| Article 1 |
These Directions are adopted pursuant to Article 6, paragraph 3 of the TPEx Rules Governing the Review of Exchange-Traded Notes for Trading on the TPEx.
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| Article 2 |
The underlying indexes of exchange-traded notes (hereinafter "ETNs") shall meet the conditions of Article 2 of the Regulations Governing the Issuance of Exchange Traded Notes by Securities Firms (hereinafter the "ETN Issuance Regulations").
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| Article 3 |
The compiler of the underlying index shall meet all of the following requirements:
- Has 3 or more years of experience in index compilation, and the ability to establish and review index compilation rules, and to maintain or update on a daily basis the files for the components of the index. If the index compiler is a securities firm, bank, or an interested party of the issuer, the compiler must establish a comprehensive internal firewall system for the index compilation rules, file maintenance and updating, and related operations.
- Has the ability to calculate index value, or sign contracts with market information suppliers to calculate index value.
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| Article 4 |
The compiler of the underlying index shall have the ability to transmit the index value and make it known throughout the market, or sign contracts with two or more market information suppliers for the transmission of the index value.
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| Article 5 |
The components of the underlying index shall meet the qualifications set out in the following subparagraphs:
- Meet one (or more) of the following standards:
- Listed for trading on the TPEx.
- Listed for trading on the Taiwan Stock Exchange.
- Listed for trading on the Taiwan Futures Exchange.
- Comply with the provisions of the Regulations Governing Securities Firms regarding the allowable scope of investment, trading, or business operations of a securities firm.
- Comply with the provisions of the Regulations Governing Securities Investment Trust Funds regarding the allowable scope of investment or trading of a securities investment trust fund.
- Comply with the provisions of the Regulations Governing Futures Trust Funds regarding the allowable scope of investment or trading of a futures trust fund.
- Comply with the provisions of the TPEx Regulations Governing Over-the-Counter Trading of Financial Derivatives by Securities Firms regarding the underlyings to which financial derivatives may be linked.
- Other underlyings that have been approved by the competent authority or approved by the TPEx.
- An index whose components meet the qualifications of any of items A to H of this subparagraph.
- The components of the underlying index and of any index under item I of the preceding subparagraph must have the following standard properties:
- The components of the index must be sufficiently diversified. Indexes with components classified as stock must have 10 or more different components, and the component accounting for the highest share of market capitalization of the index may not exceed 30 percent of the total market capitalization of the index.
- The components of the index shall have a definite degree of liquidity. The TPEx may set required liquidity standards depending on the characteristics of the components of the index.
Underlying indexes for which the competent authority, under the proviso to Article 2, paragraph 3, subparagraph 3 of the ETN Issuance Regulations, has approved exemption from the requirement of diversification are not subject to the restriction of subparagraph 2, item A of the preceding paragraph.
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| Article 6 |
If the underlying index of the ETN for which the issuer is applying for TPEx listing is not compiled by the TPEx solely or in cooperation with another index provider, or the ETN is a futures and options strategy ETN as defined in Article 3, subparagraph 6 of the TPEx Rules Governing the Trading of Exchange-Traded Notes, the issuer shall, before filing for the issuance of the ETN, fill out a written application for a letter of consent regarding the qualifications of the underlying index and, after paying an index review fee, submit the application for the letter of consent to the TPEx with the following documents attached:
- Photocopy of the index license agreement or letter of intent entered into with the index compiler.
- Documents proving that the index compiler complies with Article 3 of these Directions.
- Documents proving that the components of the underlying index comply with Article 5 of these Directions.
- Analysis of the liquidity of the components of the underlying index and related reference documents.
- A detailed description of the method for and basis of the calculation of the underlying index, and the principles for selecting and replacing the components of the underlying index.
- Historical archive of the underlying index for at least the most recent 1 year.
- All the channels through which domestic investors, in the future after the ETN has been listed on the TPEx, will be able to access information related to the index, and relevant information.'
The TPEx shall review the documents submitted with the application for the letter of consent as specified in the preceding paragraph, and may request that the issuer provide relevant supplements and descriptions. It will then approve the documents before issuing the letter of consent, and reply by letter to the applying issuer and forward a copy to the competent authority.
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| Article 7 |
If the underlying index of the ETN for which the issuer is filing for TPEx listing is compiled by the TPEx solely or in cooperation with another index provider, and furthermore the ETN is not a futures and options strategy ETN as defined in Article 3, subparagraph 6 of the TPEx Rules Governing the Trading of Exchange-Traded Notes, the issuer shall, before filing for the issuance of the ETN, submit the following documents to the TPEx for recordation:
- A brief introduction to the qualifications and experience of the ETN product development team.
- An introduction to the underlying index and the licensing agreement for the index.
- Plans for the ETN offering:
- Minimum issue amount during the early stages of the offering.
- The scheduled timeline of the TPEx listing of the ETN.
- The product design and procedures for the subscription, redemption, and early redemption of the ETN.
- Hedging strategies and risk management measures for the ETN.
- Marketing and promotion plan.
- Any other documents requested by the TPEx.
If there is any deficiency or omission in the information provided under the preceding paragraph, the TPEx may request that the issuer provide relevant supplementary information or an explanation. Once the documents are found to be complete, the TPEx will issue a letter of recordation and forward a copy to the competent authority.
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| Article 8 |
These Directions and any amendments hereto shall take force after approval and recordation by the competent authority.
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