| Article 1 |
These Rules are adopted under Article 38, paragraph 6 of the Operating Rules of the Taiwan Futures Exchange Corporation ("TAIFEX") to enhance the stability of market prices.
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| Article 2 |
For the purposes of these Rules, "Dynamic Price Banding Mechanism" (hereinafter, "DPBM") means the mechanism by which the TAIFEX rejects new orders for trading of applicable contracts in accordance with the provisions of these Rules.
These Rules are applicable to the following contracts:
- TAIFEX Taiwan Stock Exchange Stock Index (TAIEX) Futures Contracts.
- TAIFEX Mini-TAIEX Futures Contracts.
- TAIFEX Taiwan Stock Exchange Electronics Sector Index Futures Contracts.
- TAIFEX Taiwan Stock Exchange Banking and Insurance Sector Index Futures Contracts.
- TAIFEX Taiwan Stock Exchange NonFinance NonElectronics Sub-Index Futures Contracts.
- TAIFEX FTSE/TWSE Taiwan 50 Index Futures Contracts.
- TAIFEX Taipei Exchange Stock Index Futures Contracts.
- TAIFEX TPEx 200 Index Futures Contracts.
- TAIFEX Tokyo Stock Price Index Futures Contracts.
- TAIFEX Dow Jones Industrial Average Index Futures contracts .
- TAIFEX S&P 500 Index Futures Contracts.
- TAIFEX Nasdaq-100 Index Futures Contracts.
- TAIFEX Taiwan Stock Exchange Capitalization Weighted Stock Index Options Contracts.
These Rules apply to single orders for trading of contracts under the preceding paragraph and to combination orders for simultaneous trading of different contracts.
These Rules do not apply to call auction trading, to block trades, and, with respect to any contracts under paragraph 2, subparagraphs 1 to 12 of this article, to implied orders deriving from combination orders.
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| Article 3 |
When the TAIFEX generates the price determined for a new order under Article 38, paragraph 4 of its Operating Rules, the order will be rejected in any of the following circumstances:
- The determined price for a newly entered buy order is above the upper limit of the dynamic price band.
- The determined price for a newly entered sell order is below the lower limit of the dynamic price band.
- No determined price can be generated for part or the whole of a newly entered buy order, due to depletion of counterparty sell orders for trade execution, and the bid price of the newly entered buy order is above the upper limit of the dynamic price band.
- No determined price can be generated for part or the whole of a newly entered sell order, due to depletion of counterparty buy orders for trade execution, and the ask price of the newly entered sell order is below the lower limit of the dynamic price band.
The determined price for a newly entered order as described in the preceding paragraph means, with respect to a newly entered combination order for trading the contracts under Article 2, paragraph 2, subparagraph 13, the determined price for an order for trading a component (leg) of the combination order.
For a newly entered order in any of the circumstances under subparagraphs 1 to 4 of paragraph 1, unless the order is specified as a fill-or-kill order, if, in the case of a buy order, one or more determined prices for part of the order are not above the upper limit of the dynamic price band, or, in the case of a sell order, one or more determined prices for part of the order are not below the lower limit of the dynamic price band, then the order may be executed in part, with the remaining unexecuted portion being rejected.
The term "upper limit of the dynamic price band" of paragraphs 1 and 3 means the base price for the applicable contract plus a variation range; the term "lower limit of the dynamic price band" of the preceding two paragraphs means the base price for the applicable contract minus a variation range.
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| Article 4 |
For single orders for trading any contracts under Article 2, paragraph 2, subparagraphs 1 to 13, the base prices referred to in Article 3 hereof shall be determined by the following principles:
- The first base price after market opening shall be determined by the following principles:
- The trade price generated by the opening call auction.
- If no trade price is generated by the opening call auction, the opening reference price shall be taken as the first base price.
- The second base price after market opening to the last base price before market closing shall be determined by the following principles:
- The last trade price before the time at which the TAIFEX determines the base price, if the following conditions are satisfied:
- The time lag between the execution of the trade and the determination of the base price does not exceed a certain time period set by the TAIFEX.
- The trade price is within a certain range, set by the TAIFEX, from the mid-price of the effective bid price and the effective ask price. However, if there is no mid-price of the effective bid price and the effective ask price, it must be within a certain range above and below the previous base price.
- If there is no last trade price that satisfies the requirements of the preceding item, the mid-price of the effective bid price and the effective ask price shall be taken as the base price.
- If no base price can be determined pursuant to the preceding two items, the base price shall be determined by the TAIFEX taking account of the price of the underlying index, the estimated index dividend drop points, the prices of relevant domestic and global financial instruments, and other relevant information.
- If the TAIFEX announces a halt of trading due to a malfunction or disruption in its trading system or trading information transmission system or for any other cause after market opening, the first base price upon resumption of trading shall be determined by the following principles:
- The trade price generated by call auction when order matching restarts after resumption of trading (hereinafter, "call-auction trade price).
- If there is no call-auction trade price, the last base price before the halt of trading shall be taken as the first base price upon resumption of trading.
For the purposes of subparagraph 2 of the preceding paragraph, the "mid-price of the effective bid price and the effective ask price" means the simple arithmetic average of the volume-weighted average bid and ask price that satisfy the requirements for a certain number of contracts and a certain bid-ask spread ratio, as calculated by the TAIFEX based on the prices and quantities of the best five bid/ask pairs, and the price and quantity of the best one implied bid/ask pair deriving from combination orders, available at the time the TAIFEX determines the base price. The bid-ask spread ratio is equal to the volume-weighted average sell price divided by the volume-weighted average buy price, minus one.
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| Article 5 |
For combination orders for trading any contracts under Article 2, paragraph 2, subparagraphs 1 to 13, the base prices referred to in Article 3 shall be determined by the following principles:
- The first base price after market opening shall be determined by the following principles:
- If there are opening call-auction trade prices of both component contracts of a combination trade order, the opening call-auction trade price of the far contract minus the opening call-auction trade price of the near contract shall be taken as the first base price.
- If no base price can be determined pursuant to the preceding item, the base price shall be determined by the TAIFEX taking account of the price of the underlying index, the estimated index dividend drop points, the prices of relevant domestic and global financial instruments, and other relevant information.
- The second base price after market opening to the last base price before market closing shall be determined by the following principles:
- The last trade price before the time the TAIFEX determines the relevant base price, if the following conditions are satisfied:
- The time lag between the execution of the trade and the determination of the relevant base price does not exceed a certain time period set by the TAIFEX.
- The trade price is within a certain range, set by the TAIFEX, from the mid-price of the effective bid price and the effective ask price. However, if there is no mid-price of the effective bid price and the effective ask price, it must be within a certain range above and below the previous base price.
- If there is no last trade price that satisfies the requirements under the preceding item, the mid-price of the effective bid price and the effective ask price shall be taken as the base price.
- If no base price can be determined pursuant to the preceding two items, the base price shall be determined by the TAIFEX taking account of the price of the underlying index, the estimated index dividend drop points, the prices of relevant domestic and global financial instruments, and other relevant information.
- If the TAIFEX announces a halt of trading due to a malfunction or disruption in its trading system or trading information transmission system or for any other cause after market opening, the first base price upon resumption of trading shall be determined by the following principles:
- If there are call-auction trade prices of both component contracts of a combination trade order, the call-auction trade price of the far contract minus the call-auction trade price of the near contract shall be taken as the first base price upon resumption of trading.
- If no base price can be determined pursuant to the preceding item, the base price shall be determined by the TAIFEX taking account of the price of the underlying index, the estimated index dividend drop points, the prices of relevant domestic and global financial instruments, and other relevant information.
For the purposes of subparagraph 2 of the preceding paragraph, the "mid-price of the effective bid price and the effective ask price" means the simple arithmetic average of the volume-weighted average bid and ask price that satisfy the requirements for a certain number of contracts and a certain bid-ask spread range, as calculated by the TAIFEX based on the prices and quantities of the best five bid/ask pairs available at the time the TAIFEX determines the base price. The bid-ask spread range is equal to the volume-weighted average sell price minus the volume-weighted average buy price.
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| Article 6 |
For single orders for trading the contracts under Article 2, paragraph 2, subparagraph 13, the base prices referred to in Article 3 shall be determined based on an option pricing model and also taking account of the following parameters:
- Underlying price, such as the base price for the futures with the same underlying and also with the same expiration date, the price of the underlying index, the estimated index dividend drop points, or the price of a relevant domestic or global financial instrument.
- Volatility, such as the volatility determined based on trading information including option bid/ask prices and quantities, or the relevant futures volatility or underlying index volatility.
- Interest rate, such as the Taipei Interbank Offered Rate (TAIBOR), the Taiwan Bills Index Rate (TAIBIR), or the new Taiwan dollar base interest rate published by the Bank of Taiwan.
- Strike price.
- Time to expiration.
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| Article 7 |
For any contracts under Article 2, paragraph 2, subparagraphs 1 to 12, the variation range referred to in Article 3 hereof shall be determined in the following manner:
- Variation range for a single order: the most recent closing price of the underlying index multiplied by the rejection threshold for single orders.
- Variation range for a combination order: the most recent closing price of the underlying index multiplied by the rejection threshold for combination orders.
The rejection threshold under the preceding paragraph shall be separately announced, and may be adjusted based on market conditions, by the TAIFEX.
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| Article 8 |
For single orders for trading the contracts under Article 2, paragraph 2, subparagraph 13, the variation range referred to in Article 3 shall be determined in the following manner:
- For a contract expiring before the next-nearest month contract:
- Before the TAIFEX obtains the latest volatility parameter of the current trading session for the contract: the variation range shall be the most recent closing price of the underlying index multiplied by the rejection threshold for single orders.
- After the TAIFEX obtains the latest volatility parameter of the current trading session for the contract: the variation range shall be the most recent closing price of the underlying index multiplied by two times the absolute value of the theoretical hedge ratio (Delta value) and further multiplied by the rejection threshold for single orders.
- For a contract expiring after or at the same time as the next-nearest month contract: the variation range shall be the most recent closing price of the underlying index multiplied by the rejection threshold for single orders.
The theoretical hedge ratio referred to in subparagraph 1, item B of the preceding paragraph shall be determined by the TAIFEX based on the relevant parameters used to calculate the base prices under Article 6. When the absolute value of a theoretical hedge ratio is lower than 0.25, it shall be taken to be 0.25. When the absolute value of a theoretical hedge ratio is higher than 0.5, it shall be taken to be 0.5.
The rejection threshold referred to in paragraph 1 shall be separately announced, and may be adjusted based on market conditions, by the TAIFEX.
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| Article 9 |
When there is an upward price movement on a domestic or foreign futures market or spot market that exceeds a certain ratio set by the TAIFEX, for the contracts under Article 2, paragraph 2, subparagraph 13, the variation range for determining the upper limit of the dynamic price band for call options, and the variation range for determining the lower limit of the dynamic price band for put options, for a regular trading session may be relaxed by doubling the variation range prescribed in paragraph 1 of the preceding article.
When there is a downward price movement on a domestic or foreign futures market or spot market that exceeds a certain ratio set by the TAIFEX, for the contracts under Article 2, paragraph 2, subparagraph 13, the variation range for determining the lower limit of the dynamic price band for call options, and the variation range for determining the upper limit of the dynamic price band for put options, for a regular trading session may be relaxed by doubling the variation range prescribed in paragraph 1 of the preceding article.
The preceding two paragraphs do not apply where after market opening the TAIFEX has obtained the latest volatility parameter of the current trading session for all expiring contracts of the contracts under Article 2, paragraph 2, subparagraph 13, or has announced an adjustment to the dynamic price band in accordance with Article 10, paragraph 3.
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| Article 10 |
The TAIFEX may announce a temporary suspension of the DPBM for a portion of or all applicable contracts in either of the following circumstances:
- If there is a natural disaster, rioting, war, or any other event of force majeure or special circumstance, foreign or domestic, which is likely to affect futures trading on the TAIFEX.
- If an event occurs that affects the normal operation of the TAIFEX DPBM.
Upon the temporary suspension of the DPBM for a cause under the preceding paragraph, the TAIFEX may announce resumption of the DPBM after the cause ceases to exist.
The TAIFEX may announce an adjustment to the dynamic price band for a portion of or all applicable contracts in any of the following circumstances:
- When the volatility indicator for futures trading reaches a certain standard set by the TAIFEX.
- When an event occurs under paragraph 1, subparagraph 1.
- When any other event occurs for which the TAIFEX deems it necessary to make an adjustment.
The TAIFEX shall make an announcement under the preceding three paragraphs through trading information disclosure channels or media transmission devices.
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| Article 11 |
For matters not provided for in these Rules, the relevant TAIFEX rules shall apply mutatis mutandis.
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| Article 12 |
These Rules, and any amendments hereto, shall be implemented by public announcement after approval and recordation by the Competent Authority.
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