| Article 1 |
These Rules are specially prescribed to maintain orderly trading of the Taipei Exchange Stock Index Options Contracts (referred to as the " Contracts" hereunder) at the Taiwan Futures Exchange Corporation ("TAIFEX"), so as to ensure secure and fair trading of the Contracts.
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| 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.
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| Article 3 |
The Contracts are abbreviated as "GreTai Options " with the ticker symbol "GTO".
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| Article 4 |
The underlying index of the Contracts is the Taipei Exchange Capitalization Weighted Stock Index (referred to as the "underlying index" hereunder). The calculation formula, component stocks, base period, adjustments, and other relevant matters of the underlying index shall follow the determinations of the Taipei Exchange (TPEx).
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| Article 5 |
The Contracts come 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.
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| Article 6 |
The multiplier of the Contracts shall be NT$1,000 per index point.
The settlement value of the Contracts on expiration date shall be equal to the difference between the final settlement price and the strike price multiplied by the contract multiplier.
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| Article 7 |
The premium for the Contracts shall be quoted in index points. The value per point is the multiplier of the Contracts referred to in the preceding article.
The minimum fluctuation of the premium quotation shall be as follows:
- Less than 0.5 points: 0.005 points.
- 0.5 points to less than 2.5 points: 0.025 points.
- 2.5 points to less than 25 points: 0.05 points.
- 25 points to less than 50 points: 0.25 points.
- 50 points and above: 0.5 points
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| Article 8 |
The trading days of the Contracts are the business days of the TPEx. The trading hours of the Contracts 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, if the TAIFEX has made other provisions, those provisions shall govern.
If for any reason the TPEx announces a halt of trading prior to market opening of the Contracts, or when other factors influence trading of the Contracts, trading of the Contracts may be halted; if the TPEx announces a halt of trading during trading hours of the Contracts, trading of the Contracts will still continue. As necessary, however, the TAIFEX may announce a halt of trading based on the current situation, and report the halt to the competent authority for recordation on the next business day.
When the TPEx changes its trading hours, or when other factors influence trading of the Contracts, or in response to a suggestion by a futures industry association or the National Federation of Futures Industry Associations, the TAIFEX may change the trading days and trading hours for the Contracts after reporting to the competent authority for approval.
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| Article 9 |
The daily price limit of premium for the Contracts is 10 percent of the underlying index based on the closing value on the TPEx from the previous trading day.
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| Article 10 |
The delivery months for the Contracts 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 the Contracts of any delivery month shall be the third Wednesday of the month in which such the Contracts reach expiration; trading of the 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 the Contracts at expiration.
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, or if the TAIFEX has made other provisions, the next following business day shall be the last trading day.
The next business day following the last trading day of a contract in the expiration month shall be the initial trading date for the Contracts of the new delivery month.
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| Article 11 |
For listing contract series of new expiration months or contracts with new strike prices for existing expirations dates, the TAIFEX shall, based on the previous business day's closing price of the underlying index on the TPEx, 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:
- 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;
- the next two quarter months, with the highest and lowest strike prices covering 20 percent above and below the underlying index.
The "strike price interval" referred to in the preceding paragraph is determined by the following method:
- Strike price less than 150 points: 2.5 points interval for near-month contracts, 5 points for quarter-month contracts;
- Strike price of 150 points to less than 500 points: 5 points interval for near-month contracts, 10 points for quarter-month contracts;
- Strike price of 500 points or higher: 10 points interval for near-month contracts, 20 points 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 15 percent above and below the underlying index.
In addition to listing contracts with different strike prices as described in paragraphs 1 and 2, the TAIFEX may, depending on market conditions, launch contracts with other strike prices.
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| Article 12 |
Trading quotes for the Contracts are matched by call auction at the opening of market, and then by continuous matching during market hours.
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| Article 13 |
Before accepting an order to buy the Contracts, a futures commission merchant shall collect from the buyer the premium required for the total trading volume.
When accepting an order to sell the Contracts, 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 the 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.
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 TAIFEX Standards and Methods for Receipt of Clearing Margins plus a percentage prescribed by the TAIFEX.
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| 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.
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| Article 15 |
The daily settlement price of the Contracts shall be determined based on the following:
- The last transaction price of the day; or
- To be determined by the TAIFEX if there is no transaction price in the last 15 minutes before the close of market or the closing price as determined under the preceding subparagraph is obviously unreasonable.
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| Article 16 |
The final settlement price of the Contracts shall be set based on the simple average price of the underlying index during the 30 minutes of trading before market close on the expiration day as provided by the TPEx. If the TPEx postpones market closing or matching, the TAIFEX may extend the aforementioned 30-minute sampling time.
The calculation method under the preceding paragraph shall be separately prescribed by the TAIFEX.
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| Article 17 |
The Contracts may be exercised on the expiration date only. An 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 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 are entitled to receive the difference.
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| Article 18 |
Buyers who intend to exercise the Contracts shall make a declaration on the expiration date. An in-the-money option shall be deemed 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.
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| Article 19 |
All exercised options are assigned to the holders of short positions by the TAIFEX through an automatic random procedure.
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| Article 20 |
The open long or short positions a trader holds in the Contracts at any time may not exceed the TAIFEX's announced limit standards.
The open long or short positions 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 referred to in paragraph 1 according to the bracket 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 individual persons and 10 percent thereof for institutional investors. However, the lowest position limit shall be 2,000 contracts for natural persons, and 6,000 contracts for institutional investors:
- 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.
- 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.
- 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.
- 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. 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.
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. However, the TAFIEX 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 limit may be held until the expiration date of the Contracts. However, no new position may be added until the lowered limit has been complied with.
The combined aggregate of open positions in the Contracts 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.
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 Contracts held by traders shall also conform to the TAIFEX Rules Governing Surveillance of Market Positions.
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| Article 21 |
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.
The TAIFEX may make adjustments to the limit on the quantity per trading quote in the preceding paragraph in view of market trading conditions.
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| Article 22 |
Where any circumstance exists requiring suspension of trading or de-listing of the Contracts as enumerated in Article 31 of the TAIFEX Operating Rules, the TAIFEX shall make a public announcement 30 days before 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 will be settled at the settlement price as of the implementation date.
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| Article 23 |
These Rules and any amendments hereto shall be publicly announced and implemented following approval by the competent authority.
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