Firms.
  2. It has reported a regulatory capital adequacy ratio of not lower than 250 percent for each of the preceding 6 months.
  3. It has not been subject to any disciplinary warning from the competent authority during the preceding 3 months.
  4. It has not been subject to any sanction imposed by the competent authority during the preceding 6 months ordering dismissal or replacement of any of its directors, supervisors, or managerial officers.
  5. It has not been subject to any sanction imposed by the competent authority during the preceding year requiring a suspension of business.
  6. It has not been subject to any sanction imposed by the competent authority during the preceding 2 years voiding its permission for any part of its business.
  7. It has not been subject to any sanction during the preceding year whereby the TPEx, the Taiwan Stock Exchange Corporation (TWSE), or the Taiwan Futures Exchange Corporation (TAIFEX), acting pursuant to its rules, has suspended or restricted the securities firm's trading privileges.
    Any securities firm in non-conformance with any of the conditions of subparagraphs 3 to 7 of the preceding paragraph but that has made concrete improvement and has satisfied the competent authority thereof may be exempted from the restrictions of those subparagraphs.
Chapter III Recognition of Qualifications of Underlying Indexes
Article 6     Before filing for registration to issue an ETN, a securities firm shall submit a completed Application for Letter of Approval for the Qualifications of the Underlying Index of Exchange-Traded Note (Attachment 1), together with other relevant documents, to the TPEx to apply for a letter of approval recognizing the eligibility qualifications of the underlying index of the ETN. After review and approval, the TPEx will issue a letter of approval, with a copy to the competent authority. However, if the underlying index to be tracked by the ETN is prepared by the TPEx solely or in cooperation with another index provider, the securities firm may instead submit relevant documents to the TPEx for recordation, in which case the TPEx will issue a letter of recordation, with a copy to the competent authority.
    The securities firm under the preceding paragraph shall file for registration to issue the ETN, within 3 months following the day the letter of approval or recordation is issued. However, if an application for extension with good cause is filed and the application is approved by the TPEx, a 3-month, one-time-only extension may be made. If the filing for the issuance is not made by the deadline, the letter of approval or recordation shall become void.
    The Directions for the Recognition of the Qualifications of Underlying Indexes of Exchange-Traded Notes shall be separately adopted by the TPEx.
Article 7     When a securities firm applies for a letter of approval recognizing the eligibility qualifications of the underlying index of an ETN, the TPEx may deny approval if any circumstance in the following subparagraphs exists:
  1. The application documents are not submitted in full, and the securities firm fails to supplement those documents by the deadline prescribed by the TPEx.
  2. Any requirements set out in Articles 2 to 6 of the TPEx Directions for the Recognition of the Qualifications of Underlying Indexes of Exchange-Traded Notes are not satisfied.
  3. Particulars of the application do not comply with laws or regulations, or there is any misrepresentation or nondisclosure.
  4. There exists any other circumstance under which the TPEx deems approval unsuitable.
Chapter IV Filing for Registration to Issue or Reopen ETNs and Applying for Letters of Approval for TPEx Listing
Article 8     To file for registration to issue or reopen an ETN for TPEx listing, a securities firm shall submit a completed Application for Letter of Approval for TPEx Listing of Exchange-Traded Note (Attachment 2) and a completed Securities Firm Registration Statement for Issuance/Reopening of Exchange-Traded Note furnishing all required particulars, together with other required documents, to the TPEx for review, to be conducted in accordance with the ETN Issuance Regulations, these Rules, the TPEx Procedures for the Review of Exchange-Traded Notes, and other applicable TPEx rules. If the result of review shows that the securities firm satisfies the required conditions, the TPEx will issue a letter of approval for TPEx listing together with its review opinion, and then forward the above documents to the competent authority.
    When a securities firm files for registration to issue or reopen an ETN, if during the period from the balance sheet date of the most recent financial report submitted by it until the effective registration of the ETN, an event occurs that has a material effect on shareholders' rights or interests (shareholders' equity) or securities prices as contemplated in Article 36, paragraph 3, subparagraph 2 of the Securities and Exchange Act, or its financial or business status undergoes a material change or there is a change in the content of its registration documents that has a material effect on the issuance plan, the securities firm shall obtain a professional opinion from an appropriate expert, as dictated by the nature of the event, and request its attesting CPA to provide an opinion regarding the effect of the event on the current issuance plan, and report all the opinions in writing to the TPEx. The TPEx will then provide an opinion on the matter and submit a written report to the competent authority.
    The Procedures for the Review of Exchange-Traded Notes referred to in paragraph 1 shall be separately adopted by the TPEx.
Article 9     A securities firm filing for registration to issue or reopen an ETN shall submit an issuance plan furnishing the following particulars:
  1. ETN name.
  2. Issue date.
  3. Issuance period, with an indication of the maturity date.
  4. Number of units to be issued under the effective registration. In the case of a reopening, the numbers of units of the previous issue and each of the previous and the current reopenings shall be indicated.
  5. Issue price, with an indication of the unit price, minimum trading unit, and other relevant information.
  6. Description of the underlying index, including methods for index construction and calculation. If the underlying index being prepared is a price index, the issuance plan must specify how dividends will be distributed or how indicative value will be adjusted for the ETN when dividends are paid on its component securities.
  7. Dates and methods for repayment at maturity and interim distribution of dividends. Information about repayment at maturity shall include the method and timing for the repayment and the procedures for delisting from the TPEx, together with statements that the repayment amount is calculated based on the closing indicative value published after market close on the last trading day, that the last trading day is the 2nd business day before the maturity date, that the TPEx delisting date is the next business day following the maturity date, and other relevant information.
  8. Description of investor fees, including the securities firm's management fee items and how they are calculated and charged.
  9. Methods of calculating the intraday indicative value and the (closing) indicative value.
  10. Issuance method, with an indication of whether a securities underwriter is engaged to underwrite the ETN or the securities firm sells the ETN by itself. If underwriting is involved, the underwriting method shall be specified.
  11. Market of listing.
  12. Use of the funds.
  13. Hedging strategies.
  14. Risk management measures.
  15. Risks for investors.
  16. How and by what procedures investors can subscribe and redeem the ETN or trade the ETN on the given securities exchange market. This item shall at least contain a statement that the redemption price is the closing indicative value published after market close on the redemption request date and specify the minimum redemption unit, the timing of payment for and delivery of ETN units, and other relevant information.
  17. Conditions and method of notification for the securities firm's early redemption (or compulsory redemption), halting or resumption of subscriptions, and suspension of subscriptions. This item shall contain statements that the last trading day is the next business day following the day the conditions for early redemption (or compulsory redemption) are satisfied and that the repayment amount is calculated based on the redemption price equal to the closing indicative value published after market close on the last trading day. It shall also specify the timing of repayment and other relevant information.
  18. Procedures to be followed and matters to be handled if the effective registration of the ETN is voided or revoked by the competent authority or the ETN is delisted from the TPEx. This item shall specify the conditions for delisting from the TPEx and contain statements that the last trading day is the next business day following the day the conditions for delisting from the TPEx are met and that the repayment amount is calculated based on the closing indicative value published after market close on the last trading day. It shall also contain a statement that if the index provider discontinues the calculation or publication of the level of the underlying index or terminates the index license agreement, the securities firm shall immediately propose and submit a written repayment plan to the TPEx, and specify other relevant information.
  19. List of securities underwriters (if any) and liquidity providers and their obligations and duties.
  20. The ETN is issued and delivered by book-entry transfer without printing physical securities, pursuant to Article 8 of the Securities and Exchange Act.
  21. Other required particulars.
Article 10     A securities firm filing for registration to issue an ETN and applying for a letter of approval for TPEx listing shall meet the following conditions:
  1. The securities firm meets the qualifying requirements listed in Article 4 of the ETN Issuance Regulations.
  2. The aggregate of the total amount of the ETN under the filing for issuance registration plus the total amount of any ETNs already issued under previous effective registrations does not exceed 50 percent of the securities firm's net worth as shown on its most recent CPA audited and attested financial report.
  3. The total amount of the ETN under the filing for issuance registration is NT$200 million or more, and the number of units to be issued is 5 million units or more.
  4. The scheduled TPEx listing period for the ETN is not less than 1 year and not more than 20 years.
    A securities firm filing for registration to reopen an ETN and applying for a letter of approval for TPEx listing shall meet the following conditions:
  1. The securities firm meets the qualifying requirements listed in Article 4 of the ETN Issuance Regulations.
  2. The aggregate of the total amount of the ETN under the filing for reopening registration and the total amount of any ETNs already issued under previous effective registrations does not exceed 50 percent of the securities firm's net worth as shown on its most recent CPA audited and attested financial report. However, this restriction does not apply to a reopening of an ETN for which the securities firm has allocated a supplementary amount of performance bond.
  3. For the 5 business days preceding the registration date, the average ratio of the number of units already issued to the number of units to be issued under the original effective registration is 80 percent or higher.
  4. The number of units under the filing for reopening registration is 1 million units or more.
    The performance bond referred to in subparagraph 2 of the preceding paragraph shall be deposited in accordance with the Rules Governing Performance Bonds for Issuance and Reopening of Exchange-Traded Notes by Securities Firms jointly adopted by the TPEx and the TWSE.
Article 11     When a securities firm files for registration to issue or reopen an ETN, the TPEx may decline to issue a letter of approval for TPEx listing if any circumstance in the following subparagraphs exists:
  1. Any of the circumstances listed in Article 8 of the ETN Issuance Regulations.
  2. The filed registration documents are not submitted in full or do not furnish all the required particulars, and the securities firm fails to supplement those documents by the deadline prescribed by the TPEx.
  3. Particulars of the filing do not comply with laws or regulations, or there is any misrepresentation or nondisclosure.
  4. Under the circumstance set out in Article 26 or any other applicable circumstances, the TPEx has imposed a sanction specifying a period during which the TPEx would reject the securities firm's application for a letter of approval for TPEx listing of ETN, and the rejection period has not elapsed.
  5. There exists any other circumstance under which the TPEx deems listing of the ETN to be unsuitable.
Article 12     A securities firm that has effectively registered with the competent authority to issue or reopen an ETN may contract with a securities underwriter to underwrite the ETN, or it may sell the ETN by itself. The securities firm shall prepare a prospectus and a simplified prospectus and deliver copies of the prospectuses to the securities underwriter and investors and publicly announce their content. However, the securities firm is not required to deliver such prospectuses to investors who purchase the ETN on the securities exchange market.
    To make a change to an ETN prospectus or simplified prospectus that involves any matter specified in Article 15, paragraphs 2 or 3 of the ETN Issuance Regulations and that materially affects investors' rights or interests, the issuer shall report the change to the competent authority for approval and shall publicly announce the content of the change on the Internet information reporting system designated by the TPEx within 2 days counting inclusively from the day it receives the letter of approval from the competent authority.
    The model templates for the prospectus and simplified prospectus referred to in paragraph 1 shall be jointly adopted by the TPEx and the TWSE and enter into force after approval by the competent authority.
Article 13     A securities firm issuing ETNs shall deposit or maintain a sufficient amount of performance bond by the 10th day of each month, based on the balance of the ETNs outstanding as of the end of the preceding month.
    The performance bond referred to in the preceding paragraph shall be deposited in accordance with the Rules Governing Performance Bonds for Issuance and Reopening of Exchange-Traded Notes by Securities Firms jointly adopted by the TPEx and the TWSE.
Chapter V TPEx Listing and Delisting and Cancellation of ETNs
Article 14     Before issuing an ETN for which an effective registration has been filed with the competent authority, a securities firm shall submit a completed Application for TPEx Trading of Exchange-Traded Note (Attachment 3) and other relevant documents to the TPEx to apply for TPEx listing.
    When a securities firm applies for TPEx listing of an ETN to be issued, after the TPEx is satisfied that the application documents are submitted in full and that none of the circumstances set out in Article 15 exists, nor has the effective registration ever been voided or revoked by the competent authority pursuant to Article 11, paragraph 1 of the ETN Issuance Regulations, then unless otherwise provided, the TPEx may enter into a contract for TPEx trading of the ETN with the issuer, announce the TPEx listing of the ETN, and report the matter in writing to the competent authority for recordation.
    When a securities firm has filed an effective registration with the competent authority to reopen an ETN, after the TPEx is satisfied that the effective registration has never been voided or revoked by the competent authority pursuant to Article 11, paragraph 1 of the ETN Issuance Regulations, then unless otherwise provided, the TPEx may approve the TPEx listing of the ETN.
    The TPEx trading contract referred to in paragraph 2 shall be separately adopted by the TPEx.
Article 15     When a securities firm applies for TPEx listing of an ETN to be issued, the TPEx may deny approval if any circumstance in the following subparagraphs exists:
  1. The application documents are not submitted in full, and the securities firm fails to supplement those documents by the deadline prescribed by the TPEx.
  2. Particulars of the application or application documents do not comply with laws or regulations, or there is any misrepresentation or nondisclosure.
  3. The total amount of the ETN specified in the application for TPEx listing is less than NT$200 million, or the number of units to be issued is less than 5 million units.
  4. There exists any other circumstance under which the TPEx deems listing of the ETN to be unsuitable.
Article 16     If any circumstance in the following subparagraphs exists with respect to an ETN during the period after its TPEx trading contract becomes effective and before the commencement of its TPEx trading, the TPEx may void the TPEx trading contract and report the matter in writing to the competent authority for recordation:
  1. Where the effective registration of the ETN has been voided or revoked by the competent authority under any circumstance set out in Article 11, paragraph 1 of the ETN Issuance Regulations.
  2. Where the TPEx discovers concrete evidence and deems the ETN to be unsuitable for TPEx listing.
    If the ETN under the preceding paragraph has been issued, the issuer shall return the price, with statutory interest included, within 10 days from receipt of TPEx notice of voidance of the TPEx trading contract.
Article 17     ETN holders may submit requests to the issuer for redemption of ETNs units pursuant to the issuance plan. When investors submit redemption requests, the issuer shall report relevant information on the information reporting website designated by the TPEx. Redeemed ETN units shall be cancelled immediately.
    None of an issuer's market-making inventory ETN units may be cancelled.
Article 18     When a cause exists for early redemption of an ETN as specified in its issuance plan, the issuer shall, on the next business day following the day the conditions for early redemption are satisfied, submit a written report to the TPEx with the time schedule for delisting from the TPEx and relevant documents, and redeem and repay all outstanding units according to the time schedule specified in the issuance plan and based on the register of ETN holders provided by the central securities depository.
Article 19     When the term of an ETN expires, the issuer shall submit a written report to the TPEx with the time schedule for delisting from the TPEx and relevant documents, and redeem and repay all outstanding units according to the time schedule specified in the issuance plan and based on the register of ETN holders provided by the central securities depository.
Article 20     If the TPEx publicly announces termination of TPEx trading of an ETN under any of the circumstances set out in Article 12-15, paragraph 2, subparagraphs 1 to 4 and 6 of the TPEx Rules Governing Securities Trading on the TPEx, the issuer shall, on the next business day following the date of public announcement, submit a written report to the TPEx with the time schedule for delisting from the TPEx and relevant documents, and redeem and repay all outstanding units based on the register of ETN holders provided by the central securities depository.
Article 21     An issuer shall take hedging action and adopt risk management measures for ETNs issued by it.
    Before the commencement of TPEx trading of an ETN, the issuer may report to the TPEx and open a hedge account in accordance with Article 6 of the TPEx Rules Governing the Trading of Exchange-Traded Notes.
Chapter VI Reporting of Information
Article 22     An issuer shall input the following information into the Internet information reporting system designated by the TPEx within the specified deadline:
  1. Indicative value per ETN unit and the value of the underlying index: Before trading hours begin each business day, report the information for the latest available business day.
  2. Intraday indicative value per ETN unit: Report the information on the Market Information System website using the real-time index information, updated at a frequency of at least once every 15 seconds. If the components of the underlying index of the ETN include foreign securities, products, or assets, report the information from 8:30 a.m. to 5 p.m. using the real-time index value and at the above frequency of updating.
  3. Cumulative movement of the indicative value per ETN unit and the value of the underlying index, up to the end of the preceding month, for the preceding 3 months, 6 months, 1 year, and from the beginning of the fiscal year to present, and from the time of TPEx listing to present: Report the above information by the 10th day of each month.
  4. Uses of ETN funds and percentage of use: Report the information for the preceding month by the 10th day of each month.
Article 23     An issuer shall make the following non-periodical disclosures over the Internet information reporting system designated by the TPEx:
  1. Reporting of a consolidated case list for ETN issues or reopenings: Input the information on the date the application is submitted to the TPEx, the effective registration date, the date the TPEx listing date is determined, and the date the competent authority rejects, voids, revokes, or the issuer withdraws, a filing.
  2. Public announcement of the content of the issuance plan for issuance or reopening of an ETN and its prospectus and simplified prospectus: Input the content of the draft version of the prospectus and simplified prospectus before filing with the competent authority, and the content of the final version of the issuance plan, prospectus, and simplified prospectus before issuing the ETN.
  3. In the case of initial listing of an ETN, preliminary reporting of its basic information and the indicative value per ETN unit, the number of units already issued, and the total amount issued of the ETN for the latest available business day before TPEx listing: Input the information on the day before the TPEx listing.
  4. Public announcement of the book-closure period for suspension of change of entries to the register of ETN holders and the record date for distribution of dividends: Input the information at least 12 business days before the 1st day of the book-closure period for suspension of change of entries to the register of ETN holders or the record date for distribution of dividends, or first input the date(s) for distribution of dividends by the aforesaid time and then input the distribution amount at least 2 business days before the ex-dividend trading date.
  5. Reporting of changes in the number of ETN units from any subscription or redemption: Input the information after verification on the next business day following the day the issuer processes the subscription or redemption.
  6. Reporting of increase in the number of market-making inventory units of the issuer within the total amount of ETN(s) already issued after previous effective registration(s): Input the information into the reporting system designated by the TPEx by 3:30 p.m. on the given business day, with the increased number of issued units to become effective on the next business day.
  7. Reporting of changes of basic information: In the case of a reopening, input the information before trading hours begin on the effective registration date. In the case of an early redemption, input the information by 6 p.m. on the next business day following the day the conditions for early redemption are satisfied. For any other change of basic information, input the information within 2 days from the date of occurrence of the change.
  8. Matters for which public announcement and reporting are required pursuant to Article 7, paragraph 2, Article 16, and Article 17, paragraphs 2 and 3 of the ETN Issuance Regulations: Input the information within the deadlines prescribed by the ETN Issuance Regulations.
  9. Material information that is subject to reporting pursuant to the TPEx Procedures for Verification and Disclosure of Material Information of TPEx Listed Exchange-Traded Notes: Input the information by the deadlines set forth in those Procedures.
Article 24     Any errors or omissions discovered in the information reported by an issuer shall be treated according to Article 25, and the issuer shall make corrections by inputting the correct information immediately upon receiving notification from the TPEx.
Chapter VII Violations, Penalties, and Supplementary Provisions
Article 25     If an issuer violates these Rules or the information reported by an issuer contains an error or omission, the TPEx may impose a penalty of NT$10,000. However, if the error or omission is discovered by the competent authority, the TPEx, or an investor and is verified upon investigation, the TPEx may impose a penalty of NT$50,000. Failure to make an immediate supplementation or correction upon receipt of notification from the TPEx shall be subject to a further penalty of NT$10,000 for each business day beyond the due date until the day the supplementation or correction is completed.
    The information reported by an issuer will be disclosed to the public over the TPEx's information systems or provided to the competent authority in response to its inquiries. The issuer shall be held solely liable for all consequences if there is any misrepresentation or falsehood in the reported information.
Article 26     If an issuer fails to carry out any matter as specified in the issuance plan, prospectus, or simplified prospectus of an ETN, thereby materially prejudicing the rights or interests of investors, the TPEx may impose a penalty of not less than NT$30,000 and not more than NT$500,000 and may further impose a sanction of rejecting any application by the issuer for a letter of approval for TPEx listing of an ETN within 1 year from the date of occurrence of the event.
Article 27     Where a penalty is imposed by the TPEx, the issuer shall make the payment to the TPEx within 5 days after receiving notification from the TPEx.
Article 28     These Rules, and any amendments hereto, shall enter into force after approval by the competent authority.
    Relevant attachments to these Rules, and any amendments thereto, shall enter into force after approval by the President of the TPEx.