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Title	Taipei Exchange Rules Governing the Operation by Securities Firms of the Business of Proprietary Trading of Specific Foreign Bonds CH
Date	2025.08.07 ( Announced )

Article Content

Chapter I General Principles

Article 1	These Rules are adopted in accordance with Article 45-1, paragraph 1 of the Regulations Governing Securities Firms, Article 11, paragraph 2 of the Standards Governing the Establishment of Securities Firms, and Article 21-1, paragraph 1 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms.
Article 2	Securities firms operating the business of proprietary trading of specific foreign bonds shall do so in compliance with these Rules. Matters on which these Rules are silent shall be subject to the provisions of other relevant laws and regulations. When a securities firm engages in the business under these Rules, if such trading is not an investment of proprietary funds, it shall apply to the Central Bank for permission.
Article 3	Terms used in these Rules are defined as follows: "Competent authority": means the Financial Supervisory Commission. "Foreign bond": means any foreign currency denominated bond issued outside Taiwan by a Taiwanese or foreign issuer. "Specific foreign bond": means any foreign bond in a fractional amount below the minimum denomination for trading the bond as specified in the issuer's issuance rules.
Article 4	To apply to operate the business of proprietary trading of specific foreign bonds, the applicant shall apply to establish a securities firm or convert into a securities firm under Article 9 or 10-2 of the Standards Governing the Establishment of Securities Firms, or to add an additional business type or business item under Chapter VI of the Standards Governing the Establishment of Securities Firms, and submit the application documents to the TPEx for it to review and then forward to the competent authority for approval. After a securities firm has obtained approval from the competent authority under the preceding paragraph, it shall submit an application (Attachment 1) stating all the required information, accompanied by the documents required to be submitted therewith, to the TPEx to apply to sign with the TPEx a Contract for the Operation by a Securities Firm of the Business of Proprietary Trading of Specific Foreign Bonds (Attachment 2). If a securities firm that has signed a contract with the TPEx under the preceding paragraph encounters or will encounter any of the events required to be reported under Article 4, paragraph 1 of the Regulations Governing Securities Firms, it shall file a report with the TPEx for forwarding to the competent authority, unless otherwise provided by law or regulation.
Article 5	A securities firm shall adopt an internal control system pursuant to the provisions relating to the operation of the business of propriety trading of specific foreign bonds set out in the Standard Directions for the Internal Control Systems of Securities Firms adopted by the TPEx, and submit it for approval by its board of directors, and shall comply with Articles 21 to 24 and Article 36-2, paragraph 3 of the Regulations Governing the Establishment of Internal Control Systems by Service Enterprises in Securities and Futures Markets. A securities firm's operation of the business of propriety trading of specific foreign bonds shall comply with laws and regulations, its articles of incorporation, and the internal control system referred to in the preceding paragraph. Whenever the TPEx gives notice to make any amendments to the internal control system referred to in paragraph 1, the securities firm shall make the amendments within the specified time limit.
Article 6	A securities firm operating the business of proprietary trading of specific foreign bonds shall adopt a risk-based approach to perform its anti-money laundering and countering the financing of terrorism (AML/CFT) duties, in accordance with the provisions of the Money Laundering Control Act, the Counter-Terrorism Financing Act, the Regulations Governing Anti-Money Laundering of Financial Institutions, and the Regulations Governing Internal Audit and Internal Control System of Anti-Money Laundering and Countering Terrorism Financing of Securities and Futures Business and Other Financial Institutions Designated by the Financial Supervisory Commission. A securities firm operating the business of proprietary trading of specific foreign bonds shall establish an internal control and audit system for AML/CFT, based on the risk of money laundering and terrorism financing as well as its business scale, and taking into reference the Taiwan Securities Association Template for Guidelines Governing Anti-Money Laundering and Countering Terrorism Financing of Securities Firms, and shall have the system approved by its board of directors, and furthermore shall regularly review whether any amendments to the system are needed.
Article 7	The places of business and facilities of a securities firm operating the business of proprietary trading of specific foreign bonds shall comply with the standards governing places of business and facilities as prescribed by the TPEx.
Article 8	A securities firm operating the business of proprietary trading of specific foreign bonds shall do so in a fair and reasonable manner and shall take into consideration factors including relevant operating costs, transaction risks, reasonable profits, and customers' overall contribution. It is not permitted to use unreasonable prices to solicit or engage in business. The advertisements produced and broadcast by the securities firm shall not be exaggerated or biased and shall comply with the self-regulatory rules prescribed by the securities association. A securities firm operating the business of proprietary trading of specific foreign bonds shall not engage in recommendation, advertising, or business solicitation for individual securities.
Article 9	A securities firm shall establish mechanisms for recordation, change, and custody with respect to its trading of specific foreign bonds, and incorporate them into its internal control system. The securities firm shall sign a contract with a centralized securities depository enterprise, and on a daily basis transmit itemized data detailing the units of specific foreign bonds held by customers to the information reporting system designated by the centralized securities depository enterprise, and the centralized securities depository enterprise shall save backups of the data and make it available for querying and reference by customers. If any discrepancy is discovered, the securities firm and the centralized securities depository enterprise shall jointly investigate and determine the cause and correct the discrepancy in a timely manner. Matters relating to information transmission, handling of irregularities, and fees under the preceding paragraph shall be handled in accordance with the provisions of the centralized securities depository enterprise.
Article 10	A securities firm operating the business of proprietary trading of specific foreign bonds shall sign a trust agreement with a financial institution and engage the trustee financial institution to manage or dispose of the foreign bonds within the scope of the business under these Rules in accordance with the trust agreement. Creditors of a securities firm's liabilities incurred with respect to its own property may not make any claim or exercise any other rights against the foreign bonds placed in custody under the preceding paragraph. The trust agreement signed between the securities firm and the financial institution in accordance with paragraph 1 shall stipulate the following: The securities firm agrees that the trustee financial institution shall provide data related to the dedicated trust account as required by the competent authority or the TPEx to audit the business of the securities firm. If the securities firm suspends operations, terminates its operations, reorganizes, is declared bankrupt, dissolves, has its establishment registration or permit canceled, or is otherwise unable to perform any transaction agreement with any customer during the term of the trust, the beneficial rights in the trust shall vest in the customer. The trustee financial institution shall then promptly return the proceeds of the disposal of the trust property to the customer or transfer the trust property to the new trustee financial institution. Except as provided in the preceding subparagraph, the beneficial rights in the trust may not be transferred or pledged. 4. Other matters as provided by the TPEx or the competent authority.
Article 11	A securities firm that operates only the business of proprietary trading of specific foreign bonds shall appoint one general manager to be responsible for the overall management of the entire company's business, who shall meet the qualifications under Article 9, paragraph 2 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms. The securities firm furthermore shall first submit documents verifying that its candidate meets the required qualifications to the TPEx for review and its approval before the candidate may fill that position. The securities firm's chief proprietary trading officer for the execution of the business of proprietary trading of specific foreign bonds and its chief clearing and settlement officer and chief internal auditor shall possess qualification as senior securities agents, and shall meet the qualifications set out in Article 10 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms. The securities firm's personnel executing the business of proprietary trading of specific foreign bonds and its clearing and settlement personnel and internal auditors shall possess the qualification of securities agent or higher, and shall participate in pre-service and in-service training pursuant to Articles 15 to 17 of the Regulations Governing Responsible Persons and Associated Persons of Securities Firms. In the case of a securities firm operating only the business of proprietary trading of specific bonds, the board of directors shall appoint one senior officer to serve as the chief AML/CFT compliance officer.
Article 12	The internal auditors of a securities firm shall perform regular or unscheduled internal audits of its finances, business, and information security, prepare internal audit reports, and keep them available for auditing. The internal audit reports under the preceding paragraph shall include whether the finances, business, and information security of the securities firm comply with relevant laws and regulations and its internal control system. A securities firm shall file with the TPEx, in the prescribed format by the end of each fiscal year, its annual audit plan for the next fiscal year, and within 2 months after the end of each fiscal year, it shall file with the TPEx in the prescribed format its report on the execution of its previous fiscal year's annual audit plan.
Article 13	A securities firm shall keep records of its handling of the business of proprietary trading of specific foreign bonds, and keep them available for auditing. The records under the preceding paragraph shall be kept for at least 10 years. In the event of any dispute, however, they shall be kept until the dispute is resolved.

Chapter II Finances and Business

Article 14	A securities firm that operates only the business of proprietary trading of specific foreign bonds shall, within 3 months after the end of each fiscal year, file with the TPEx and publicly announce its annual financial report audited and attested by CPAs. The auditing and attestation of the aforesaid financial report shall be performed by practicing CPAs of a joint CPA firm approved by the competent authority in accordance with the Regulations Governing Approval of Certified Public Accountants to Audit and Attest to the Financial Reports of Public Companies. The financial reports under the preceding paragraph shall be prepared in accordance with applicable laws and regulations. For matters on which applicable laws and regulations are silent, they shall be prepared in accordance with generally accepted accounting principles. A securities firm that operates only the business of proprietary trading of specific foreign bonds shall, by the 7th day of each month, file with the TPEx in the prescribed format its monthly accounting summary and income statement for the preceding month. The periods for which a securities firm keeps its accounting reports, account books, and accounting documents shall comply with the Business Entity Accounting Act, and additionally shall comply with the Table of Mandatory Preservation Periods for Accounts, Statements, and Documents of Securities Firms Trading on the TPEx adopted by the TPEx.
Article 15	In the case of a securities firm that operates only the business of proprietary trading of specific foreign bonds, the total amount of the securities firm's external liabilities may not exceed its net worth.
Article 16	In the case of a securities firm that operates only the business of proprietary trading of specific foreign bonds, its capital may not be loaned to others nor used for other purposes. The utilization of its capital shall be limited to the following: Bank deposits. Purchase of government bonds or financial bonds. Purchase of treasury bills, negotiable certificates of deposit, or commercial paper. Other uses approved by the competent authority or the TPEx.
Article 17	A securities firm that operates only the business of proprietary trading of specific foreign bonds may not make any equity investment in other securities, futures, financial or other enterprises and may not be a shareholder of unlimited liability in another company or a partner in a partnership enterprise.
Article 18	A securities firm and its responsible persons, managers, and employees shall conduct the operation of the business of proprietary trading of specific foreign bonds in accordance with the duties of care and loyalty of a good fiduciary and the principles of honesty and good faith. A securities firm and its personnel executing the operation of the business of proprietary trading of specific foreign bonds may not engage in any of the following conduct: Agreeing to or providing any specific interest or sharing of losses, or providing any judgment regarding whether a certain bond will rise or fall in price, or providing any investment recommendation, or providing investment consulting service, to induce investors to trade. Misappropriating bonds owned by a customer or temporarily kept under the custody of the securities firm in the course of business. Concealing or omitting important financial or business information with respect to bonds on which they provide buy and sell quotes, issuers or guarantors of bonds, or otherwise. Any agreement between the securities firm or any insider thereof and the issuer of a bond on which they provide buy and sell quotes or relevant personnel thereof for purposes of improper profit. Forging, concealing, or making a false entry regarding any record of collection, payment, or transfer of money or bonds. Any other matter injurious to the rights and interests of investors or in violation of any relevant law or regulation.
Article 19	A securities firm's collection, processing, use, or provision for use by the competent authority, the TPEx, and the centralized securities depository enterprise, of the personal data of investors shall comply with the Personal Data Protection Act.
Article 20	A securities firm shall adopt an information security policy in accordance with applicable laws and regulations, its internal control system, and its business needs, and the policy shall serve as a basis for evaluating risks and establishing various information security management mechanisms, to ensure the effectiveness of security measures for trading.
Article 21	The securities firm shall adopt procedures for managing information security incidents. The procedures shall at least include incident confirmation and troubleshooting mechanisms, incident reporting mechanisms, emergency response mechanisms, occasions for suspension of trading and the handling thereof, compensation measures with respect to the rights and interests of investors, and procedures for handling resumption of trading. The securities firm furthermore shall be diligent about effectively preserving a trail log and evidence and set up business continuity management mechanisms. When there occurs any incident of irregularity in information services, or any cyber security incident, that materially affects customer rights or interests or normal operation, the securities firm shall make a preliminary notification through the Cyber Security Notification System for Securities and Futures Industry within 30 minutes after it becomes aware of the incident, and shall make a formal notification and an incident resolution notification, respectively, at the time the incident has been investigated and understood and after the handling of the incident is finished.

Chapter III Trading Regulations

Article 22	A securities firm conducting specific foreign bond business shall do so through proprietary trading and by means of price negotiation and may not engage in repo transactions. When the securities firm first purchases a given foreign bond from offshore for the purposes of operating the business of proprietary trading of specific foreign bonds or sells offshore the positions held in a given foreign bond, the securities firm may be exempted from the restriction that otherwise requires it to trade in fractional amounts below the minimum denomination for trading the bond as specified in the issuer's issuance rules. The specific foreign bonds involved in a securities firm's operation of the business of proprietary trading of specific foreign bonds shall meet the following conditions: In the case of foreign central government bonds, the sovereign rating of the issuing country shall be at or above a certain level given by a credit rating agency listed in Table 1; in the case of foreign bonds other than foreign central government bonds, the long-term debt credit rating of the foreign bond's issuer or guarantor and the debt issue rating of the foreign bond shall be at or above a certain level given by a credit rating agency listed in Table 2. The foreign bonds may not be structured bonds, bonds with equity characteristics, subordinated bonds, total loss absorbing capacity bonds ("TLAC bonds"), mortgage backed securities (MBS), collateralized?debt?obligations (CDO), or bonds involving mainland China securities markets. The interest of the foreign bonds shall be calculated by a fixed rate or a positive floating rate.
Article 23	A securities firm shall disclose the basic information of the specific foreign bonds being sold by it, including related information such as the issuer, place of issue, International Securities Identification Number (ISIN), long-term credit rating, denomination currency, date of issue, maturity date, coupon dates, coupon rate, terms for interest and principal repayment, and other early call or put provisions, on its website for convenient query and reference by investors. For specific foreign bonds being sold by a securities firm that have early call or put provisions, the securities firm shall adopt related handling procedures and publish them on its website and incorporate them into its internal control system.
Article 24	A securities firm that will operate the business of proprietary trading of specific foreign bonds shall adopt handling procedures in accordance with Article 31-2 of the Regulations Governing Securities Firms and incorporate them into its internal control system. The securities firm shall adopt trading rules for its proprietary trading of specific foreign bonds and publish them on its website and incorporate them into its internal control system. The trading rules under the preceding paragraph shall include the trading hours, price quote method, order submission method, trade execution principles, trading procedures, bond interest distribution method, restrictions on currencies used in trades, clearing and settlement method, and the handling of default, and shall be without prejudice to the interests of customers.
Article 25	A securities firm operating the business of proprietary trading of specific foreign bonds shall make daily disclosure of the reference market prices for the foreign bonds within the scope of its business under these Rules and shall provide two-way firm quotes for the purchase and sale of the specific foreign bonds, provided, however, that when all foreign bonds held by the securities firm have been sold to customers, it need only disclose firm buy quotes. If a securities firm is unable to provide the firm quotes required under the preceding paragraph due to significant market fluctuations or a force majeure contingency, then, with approval from the TPEx, it may temporarily suspend its provision of such quotes. A securities firm shall provide reasonable price quotes based on its professional judgment and shall efficiently adjust demand and supply in the market depending on the market situation, and it may not give a quote that deviates from a reasonable price, thereby impairing the formation of fair prices. A securities firm shall pay special attention to the reasonableness of the spread between quoted buy and sell prices and shall adopt in its internal control system a basis for the determination of price quotes and maximum spreads, and shall disclose on its quotation webpage its adopted maximum spreads between buy and sell quotes. In the course of conducting the business of proprietary trading of specific foreign bonds, a securities firm shall provide buy and sell quotes, and effect settlement, in the denomination currency in which the bond is issued.
Article 26	When a securities firm engages in negotiated trading of specific foreign bonds with customers, it shall prepare and issue records of the trades to the customers.
Article 27	For securities firms operating the business of proprietary trading of specific foreign bonds, when the issuer of a specific foreign bond sold provides to the securities firm any notification or other information relating to the rights and interests of investors, upon receipt, the securities firm shall, as quickly as practical, truthfully transmit such to the customers. When a securities firm is aware that the issuer or guarantor of a bond is in financial difficulties or default, the securities firm shall notify the customers and report to the TPEx immediately on becoming aware of such event.
Article 28	A securities firm shall first apply to the TPEx for registration of a foreign bond and receive approval of registration from the TPEx before trading such specific foreign bond at its place of business. However, the preceding restriction does not apply to foreign bonds that have already been registered by other securities firms. Where there is a change to the registration data of a foreign bond mentioned in the preceding paragraph, the originally registering securities firm shall complete the updating of the registration data within 5 days after the change has occurred. The information to be registered for a foreign bond shall include its issuer, place of issue, International Securities Identification Number (ISIN), long-term credit rating, denomination currency, date of issue, maturity date, coupon dates, coupon rate, terms for interest and principal repayment, and other early call or put provisions. The trading hours for the conduct of the business of proprietary trading of specific foreign bonds by securities firms at their places of business are from 9 a.m. to 3 p.m. However, if a securities firm has already adopted internal operating rules for extended trading hours, it may extend its trading hours and publicly announce the extended hours at its place of business or on its website. If a securities firm adopts internal operating rules referred to in the preceding paragraph, those rules, and any amendments to them, shall be approved by the chairman of the board of directors.
Article 29	Securities firms operating the business of proprietary trading of specific foreign bonds, when holding positions in foreign bonds, shall comply with the competent authority's restrictions on the total foreign securities holdings of securities firms.
Article 30	For any position held by a securities firm when conducting proprietary trading of specific foreign bonds, if there is any deterioration in the credit rating associated with such position, which includes the country's sovereign rating, the long-term debt credit rating of the bond's issuer or guarantor, and the bond's debt issue rating, below the minimum standard set by the competent authority, the securities firm shall restrict its further trading in that foreign bond to buying back holdings of domestic customers of that foreign bond and selling positions held in that bond to counterparties operating business offshore, and shall suspend its further sale of that foreign bond to domestic customers.
Article 31	Securities firms shall comply with the Regulations Governing the Preparation of Financial Reports by Securities Firms when accounting for their proprietary trades in specific foreign bonds.
Article 32	A securities firm operating the business of proprietary trading of specific foreign bonds shall enter into contracts with the counterparties, which contracts shall outline the rights and obligations of the two parties. The securities firm shall confirm the terms and conditions of each individual transaction with the counterparty. A contract under the preceding paragraph shall specify the matters agreed with respect to the specific foreign bond such as interest distribution and restriction on power or right to make investment decisions.
Article 33	A securities firm operating the business of proprietary trading of specific foreign bonds shall conduct trading and perform its settlement obligations in accordance with the local laws and regulations or market practices, and shall file tax returns in accordance with tax laws and regulations.
Article 34	A securities firm shall, immediately after the execution of a trade has been confirmed, enter the trade information into the TPEx information system within the deadline and using the format prescribed by the TPEx. However, for a trade that is executed after 5 p.m., the information shall be reported by 5 p.m. on the next business day.
Article 35	The securities firm shall use the TPEx foreign bond issuance information registration and disclosure system. The fee standards for use of the system shall be as prescribed by the TPEx.

Chapter IV Auditing of Securities Firms and Handling of Violations

Article 36	The TPEx may audit a securities firm's operation of the business of proprietary trading of specific foreign bonds, and the securities firm may not evade, obstruct, or refuse the inspection or examination or refuse to provide information. When any deficiency is discovered, the TPEx may request the securities firm in writing to submit a corrective plan or an internal audit report. When the TPEx deems necessary, it may require the securities firm to engage a CPA(s) designated by the TPEx to conduct a targeted examination within an audit scope designated by the TPEx, and to submit the results of the examination to the TPEx. The audit fees shall furthermore be borne by the securities firm.
Article 37	If a securities firm is in any of the following circumstances, the TPEx may notify it to make supplementation or correction within a time limit, and in addition may impose a penalty of not more than NT$100,000: Violation of Articles 5 to 9, Articles 11 to 13, paragraphs 3 to 4 of Article 14, Article 15, or Articles 19 to 35. Failure to provide information to the TPEx or a CPA designated by the TPEx by a deadline set by the TPEx. Violation of any other provision of these Rules or other relevant requirements.
Article 38	If a securities firm is in any of the following circumstances, the TPEx may issue a warning, and in addition may impose a penalty of not more than NT$300,000, and notify it to make supplementation or correction within a time limit: Violation of Article 10, paragraphs 1 to 2 of Articles 14, or Articles 16 to 18. Failure to make supplementation or correction or to pay a penalty within a time limit set pursuant to the preceding article. Commission of a violation set forth in the preceding article, and the violation is of a material nature. Refusal, obstruction, or evasion of an inspection or examination by the TPEx or by a CPA designated by the TPEx. Misrepresentation, concealment, material omission, or obvious error in any relevant material presented by the securities firm. Occurrence of a serious information security incident. Material breach of a contract signed with the TPEx. Violation of laws or regulations of the competent authority and the violation is of a material nature. Dispositions made pursuant to the preceding paragraph shall be filed by the TPEx with the competent authority for recordation.
Article 39	If a securities firm is in any of the following circumstances, the TPEx may impose a penalty of not more than NT$600,000, and notify it to make supplementation or correction within a time limit; if the securities firm fails to make the supplementation or correction within the time limit, the TPEx may continually impose penalties each time until supplementation or correction is made: Failure to make supplementation or correction or to pay a penalty within a time limit set pursuant to the preceding article. Two or more instances of warning or penalty imposed under the preceding article within the past half year. Violation under the preceding two articles, and the violation is of a material nature such that it adversely affects market trading order or the rights or interests of investors. If the securities firm again commits any violation under any subparagraph of paragraph 1 within the past half year, the TPEx may impose a penalty of NT$1 million. Dispositions made pursuant to this article shall be filed by the TPEx with the competent authority for recordation.
Article 40	If a securities firm is in any of the following circumstances, the TPEx may suspend or terminate its operation of the business of proprietary trading of specific foreign bonds: Failure to make supplementation or correction or to pay a penalty within a time limit set pursuant to the preceding article. Misrepresentation or concealment in any material presented, sufficient to cause damage to the TPEx or others. Making of untrue records of trading or payment/receipt. Occurrence of a serious information security incident, and it affects the rights or interests of investors. Net worth lower than one-half of paid-in capital for 6 consecutive months. Upon application by the securities firm or as the TPEx otherwise deems necessary. A disposition under the preceding paragraph to suspend operation of the business of proprietary trading of specific foreign bonds shall be filed by the TPEx with the competent authority for recordation. A disposition to terminate operation of the business of proprietary trading of specific foreign bonds shall be submitted by the TPEx to the competent authority for approval.
Article 41	If any employee of a securities firm operating the business of proprietary trading of specific foreign bonds has materially violated these Rules or other relevant requirements, the TPEx may notify the securities firm to give a warning to the employee or suspend the employee's execution of business for a period of from 1 month to 6 months.

Chapter V Supplementary Provisions

Article 42

These Rules, and any amendments hereto, shall enter into force after submission to the competent authority for approval and recordation. Any addition, deletion, or amendment to the attachments of these Rules shall enter into force after approval by the president of the TPEx.