| Article 1 |
These Trading Rules are specially prescribed to maintain orderly trading of the Taiwan Stock Exchange Finance Sector Index Option Contracts ("the Contracts") at the Taiwan Futures Exchange Corporation ("TAIFEX"), so as to safeguard secure and fair trading of the Contracts.
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| Article 2 |
Futures commission merchants that engage in trading of the Contracts shall observe these Rules as well as the Futures Trading Act and other applicable acts and regulations. Matters on which these Rules are silent shall be handled in accordance with the bylaws and rules, public announcements, and circulars of the TAIFEX.
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| Article 3 |
The Contracts are abbreviated as "Financial Options." The ticker symbol is "TFO."
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| Article 4 |
The underlying index of the Contracts is the Taiwan Stock Exchange Finance Sector Index ("the underlying index"). The calculation formula, component stocks, base period, adjustments thereto, and other relevant matters of the underlying index shall be as prescribed by the Taiwan Stock Exchange Corporation ("TWSE").
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| Article 5 |
The Contracts come in call options and put options.
A call option is a contract giving the buyer the right to purchase from the seller a specified quantity of the underlying or clear and settle the right in cash on the expiration date at the strike price under specified trading terms.
A put option is a contract giving the buyer the right to sell a specified quantity of the underlying or clear and settle the right in cash on the expiration date at the strike price under specified trading terms.
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| Article 6 |
The multiplier of the Contracts shall be NT$250 per index point.
The settlement value of the Contracts on expiration date shall be equal to the difference between the final settlement price and the strike price, multiplied by the contract multiplier.
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| Article 7 |
The premium of the Contracts shall be quoted in index points. The value per point shall be the contract multiplier set out in the preceding Article.
The minimum fluctuation in premium quotations shall be as follows:
- Under 2 points: 0.02 points.
- 2 points or above but under 10 points: 0.1 points.
- 10 points or above but under 100 points: 0.2 points.
- 100 points or above but under 200 points: 1 point.
- 200 points or above: 2 points
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| Article 8 |
The trading hours for the Contracts are from 8:45 am to 1:45 pm on TWSE business days. On the last trading day of the month in which a contract reaches expiration, the trading hours are 8:45 am to 1:30 pm. However, if the TAIFEX has made other provisions, those provisions shall govern.
If for any reason the TWSE announces a halt of trading prior to market opening of the Contracts, or when other factors influence trading of the Contracts, trading of the Contracts may be halted; if the TWSE announces a halt of trading during trading hours of the Contracts, trading of the Contracts will continue. As necessary, however, the TAIFEX may announce a halt of trading based on the current situation, and report the halt to the competent authority for recordation on the next business day.
When the TWSE changes its trading hours, or when other factors influence trading of the Contracts, or in response to a suggestion by a futures industry association or the National Federation of Futures Industry Associations, the TAIFEX may change the trading hours for the Contracts after reporting to the competent authority for approval.
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| Article 9 |
The daily fluctuation of the Contracts premium shall be capped at 10 percent of the closing price of the underlying index on the TWSE on the previous business day.
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| Article 10 |
Expiration months for the Contracts are the current month and the next two calendar months, such that there are three expiration months listed and traded concurrently. The last trading day of any Contract shall be the third Wednesday of the month in which the given contract expires, with trading ending at close of market on the last trading day. The the last trading day shall be the expiration date.
Where the last trading day referred to in the preceding paragraph falls on a holiday or trading cannot take place due to force majeure, or if the TAIFEX has made other provisions, the next following business day shall the last trading day.
The next business day following the last trading day of a contract in the expiration month shall be the first trading day for contracts with a new expiration month.
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| Article 11 |
For listing contract series of new expiration months or contracts with new strike prices for existing expirations dates, the TAIFEX shall, based on the previous business day's closing price of the underlying index on the TWSE, consecutively introduce contracts with in-the-money and out-of-the money strike prices at intervals of the strike price interval, to satisfy the condition of having three consecutive near months beginning with the spot month, with the highest and lowest strike prices covering 15 percent above and below the underlying index.
The "strike price interval" referred to in the preceding paragraph is determined by the following method:
- Strike price of less than 600 points: 5-point interval for the nearest-month contracts,10-point interval for the following two near-month contracts;
- Strike price of 600 points or higher but less than 2,000 points: 10-point interval for the nearest-month contracts, 20-point interval for the following two near-month contracts;
- Strike price of 2,000 points or higher: 20-point interval for the nearest-month contracts, 40-point interval for the following two near-month contracts.
When the next-nearest-month contract becomes the nearest-month contract, based on the strike price interval of the nearest-month contract, contracts shall be introduced to supply all the required strike prices covering 15 percent above and below the underlying index.
In addition to listing contracts with different strike prices in accordance with paragraphs 1 and 2, the TAIFEX may, depending on market conditions, introduce contracts with other strike prices.
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| Article 12 |
Trading quotes for the Contracts are matched by call auction at the opening of market, and then by continuous matching during market hours.
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| Article 13 |
When it accepts an order to buy the Contracts, a futures commission merchant shall first collect from the buyer the premium required for the total volume of the buy order.
When accepting an order to sell the Contracts, a futures commission merchant shall first collect from the seller the trading margin required for the total volume of the sell order. After the trade has been executed, the futures commission merchant shall credit the proceeds from the premium received for selling the Contracts to the margin account of the seller, and mark to market the margin required for short positions of that principal on a daily basis from the trade date until the positions have been closed out. It is not necessary to post margin for a short position that is taken to offset an earlier long position.
If the balance in the principal's margin account falls below the maintenance margin level, the futures commission merchant shall immediately notify the principal to deposit in cash the difference between the margin account balance and the required margin for all open positions within a prescribed time period. If the principal fails to deposit the margin within the prescribed time limit, the futures commission merchant may proceed to liquidate the principal's positions.
The trading margin and the maintenance margin referred to in the preceding two paragraphs shall not be lower than the initial margin and maintenance margin requirements announced by the TAIFEX.
The initial margin and maintenance margin announced by the TAIFEX shall be based on the clearing margin calculated according to the TAIFEX Standards and Methods for Receipt of Clearing Margins plus a percentage prescribed by the TAIFEX.
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| Article 14 |
Prior to closing of the last trading day, a futures trader may settle rights and obligations under the Contracts by selling or buying back on the TAIFEX centralized exchange market part or all of the volume originally bought or sold.
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| Article 15 |
The daily settlement price of the Contracts shall be determined based on the following:
- The last executed trade price on the given day; or
- A price determined by the TAIFEX if there is no trade price in the last 15 minutes before the close of market on the given day or the settlement price in the preceding subparagraph is obviously unreasonable.
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| Article 16 |
The final settlement price of the Contracts shall be set based on the simple average price of the underlying index during the 30 minutes of trading before market close on the expiration day as provided by the Taiwan Stock Exchange. If the Taiwan Stock Exchange postpones market closing or matching, the TAIFEX may extend the aforementioned 30-minute sampling time.
The calculation method under the preceding paragraph shall be separately prescribed by the TAIFEX.
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| Article 17 |
The Contracts may be exercised on the expiration date only. If an open position is in-the-money on the expiration date, the difference between the final settlement price and the strike price shall be settled in cash.
An in-the-money position as referred to in the preceding paragraph is a call option position when the final settlement price is higher than the strike price, or a put option position when the final settlement price is lower than the strike price. The writer of an in-the-money position shall pay the difference referred to in the preceding paragraph, while the buyer is entitled to collect the difference referred to in the preceding paragraph.
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| Article 18 |
A buyer who intends to exercise the Contracts shall make a declaration on the expiration date. In-the-money options shall be deemed automatically exercised if the difference between the final settlement price and the strike price falls in the range announced by the TAIFEX, unless the buyer declares a waiver of exercise in advance.
Futures commission merchants shall submit notice within the time prescribed by the TAIFEX indicating exercise or waiver of the option.
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| Article 19 |
Exercised options are assigned to option writers by the TAIFEX by a random method.
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| Article 20 |
A trader's open same-side positions in the Contracts at any time may not exceed the limit standard as publicly announced by the TAIFEX.
The term "open same-side positions" referred to in the preceding paragraph means total positions in call options bought plus put options written, or total positions in call options written plus put options bought.
Every three months or as occasioned by market conditions, the TAIFEX will publicly announce the applicable position limit standard under paragraph 1, according to the below-listed brackets, based on the average daily figure for trading volume or open interest (whichever is higher) in the Contracts during the period in question, with the benchmark set at not less than 3 percent and not more than 5 percent thereof for natural persons and set at 10 percent thereof for institutional investors. However, the lowest position limit shall be 2,000 contracts for natural persons, and 6,000 contracts for institutional investors:
- When the benchmark is 2,000 or more contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 500 contracts.
- When the benchmark is 5,000 or more contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 1,000 contracts.
- When the benchmark is 10,000 or more contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 2,000 contracts.
- When the benchmark is 20,000 or more contracts, the position limit shall be the benchmark rounded down to the nearest integral multiple of 4,000 contracts.
The combined aggregate of open positions in the Contracts held by futures dealers shall be limited to three times the position limit set out in paragraph 3 for institutional investors. The TAIFEX, however, may adjust this limit for market makers of the Contracts as it deems necessary in view of market conditions.
When the TAIFEX examines which position limit bracket is applicable, if the average daily figure for trading volume or open interest during a given period has not increased or decreased by more than 2.5 percent in comparison with the time of the previous adjustment, then a new position limit bracket will not be applied even if the criteria are met for application of a new bracket.
Any raising of the position limit will take effect from the TAIFEX announcement date. Any lowering of the position limit will take effect from the expiration of the next-nearest month contract that is already listed on the announcement date. Notwithstanding the forgoing, the TAFIEX 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 contract. However, no new position may be added until the lowered limit standard has been complied with.
The combined aggregate of open positions in the Contracts held in an omnibus account is not subject to the limits in paragraph 3, with the exception of undisclosed omnibus accounts, which accounts are subject to the limits for institutional investors.
An institutional investor may apply to the TAIFEX for an easing of position limits on the basis of its hedging needs.
In addition to conforming to the provisions of this article, the limits on open positions in the Contracts held by futures traders shall also conform to the TAIFEX Rules Governing Surveillance of Market Positions.
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| Article 21 |
Except as otherwise provided, a futures commission merchant engaging in proprietary or brokerage trading of the Contracts shall be subject to a limit of 200 contracts on the quantity per trading quote.
The TAIFEX may adjust the limit on the quantity per trading quote set out in the preceding paragraph in view of market trading conditions.
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| Article 22 |
Where any circumstance exists requiring suspension of trading or de-listing of the Contracts as enumerated in Article 31 of the TAIFEX Operating Rules, the TAIFEX shall make a public announcement 30 days before the implementation date.
All open positions shall be liquidated by the announced implementation date of suspension of trading or de-listing. Any positions that have not been liquidated by the implementation date will be settled at the settlement price on the implementation date.
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| Article 23 |
These Trading Rules and any amendments hereto shall be publicly announced and implemented following approval by the competent authority.
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