| Article 9 |
A securities firm having received approval of qualification as an issuer of call (put) warrants from the competent authority and wishing to apply to the GreTai for OTC listing of a planned call (put) warrants issue shall apply to the GreTai with an Application for OTC Listing of Call (Put) Warrants (Attachment 2) filled out in full and with the required documents attached thereto. Following its review and approval of the issuance plan, the GreTai will immediately issue a letter of approval, with a copy to the competent authority, provided that depending on specific conditions such as the applicant's financial or business status, the status of the underlying securities or index, the number of call (put) warrants already listed on OTC markets with identical or similar types of underlying securities, and the distribution of expiration dates, the GreTai may withhold approval, limit the number of warrants to be listed on OTC markets, or impose other conditions.
After receiving a GreTai approval letter, with a copy submitted to the competent authority, the securities firm may entrust an underwriter with underwriting of the issue or it may sell the warrants itself, and provide a prospectus to the subscribers.
The directions for information to be published in a public offering prospectus referred to in the preceding paragraph will be promulgated by the GreTai in accordance with Article 13 of the Regulations Governing Applications for Issuance of Call (Put) Warrants by Issuers and shall take force upon review and ratification by the competent authority. |
| Article 10 |
Call (put) warrants for which a securities firm applies to the GreTai for OTC-listing approval shall meet all of the following requirements:
1. The issue shall comprise 5 to 20 million issuance units. For non-index warrants, the ratio of each issuance unit to the underlying securities or beneficial units, or to the underlying securities basket, is the exercise ratio. Exercise ratios may be: 1:1, 1:0.5, 1:0.25, 1:0.2, 1:0.1, 1:0.05, 1:0.02, or 1:0.01, provided that the exercise ratios of 1:0.05, 1:0.02 and 1: 0.01 may only be applied where the price of the underlying security is NT$200 or higher. For index warrants, the issuer itself determines the number of index points represented by each issuance unit; one index point corresponds to NT$1.
2. Duration: Calculated from the date of OTC listing, the period of validity shall be from not less than six months to not more than two years.
3. Limits on the amount of the underlying security's total issuance represented by the warrants:
(1) If the underlying is stock, the combined total of the number of shares of the underlying securities that may be called (or put) through the call (put) warrants of a domestic call (put) warrants issuing unit and the number of shares of the same underlying securities represented by other existing call (put) warrants already listed on the GreTai, after deduction of the shares set forth below, may not exceed 22 percent of the total share issuance by the issuing company. In addition, when a securities firm or its overseas subsidiary (where warrant issuance business is guaranteed or secured by the parent company) issues offshore call (put) warrants, the combined total of the number of shares of the underlying securities that may be called (or put) through the call (put) warrants of the issuing unit and the number of shares of the same underlying securities represented by other existing call (put) warrants already issued on overseas markets, after deduction of the shares set forth below, may not exceed 3 percent of the total share issuance by the issuing company:
(i) The total number of shares held by directors and supervisors under statutory shareholding ratio requirements.
(ii) Already pledged shares.
(iii) The number of centrally deposited shares mandatory for newly OTC listed companies.
(iv) Shares already repurchased under the Regulations Governing Share Repurchase by Listed and OTC Companies and not yet cancelled.
(v) Shares with restrictions on listing on OTC markets imposed by the competent authority.
(2) If the underlying security is exchange traded fund (ETF) beneficial interest certificates announced by the GreTai, the combined total of the number of underlying beneficial interest units that may be called (or put) through call (put) warrants of the issuing unit and the shares of the same underlying securities of call (or put) warrants represented by other existing call (or put) warrants already OTC listed on the GreTai, plus the number of shares of the same underlying securities represented by call (or put) warrants issued on foreign markets by the issuer or its externally engaged institution, may not exceed the total number of beneficial interest units already issued by that fund.
4. If the underlying securities are an exchange-traded fund (ETF) announced by the GreTai, the approval of the compiler of that fund's underlying index shall be obtained in advance. If the underlying index is an index announced by the GreTai, the approval of the compiler of that underlying index shall be obtained in advance.
5. The issuance plan shall contain the following terms and conditions:
(1) The issue date and the period of validity.
(2) Detailed information on the underlying index, security(ies) or basket of securities (if the underlying securities of the warrants issued are stocks, in addition to the financial report of the most recent period audited or reviewed by a certified public accountant and showing no losses, there shall also be a statement of the reason for issuing warrants on the underlying securities).
(3) The type of call (put) warrants, the volume of issuance units and total value of the issue.
(4) Terms of issuance (including issuance price, strike price or strike level, exercise period and number of shares or beneficial interest units, depositary receipt units, or index points represented per issuance unit; where knock-out call warrants or knock-out put warrants are issued, conditions regarding upper and lower price or index caps and the fact that, when the closing price of the underlying security(ies) or the closing index of the underlying index reaches the upper or lower price or index cap, the current day will be deemed the last trading day for the warrants, and they will be at maturity on the second following business day, requiring automatic settlement exclusively in cash based upon the closing price of the underlying security(ies) or closing index of the underlying index on the last trading day for the warrants, with such conditions set out in a prominent typeface). For a call warrant, the abovementioned strike price or strike level may not exceed 150 percent of the closing price of the underlying security or the closing index of the underlying index at market close on the date of application; for a put warrant, the abovementioned strike price or strike index may not be lower than 50 percent of the closing price of the underlying security or the closing index of the underlying index at market close on the date of application, provided that the above ratios may be exceeded when the strike price and the closing price of the underlying security(ies) differ by less than NT$30. There shall be reasonable cause and explanation for any terms of issuance that do not conform to the above standards, and full disclosure shall be given to investors.
(5) The method by which the issuance price is calculated, including the price of the underlying security or index, strike price or strike level, period of validity, interest rate, volatility, and other elements used in the calculation, and a table of comparison with other warrants in the preceding year that took the same OTC security or index as an underlying security.
(6) Detailed information on the guarantor and the guaranty agreement or collateral.
(7) Matters that shall be recorded as set forth in Article 8 the GreTai Rules Governing Liquidity Providers of Call (Put) Warrants.
(8) Procedures for exercising the option and the terms for cancellation of already-exercised call (put) warrants.
(9) Strategies for offsetting foreseeable risks.
(10) The policy regarding adjustment of the strike price of the call (put) warrants or other related items when the issuing company of the underlying securities distributes dividends or bonuses, or conducts a capital increase or decrease, stock split or consolidation, and other related matters, or when the securities investment trust enterprise (SITE) distributes dividends on the underlying exchange-trade fund (ETF) or conducts other related matters. If the issuer does not adopt adjustments in accordance with the GreTai reference formula, that fact shall be noted in a prominent typeface in the public offering prospectus.
(11) Methods of handling when the issuing company of the underlying securities undergoes a merger, or its stocks are placed in the altered-trading-method category, suspended from trading, or de-listed from the GreTai; or when the GreTai announces suspension of the compilation of the underlying index; or the underlying ETF is terminated due to the dissolution, bankruptcy, or voidance of the approval of the securities investment trust enterprise (SITE); provided that if the stocks are de-listed from the GreTai when the issuing company of the underlying securities transfers its listing to a stock exchange, the call (put) warrants may continue trading on the GreTai until the expiration date.
(12) Methods of handling OTC listing of the call (put) warrants, or delisting from OTC markets, or suspension of OTC trading imposed by the GreTai.
(13) Terms stipulating that upon expiration of the period of validity, if the market price of the underlying securities or closing index of the underlying index is higher than the strike price or strike index of a call warrant (or the strike price or strike index of a put warrant is higher than the market price of the underlying securities or closing index of the underlying index) and therefore possesses exercise value, and where the terms of exercise require cash settlement, the warrant holder shall be deemed to have expressed its intention to exercise the warrant and is entitled to request settlement.
(14) Terms stipulating that the securities firm may not substitute another warrant with a period of validity longer than that of the original warrant, or any other security, for the originally issued warrant.
(15) Procedures for delivery/settlement when the warrant holder exercises the option.
(16) Terms stipulating that where settlement for exercise of the option under the preceding subparagraph shall be in cash, the cash settlement amount shall be calculated based on the closing price of the underlying securities, or closing index of the underlying index, on the exercise date.
(17) Terms stipulating the methods for handling distribution of securities centrally deposited in the Taiwan Depository & Clearing Corporation (TDCC) account where the securities firm fails to perform its obligation of delivery of the underlying securities or cash settlement of the price difference within a prescribed time limit.
(18) Clarification of whether or not there are plans for a reverse issue of call (put) warrants against the same underlying securities or underlying index within the coming three months. |
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