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The Directions for Handling the Trading and Exercise of Call (Put) Warrants During Natural Disasters, Election and Recall of Public Officials, or National Holidays are as follows:
- In the event of a natural disaster (or an election or recall of public officials) during which the TPEx market remains open, the following operations shall apply to requests by investors to exercise call (put) warrants, and to the payment and delivery of funds and securities in connection with such exercise, in areas where the local government has announced closure of offices:
- In areas where the local government has announced closure of offices, if a securities firm decides to suspend business activities, its investors will not be able to request exercise of call (put) warrants on the day of suspended business, and will be able to do so only after the securities firm resumes business.
- The payment and delivery of funds and securities for the exercise of warrants does not fall within the scope of transactions for which the TPEx guarantees settlement, and the current regulations under which the TPEx will advance settlement funds in the event of a natural disaster (or an election or recall of public officials) furthermore do not apply to it. The operations to process the funds and securities payable/deliverable for the exercise of a call (put) warrant requested on the second business day before the date of a natural disaster (or election or recall of public officials) which would have been processed by the securities firms (including such securities firms appointed by the issuer and those of warrant holders) in the area where the local government has announced closure of offices and the TPEx shall be postponed to the date when business is resumed, and handled together with the operations to process the funds and securities payable/deliverable for exercise requests made on the business day immediately before the date of the natural disaster (or election or recall of public officials).
- In areas where the local government has announced closure of offices, if a securities firm decides to remain open for business as usual, for warrants exercised by its investors during the occurrence of a natural disaster (or election or recall of public officials), the securities firm will handle the warrant exercise payment/delivery operations with the TPEx on the next business day after the day that business is resumed.
- In the event a natural disaster (or election or recall of public officials) occurs on the expiration date of warrants and the TPEx market remains open, investors in the areas where the local government has announced closure of offices may submit requests to exercise a call (put) warrant on the date when business is resumed. As for warrants subject to cash settlement and automatic exercise, on the date of occurrence of a natural disaster (or election or recall of public officials), the TPEx will perform automatic exercise only for investors in areas where the local government has announced continuation of business as usual. Automatic exercise for investors in areas where offices are closed will be postponed until the date when business is resumed. The settlement price or index shall be calculated based on the simple arithmetic mean trade price of the underlying securities during the 60 minutes before market closing, or the mean closing price of the underlying spot gold, or the underlying settlement index, or the underlying futures settlement price, on the expiration date. If the underlying securities have no trade price during the 60 minutes before market closing, the trade price of the most recent transaction shall be used in the calculation. In the event of a circumstance under Article 35, paragraph 4 of the Taipei Exchange Rules Governing Securities Trading on the TPEx ("TPEx Trading Rules"), the trade price or index during the extended period shall be included in the calculation. However, if the underlying is foreign securities or a foreign index, the Taipei Exchange Guidelines for the Exercise of Call (Put) Warrants shall govern.
- In the event a natural disaster (or election or recall of public officials) occurs on the business day before the expiration date of warrants and the TPEx market remains open, for investors in areas where the local government has announced closure of offices, the final deadline for requesting exercise of call (put) warrants will be extended until the next business day after the day that business is resumed. The settlement price shall still be calculated based on the simple arithmetic mean trade price of the underlying securities during the 60 minutes before market closing, or the mean closing price of the underlying spot gold, or the underlying settlement index, or the underlying futures settlement price, on the expiration date. If the underlying securities have no trade price during the 60 minutes before market closing, the trade price of the most recent transaction shall be used in the calculation. In the event of a circumstance under Article 35, paragraph 4 of the TPEx Trading Rules, the trade price or index during the extended period shall be included in the calculation. However, if the underlying is foreign securities or a foreign index, the Taipei Exchange Guidelines for the Exercise of Call (Put) Warrants shall govern.
- According to Article 35-8 of the TPEx Trading Rules, the TPEx shall stop accepting orders and trading of call (put) warrants on the business day before the expiration date of the warrants. Therefore, the last trading day for all call (put) warrants shall be the second business day before the expiration date of the warrants. To ensure that the rights and interests of warrant holders will not be compromised due to closure of the TPEx market, if a natural disaster (or election or recall of public officials) occurs during the (3-day) period from the last trading day to the expiration date of the warrants, resulting in the full closure of the TPEx market, the expiration date of the call (put) warrants shall always be postponed accordingly. Their settlement price or index shall be handled in accordance with the Taipei Exchange Guidelines for the Exercise of Call (Put) Warrants. If the expiration date of warrants falls on a national public holiday, handling of a request to exercise a call (put) warrant shall be postponed to the next business day.
- The underlying settlement index and the underlying futures settlement price referred to above shall be calculated in accordance with Article 11, paragraph 1, subparagraphs 6 and 7 of the Taipei Exchange Rules Governing the Review of Call (Put) Warrants for Trading on the TPEx.
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The Standards for Calculating whether a Call (Put) Warrant for which the Performance Method is "Cash Settlement" Possesses Exercise Value and the Directions for the Calculations are as follows:
- The standard for calculating whether a call (put) warrant for which the performance method is "cash settlement" possesses exercise value are as follows:
- Call warrants
Index warrants possess exercise value if the result of the following calculation is greater than zero: (settlement index – strike point) × corresponding monetary amount per index point × number of warrant units × exercise ratio – (settlement index – strike point) × corresponding monetary amount per index point × number of warrant units × exercise ratio × securities transaction tax rate.
Futures warrants possess exercise value if the result of the following calculation is greater than zero: (settlement price － strike point) × corresponding monetary amount per point × number of warrant units × exercise ratio － (settlement price － strike point) × corresponding monetary amount per point × number of warrant units × exercise ratio × securities transaction tax rate.
Other call warrants possess exercise value if the result of the following calculation is greater than zero: (settlement price － strike price) × quantity of the linked underlying － (settlement price － strike price) × quantity of the linked underlying × securities transaction tax rate.
- Put warrants
Index warrants possess exercise value if the result of the following calculation is greater than zero: (strike point – settlement index) × corresponding monetary amount per index point × number of warrant units × exercise ratio – (strike point – settlement index) × corresponding monetary amount per index point × number of warrant units × exercise ratio × securities transaction tax rate.
Futures warrants possess exercise value if the result of the following calculation is greater than zero: (strike point － settlement price) × corresponding monetary amount per point × number of warrant units × exercise ratio － (strike point － settlement price) × corresponding monetary amount per point × number of warrant units × exercise ratio × securities transaction tax rate.
Other put warrants possess exercise value if the result of the following calculation is greater than zero: (strike price － settlement price) × quantity of the linked underlying － (strike price － settlement price) × quantity of the linked underlying × securities transaction tax rate.
- The directions for calculation of the exercise value based on the above standards are as follows:
- The exercise processing fee collected by a securities firm is not deducted in the calculation of the exercise value under the standard set out above. Therefore, when the amount receivable by the holder as a result of exercise, after subtraction of the transaction tax, is less than the exercise processing fee calculated pursuant to Article 12 of the Taipei Exchange Regulations Governing the Trading of Call (Put) Warrants, the exercise processing fee collected by the securities firm may not be higher than the amount receivable by the investor as a result of exercise.
- The Taiwan Depository & Clearing Corporation ("TDCC"), after accepting a securities firm's request to exercise a call (put) warrant for which the performance method is "cash settlement", will review and approve the application in accordance with the standards for calculating exercise value. When the call (put) warrant for which the securities firm requests exercise has no exercise value according to the calculation formulas above, the TDCC will reverse it.
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An order ticket for call (put) warrants is generally the same as an order ticket for securities in general, and shall be completed in accordance with the Regulations Governing Information to be Published in Order Tickets, Trade Reports, and Reconciliation Statements Prepared by Securities Brokers Upon Receiving Orders to Buy or Sell Securities.
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