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Title Taiwan Futures Exchange Corporation Trading Rules for Stock Option Contracts CH
Date 2008.10.13 ( Amended )

Article Content

Article 1
Article 2
Article 3 The terms used in these Regulations shall have the following meanings: 1. Stock Option Contract: An option contract in which the underlying is a stock selected pursuant to TAIFEX regulations. 2. Call Option: a right of an option holder to buy the Underlying Assets from the option writer, or to settle the difference in cash on a given expiration date under specific trading terms including strike price and quantity. 3. Put Option: a right of an option holder to sell the Underlying Assets to the option writer, or to settle the difference in cash on a given expiration date under specific trading terms including strike price and quantity. 4. Option Series: Stock Option Contracts that have the same Underlying Securities, type of option, expiration month, and strike price. 5. Underlying Assets: The underlying content deliverable by a Call Option writer or a Put Option holder under a Stock Option Contract at the time of settlement. 6. Underlying Securities: Securities encompassed by the Underlying Assets of a Stock Option Contract.
Article 4
Article 5
Article 6
Article 7 Stock Option Contracts are traded from 8:45 am to 1:45 pm on the same trading days as the Underlying Securities market. However, if trading activities on the Underlying Securities market are suspended for any reason or there are other factors affecting trading of the Stock Option Contracts, the TAIFEX may announce a temporary suspension of trading based on the circumstances at the time. The trading days and trading hours under the preceding paragraph are subject to change by the TAIFEX with the approval of the competent authority.
Article 8
Article 9
Article 10
Article 11
Article 12 The Underlying Assets of each Stock Option Contract are 5,000 shares of the Underlying Securities, provided this restriction shall not apply where there is contract adjustment in accordance with regulations.
Article 13 The delivery price for a Stock Option Contract at the time of exercise and settlement is the strike price multiplied by the strike price multiplier. The strike price multiplier referred to in the preceding paragraph is 5,000.
Article 14 Stock Option Contract premiums shall be quoted in points. The premium multiplier is NT$5,000 per point. The minimum movement (tick) for a premium quote is as follows: 1. A quote of less than 5 points: 0.01 point. 2. A quote of 5 points to less than 15 points: 0.05 point. 3. A quote of 15 points to less than 50 points: 0.1 point. 4. A quote of 50 points to less than 150 points: 0.5 point. 5. A quote of 150 points to less than 1,000 points: 1 point. 6. A quote of 1.000 points or more: 5 points.
Article 15
Article 16 Expiration months for a Stock Option Contract shall be the next four nearest quarter months of March, June, September, and December from the spot month, listed and traded concurrently. The last trading day for a Stock Option Contract shall be the third Wednesday of the expiration month. The trading of a contract reaching maturity ends at close of market on the last trading day. The last trading day is the expiration day of the contract. If the last trading day referred to in the preceding paragraph falls on a holiday or if trading may not proceed on that day due to a force majeure event, the next business day shall become the last trading day. The next business day following the expiration day of the expired contract is the first trading day for the contract of the next nearest expiration month.
Article 17
Article 18 Except where otherwise prescribed by the TAIFEX, the aggregate open positions on the same side of the market in option contracts representing the same Underlying Securities held by a trader at any time shall be subject to the following tiered position limits: 1. Tier 1: The position limit is 2,000 contracts for individual investors, 6,000 contracts for institutional investors, and 15,000 contracts for market makers. 2. Tier 2: The position limit is 1,500 contracts for individual investors, 4,500 contracts for institutional investors, and 11,250 contracts for market makers. 3. Tier 3: The position limit is 1,000 contracts for individual investors, 3,000 contracts for institutional investors, and 7,500 contracts for market makers. 4. Tier 4: The position limit is 5,00 contracts for individual investors, 1,500 contracts for institutional investors, and 3,750 contracts for market makers. 5. Tier 5: The position limit is 150 contracts for individual investors, 500 contracts for institutional investors, and 1,250 contracts for market markers. The aggregate open positions on the same side of the market referred to in the preceding paragraph means the combined positions in Call Options bought and Put Options sold or in Call Options sold and Put Options bought. The tiers applicable to Underlying Securities under paragraph 1 are as follows: 1. Tier 1: Where the total trading volume of the Underlying Securities in the past three calendar months reached 2 billion shares or more; or total trading volume in the past three calendar months reached 1.5 billion shares or more and the number of outstanding shares reached 4 billion shares or more. 2. Tier 2: Where the total trading volume of the Underlying Securities in the past three calendar months reached 1.6 billion shares or more; or total trading volume in the past three calendar months reached 1.2 billion shares or more and the number of outstanding shares reached 3.2 billion shares or more. 3. Tier 3: Where the total trading volume of the Underlying Securities in the past three calendar months reached 800 million shares or more; or total trading volume in the past three calendar months reached 600 million shares or more and the number of outstanding shares reached 1.6 billion shares or more. 4. Tier 4: Where the total trading volume of the Underlying Securities in the past three calendar months reached 400 million shares or more; or total trading volume in the past three calendar months reached 300 million shares or more and the number of outstanding shares reached 600 million shares or more. 5. Tier 5: Where the requirements of the four preceding subparagraphs are not met. The TAIFEX will, once every three months or according to market status, examine the tier grade of the Underlying Securities based upon the criteria set out in the preceding paragraph. Any raising of the position limit will take effect from the TAIFEX announcement date, and any lowering of the position limit will take effect upon expiry of all the option contracts are already listed on the announcement date; provided, the TAIFEX may adjust this according to circumstances. Where a trader violates the provisions regarding position limit, the TAFIEX may restrict the trader from adding new positions, or instruct the FCM concerned to liquidate the trader's positions under conditions where this will not affect market price. An institutional investor may apply to the TAIFEX for a position limit increase based on hedging needs. In addition to complying with the provisions of this article, a trader shall also comply with the Taiwan Futures Exchange Corporation Regulations Governing Surveillance of Market Positions in holding open positions in Stock Option Contracts.
Article 19
Article 20 A Stock Option Contract buyer may apply to exercise the contract only on the expiration date. Except where cash settlement of the price difference is otherwise provided for, an exercised Stock Option Contract shall be settled by delivery or acceptance of the Underlying Securities; prices for cash settlement shall be determined by the TAIFEX. The unit for delivery/acceptance of the Underlying Securities shall be limited to 1,000 shares or an integer multiple thereof, provided, where a figure of less than 1,000 shares of the Underlying Securities is created by contract adjustment under relevant regulations, such number shall be converted into cash (rounded down to the new Taiwan dollar) for settlement, calculated on the basis of the closing price on the contract expiration date. Settlement of an exercised Stock Option Contract shall be handled in accordance with point 6 of the TAIFEX Directions for Clearing and Settlement by Futures Commission Merchants and Clearing Members.
Article 21
Article 22
Article 23 The effective date of Stock Option Contract adjustment shall be the second business day prior to the book closure date of the Underlying Securities. Should the effective date of a contract adjustment under the preceding paragraph fall on the contract expiration day, the contracts reaching maturity in that month are not subject to adjustment. A trader shall handle all trading and liquidation operations in compliance with the content of the post-adjustment Stock Option Contract, both for positions in the option contract already held prior to the effective date of contract adjustment and those opened thereafter.
Article 24
Article 25 Where contract adjustment is made in any circumstances under subparagraphs 1 through 3 of Article 22, the Underlying Assets shall be adjusted to the total of the following items: 1. 5,000 shares of the ex-rights Underlying Securities. 2. Gratis capitalization issue or certificates of entitlement to new shares, allocated to 5,000 shares of the Underlying Securities. 3. Cash dividend distributed to 5,000 shares of the Underlying Securities, rounded down to the new Taiwan dollar. 4. Fair value of preemptive rights to participate in cash capital increase granted to 5,000 shares of the Underlying Securities, rounded down to the new Taiwan dollar. The term "cash dividend" referred to in subparagraph 3 of the preceding paragraph is based upon the cash dividend yield computed by the closing price of the Underlying Securities on the resolution date of the shareholders' meeting of the issuer of the Underlying Securities; where either of the following circumstances applies, the cash dividend yield is excluded from computation: 1. The cash dividend yield is 2 percent or lower. 2. The cash dividend yield is higher than 2 percent but not higher than 5 percent (exclusive), and the cash dividend per share accounts for between 80 percent or higher and 120 percent or lower of the issuer's average cash dividend per share for the past three years. The term "fair value of preemptive rights to participate in cash capital increase" referred to in subparagraph 4 of paragraph 1 is computed as follows: 1. The difference between the closing price of the Underlying Securities on the deadline for payment [for shares] and the subscription price of the cash capital increase, multiplied by the number of shares that may be subscribed with the preemptive rights to participate in the cash capital increase granted to 5,000 shares of the Underlying Securities. Provided, where the closing price of the Underlying Securities on the deadline for payment is lower than the subscription price of the cash capital increase, computation is excluded. 2. Where the deadline for payment under the preceding subparagraph is later than the expiration date, the difference between the closing price of the Underlying Securities on the expiration date and the subscription price of the cash capital increase, multiplied by the number of shares that may be subscribed with the preemptive rights to participate in the cash capital increase granted to 5,000 shares of the Underlying Securities. Provided, where the closing price of the Underlying Securities on the expiration date is lower than subscription price of the cash capital increase, computation is excluded.
Article 26 A contract adjustment under Article 22, subparagraph 4 shall be made in the following manner: 1. Where the surviving company is represented by any Underlying Security of a Stock Option Contract listed by the TAIFEX, the Underlying Assets shall be adjusted to the stock or certificates of entitlement to new shares of the surviving company, in the same amount as 5,000 shares in the extinguished company may be exchanged for the shares in the surviving company. 2. Where the surviving company is not represented by any Underlying Security of a Stock Option Contract listed by the TAIFEX, the Stock Option Contracts on the Underlying Securities of the extinguished company shall be delisted from the TAIFEX. Provided, however, that prior to the pubic announcement of the contract adjustment, the TAIFEX may act pursuant to the preceding subparagraph upon compliance with listing-related procedures for stock options.
Article 27 The Underlying Assets subject to a contract adjustment under Article 22, subparagraph 5 shall be adjusted as the Underlying Securities after capital reduction, by the quantity of 5,000 shares less the number of shares representing the percentage of the capital reduction.
Article 28
Article 29 Where during its duration an adjusted contract is subject to further adjustment under Article 22, the Underlying Securities in the Underlying Assets shall be adjusted pursuant to the relevant provisions of Articles 25 through 28, and the figure of 5,000 shares referred to in Articles 25 through 27 shall be calculated as the number of shares representing the Underlying Securities subsequent to the prior adjustment of the contract.
Article 30
Article 31 The TAIFEX will add no new series to a contract that has been adjusted; any of its series that has no open positions left after close of market on any business day will be delisted from the next business day.
Article 32 On the effective date of a contract adjustment under Article 22, with the exception of adjustments under subparagraph 4, the TAIFEX may add new series to the adjusted contract, for 5,000 shares of the Underlying Securities. Article 16, paragraph 1 and Article 17, paragraph 1 shall apply mutatis mutandis to adding of new series under the preceding paragraph; provided that no new series may be added where the remaining life of a contract is not longer than five business days.
Article 33
Article 34
Article 35
Article 36
Article 37
Article 38
Article 39
Article 40
Article 41
Article 42
Article 43
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