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Title	Taiwan Futures Exchange Corporation Trading Rules for Stock Option Contracts CH
Date	2014.03.25 ( Amended )

Article Content

Article 1
Article 2
Article 3	The terms used in these Rules 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

The Underlying Securities of a TAIFEX Stock Option Contract or the issuer of the [Underlying Securities] shall comply with all of the following requirements: 1.Common stock listed with the Taiwan Stock Exchange Corporation (TWSE) or the GreTai Securities Market (GTSM). 2.Market value of at least NT$10 billion. 3.Trading volume during the most recent 3 calendar months equal to 20 percent or more of the total amount for all TWSE listed or GTSM listed shares, or average monthly trading volume for the most recent 3 calendar months of 100 million shares or more. 4.No deficit on the most recent financial statement audited and attested or reviewed by a CPA, or a deficit in the most recent period but no accumulated deficit. 5.Have not in the most recent three years been partially or completely suspended from trading by order of the competent authority due to any circumstance in Article 156 of the Securities and Exchange Act. 6.Have not in the past year been subject to imposition of an altered trading method by the TWSE or GTSM, or an announcement of suspended trading under Article 50 or 50-3 of the TWSE Operating Rules or Article 12-1 of the GTSM Rules Governing Securities Trading on the GTSM. 7.Have not in the most recent three months been subject to any sanction imposed by the TWSE pursuant to the TWSE or GTSM Rules Governing Implementation of the Stock Market Surveillance System due to irregular fluctuations in the price of the Underlying Securities. 8.Are not been subject to a public announcement by the TWSE or GTSM to halt margin purchase and short sale transactions pursuant to Article 4 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale. 9.Are not marked with any warning indicator in the Key Financials Section of the Market Observation Post System (MOPS). 10.There is no other factor arising out the nature of the enterprise or special circumstances that may be deemed to have an adverse effect on the price of the Underlying Securities. If the shares of the issuer of the Underlying Securities of a TAIFEX Stock Option Contract are delisted from the TWSE or GTSM due to the issuer's transformation into a financial holding company, and the TWSE or GTSM has approved the listed trading of the financial holding company on the TWSE or GTSM, the TAIFEX may select the financial holding company as [the issuer of] the Underlying Securities of a Stock Option Contract, and the restrictions set forth in subparagraphs 2 to 4 of the preceding paragraph shall not apply.

Article 5

Except where otherwise provided, the TAIFEX will once every 3 months select securities qualified as underlyings of Stock Option Contracts under the preceding article, and examine the underlyings of listed Stock Option Contracts according to market conditions.

Article 6
Article 7
Article 8
Article 9
Article 10
Article 11

Article 12	The Underlying Assets of each Stock Option Contract are 2,000 shares of the Underlying Securities, provided this restriction shall not apply where there is contract adjustment in accordance with regulations.
Article 13	The strike price multiplier for Stock Option Contracts is 2,000. Except where otherwise provided, the settlement value of a Stock Option Contract upon expiration shall be calculated by the difference between the value of the underlying assets, as determined based on the final settlement price, and the exercise amount, with the resultant amount rounded down to the new Taiwan Dollar. The exercise amount under the preceding paragraph is the strike price multiplied by the strike price multiplier.
Article 14	Stock Option Contract premiums shall be quoted in points. The premium multiplier is NT$2,000 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	The daily fluctuation limit of the premium of a Stock Option Contract is the daily price fluctuation limit of the Underlying Assets divided by the premium multiplier.
Article 16
Article 17	For listing series of a new expiration month, the TAIFEX shall first introduce one contract with at-the-money strike price based on the given day's opening reference price of the Underlying Securities, rounded off to the nearest multiple of the strike price interval. Also, taking the above-stated strike price as the base price, two in-the-money and two out-of-the-money contracts with different strike prices shall be introduced above and below it respectively according to the strike price interval. Where the opening reference price of the Underlying Securities referred to in the preceding paragraph is a number within the strike price interval, the strike price shall be the nearest upper multiple of the interval. The strike price intervals referred to in paragraph 1 shall be determined as follows: 1.For a strike price of less than NT$10: the interval is NT$1, and the minimum strike price is NT$2. 2.For a strike price of NT$ 10 and above but less than NT$50: the interval is NT$2. 3.For a strike price of NT$50 and above but less than NT$100: the interval is NT$5. 4.For a strike price of NT$100 and above but less than NT$200: the interval is NT$10. 5.For a strike price of NT$200 and above but less than NT$500: the interval is NT$20. 6.For a strike price of NT$500 and above but less than NT$1,000: the interval is NT$50. 7.For a strike price of NT$1,000 and above: the interval is NT$100. For the duration of a contract, when the opening reference price of the Underlying Securities on any day has reached the second highest or the second lowest strike price available, new series are listed sequentially on that day based on the strike price interval, to maintain at least two in-the-money and two out-of-the-money contracts. In addition to listing contracts of different strike prices as described above, the TAIFEX may, according to market conditions, list contracts with other strike prices.
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 8,000 contracts for individual investors, 24,000 contracts for institutional investors, and 60,000 contracts for market makers. 2.Tier 2: The position limit is 4,000 contracts for individual investors, 12,000 contracts for institutional investors, and 30,000 contracts for market makers. 3.Tier 3: The position limit is 2,000 contracts for individual investors, 6,000 contracts for institutional investors, and 15,000 contracts for market makers. 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 TAIFEX may adjust the limits on aggregate open positions held by market makers under paragraph 1 as it deems necessary in view of market conditions. 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 3 calendar months reached 1.6 billion shares or more; or total trading volume in the past 3 calendar months reached 1.2 billion shares or more and the number of outstanding shares reached 3.2 billion shares or more. 2.Tier 2: Where the total trading volume of the Underlying Securities in the past 3 calendar months reached 800 million shares or more; or total trading volume in the past 3 calendar months reached 600 million shares or more and the number of outstanding shares reached 1.6 billion shares or more. 3.Tier 3: Where the requirements of the two preceding subparagraphs are not met. The "number of outstanding shares" in the preceding paragraph and in Article 18-1, paragraph 1 means the total number of shares issued by the issuer of the Underlying Securities, less the following: 1.The total percentage of shares held by directors and supervisors under statutory shareholding ratio requirements. 2.Number of pledged shares. 3.The number of shares that companies newly listed on the TWSE or GTSM are required to place in compulsory central custody. 4.Shares repurchased under the Regulations Governing Share Repurchase by Listed and OTC Companies, but not yet retired. 5.Shares on which the competent authority imposes a restriction with respect to listing or trading on the TWSE or GTSM. The TAIFEX will, once every 3 months or according to market status, examine the tier grade of the Underlying Securities based upon the criteria set out in the paragraph 3. 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 expiration of the next-nearest month contract that is already listed on the announcement date; provided, the TAIFEX 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 standard may be held until the expiration date of the Contracts, provided that no new position may be added until the lowered limit standard has been complied with. 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. The aggregate open positions in Stock Option Contracts held in omnibus accounts are not subject to the limits in paragraph 1. 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 18-1	If the total number of shares represented by the open positions in the same Underlying Securities of a stock future or stock option after close of market on any trading day exceeds 15 percent of the total number of outstanding shares of the Underlying Securities, then, unless otherwise provided, the TAIFEX may impose a restriction to the effect that no trades in the stock option are allowed except to close out existing positions, starting from the next trading day. When the percentage under the preceding paragraph falls below 12 percent, the TAIFEX may remove the restriction starting from the next trading day.
Article 19
Article 19-1
Article 20
Article 20-1
Article 21

Article 22	Where any of the following circumstances applies to the issuer of the Underlying Securities in a Stock Option Contract, the TAIFEX shall adjust the terms and condition of the contract and publicly announce the adjusted contract content prior to the effective date of the adjustment: 1.Distribution of cash dividends. 2.Conversion of capital reserves or earnings into capital. 3.Cash capital increase. However, this shall not apply if the shareholders do not have preemptive rights to subscribe common shares. 4.Being a company that is extinguished following a corporate merger. 5.Capital reduction. However, this shall not apply to cancellation of shares upon share repurchase or upon a shareholder's waiver of shares in accordance with regulations. 6.Conversion of shares to those of a subsidiary of another company. 7.Any other event causing a change to the name, type, or quantity of shares held by shareholders, or distribution of other benefits to shareholders.
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. However, this shall not apply in any of the following circumstances: 1.In the case of a statutory consolidation or a conversion of shares into a newly established company, the effective date of Contract adjustment shall be the record date of the merger or the record date of the share conversion. 2.In the case of a capital reduction to cover losses, or a capital reduction by returning share capital in cash only, the effective date of Contract adjustment shall be the date when the trading of the Underlying Securities is resumed. On a case-by-case basis, the TAIFEX may otherwise set the date of Contract adjustment referred to in the preceding paragraph. 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
Article 26
Article 27
Article 28	The TAIFEX may execute contract adjustments under Article 22, subparagraph 7 on a case-by-case basis.
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 2,000 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	At the time of settlement, a trader may not request a time extension or refuse to deliver the Underlying Assets under the pretext that it has not yet received a cash dividend or capital increase stock, or that it has waived its right to participate in a cash capital increase.
Article 31
Article 32	On the effective date of a contract adjustment under Article 22, the TAIFEX may add new series to the adjusted contract, for 2,000 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.
Article 33	Upon adjustment of a Stock Option Contract in any circumstances under Article 22, the position limit shall be computed by inclusion of all options on the same Underlying Securities held by the trader; if there is any adjustment in the number of Underlying Securities, it shall also be based upon the total number of shares of the Underlying Assets. Adjustment contents and reversion dates for position limits under the preceding paragraph shall be publicly announced by the TAIFEX.

Article 34	The TAIFEX shall suspend the adding of new series to a Stock Option Contract in any of the following circumstances with respect to Underling Securities or the issuer thereof: 1.Where the market value of the Underlying Securities is less than NT$5 billion. 2.The volume of shares of the Underlying Securities traded during the most recent 3 calendar months account for less than 8 percent of the total amount for all TWSE or GTSM listed shares, and the average volume of shares traded in the most recent 6 calendar months is less than 40 million shares. 3.Where the issuer is publicly announced as an extinguished company in a corporate merger. 4.Where the competent authority has ordered the partial or complete suspension of trading of the Underlying Securities. 5.Where the TWSE or GTSM has publicly announced a change of trading method for the Underlying Securities. 6.Where suspension of trading of the Underlying Securities has been announced by the TWSE pursuant to Article 50 or 50-3 of the TWSE Operating Rules or by the GTSM pursuant to Article 12-1 of the GTSM Rules Governing Securities Trading on the GTSM. 7.Where the TWSE or GTSM has announced the halting of margin purchase and short sale transactions pursuant to Article 4 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale, or the GTSM listed Underlying Securities are changed to a listing on the TWSE and the TWSE has announced that the securities are not eligible for margin purchase and short sale. The TAIFEX shall make a quarterly examination and announcement with respect to any suspension of adding new series under subparagraphs 1 and 2 of the preceding paragraph; with respect to suspension of adding new series under any of the other subparagraphs, it shall make the announcement upon learning of the event. In addition to complying with the provisions of paragraph 1, the TAIFEX may suspend the adding of new series based upon the condition of the issuer of the Underlying Securities or upon market conditions. In the circumstances under subparagraphs 1 or 2 of paragraph 1, the TAIFEX may keep adding new series [to a Stock Option Contract] to meet market needs.
Article 35	Where adding of new series to a Stock Option Contract is suspended, the TAIFEX may resume the addition of new series thereto in either of the following circumstances: 1.In the case of suspension of adding new series in any of the circumstances under subparagraphs 1 and 2 of paragraph 1 of the preceding article: the Underlying Securities or the issuer thereof meets the requirements under Article 4. 2.In the case of suspension of adding new series in any of the circumstances under subparagraphs 3 or 7 of paragraph 1, or under paragraph 3 of the preceding article: the circumstances which led to the suspension cease to exist. Upon resumption of adding new series to a stock option, new contracts shall be introduced for each expiration month under Article 16, and introduced or supplemented for each strike price according to the strike price interval, to maintain two out-of-the-money and two in-the-money contracts as determined by the opening reference price of the Underlying Securities on a given day.
Article 36

Article 37
Article 38
Article 39
Article 40
Article 41
Article 42

Article 43