| Article 1 |
These Operation Directions are adopted under Article 24-1, paragraph 2 of the Taipei Exchange ("TPEx") Rules Governing Management of Foreign Currency Denominated International Bonds and Article 21, paragraph 1 of the TPEx Rules Governing Foreign Currency Denominated International Bonds that are Linked to Financial Derivatives or are Structured Bonds.
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| Article 2 |
Securities dealers, and banks without a concurrently operated securities dealer business, may apply to become a liquidity provider and, after review and approval by the TPEx, engage in liquidity providing business.
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| Article 3 |
When a securities dealer applies to become a liquidity provider, it shall submit the following documentation:
- Application form (Appendix 1).
- Liquidity Provider Agreement for Foreign Currency Denominated International Bonds (Appendix 2).
- Documentary proof demonstrating its participation in the International Bond Trading System ("IBTS").
- Other necessary documents specified by the TPEx.
When a bank without a concurrently operated securities dealer business applies to become a liquidity provider, it shall submit the following documentation:
- Application form (Appendix 3).
- Liquidity Provider Agreement for Foreign Currency Denominated International Bonds (Appendix 4).
- If required by the competent authority in charge of the relevant industry to set up an internal control system, submit an internal control system for the conduct of liquidity providing business for international bonds.
- Documentary proof of the bank's signing with a securities dealer of a consent form for the bank's use of the IBTS as a securities firm customer to trade international bonds.
- Other necessary documents specified by the TPEx.
The provisions of Article 4-1 of the TPEx Rules Governing the Electronic Bond Trading System with respect to a "specified institutional juristic person" shall apply mutatis mutandis to the method of application for participation, the performance of settlement obligations, and the conduct of other relevant operations with respect to the participation in the IBTS by a bank without a concurrently operated securities dealer business.
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| Article 4 |
A liquidity provider shall abide by the principle of honesty and good faith when conducting liquidity providing business operations. It shall also, in response to market conditions, review its operational strategies and procedural rules in a timely manner and shall evaluate whether performance is consistent with its established operational strategies and whether the risks assumed are within its allowed tolerance.
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| Article 5 |
A liquidity provider shall assign one or more operational persons to perform relevant business operations.
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| Article 6 |
With the exception of foreign currency denominated international bonds that are linked to financial derivatives or are structured bonds, as offered and issued by a domestic bank in accordance with the Regulations Governing Issuance of Bank Debentures by Banks (hereinafter, “structured international bonds”), for international bonds with an issue period of more than 7 years, a liquidity provider shall report to the TPEx on a daily basis yield curve quotes in the currency in which the bonds are denominated, or provide two-way buy and sell reference quotes for negotiated trading at its places of business in accordance with the following provisions, provided, however, that for bonds it does not hold, it need only quote or display buy prices:
- Within 3 months from the TPEx listing date of the bonds, report the quotes to the TPEx each day during the hours in which the negotiated trading is conducted at places of business of the securities firm.
- After 3 months from the TPEx listing date of the bonds, each day continue reporting the quotes to the TPEx in accordance with the preceding subparagraph, or otherwise disclose the quotes at its places of business.
A liquidity provider providing quotes pursuant to the preceding paragraph shall possess permission to engage in bond dealing business.
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| Article 7 |
With the exception of structured international bonds, for international bonds with an issue period of 7 years or less, a liquidity provider shall continue providing two-way buy and sell quotes through the IBTS each business day from 9 a.m. to 12 noon and in doing so shall comply with the following provisions; however, if the amount of the issue is less than US$20 million or the equivalent in other foreign currency, it may provide reference quotes as provided in Article 6:
- The quotes provided must be firm quotes.
- The quotes shall be disclosed to 10 or more securities dealers.
- The spread between the provided buy and sell quotes may not exceed:
- in the case of bonds with a duration of 5 years or less, NT$0.5;
- in the case of bonds with a duration of more than 5 years, NT$0.8.
Failure by a liquidity provider to provide quotes in compliance with the preceding paragraph shall be deemed a suspension of quotation. Unless otherwise provided herein, a liquidity provider may not suspend quotations for a cumulative time of more than 60 minutes a day.
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| Article 7-1 |
A liquidity provider for structured international bonds shall, every day of the issue period of the structured international bonds, during the hours that negotiated trading is conducted at its places of business, report to the TPEx its two-way buy and sell reference quotes for negotiated trading at its places of business, provided, however, that for bonds it does not hold, it need only report buy price quotes.
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| Article 7-2 |
When a liquidity provider for structured international bonds reports two-way buy and sell reference quotes for negotiated trading at its places of business, the buy quotes and sell quotes shall comply with the provisions below, provided that this does not apply when it need only report buy price quotes as provided in the preceding article:
- When the linked underlying(s) is a domestic underlying(s), the buy-sell spread may not be greater than 1 percent. The formula for calculating the buy-sell spread is (buy-sell spread) = [(sell quote) – (buy quote) / (sell quote)].
- When the linked underlying(s) is a foreign underlying(s), the buy-sell spread may not be greater than 3 percent. The formula for calculating the buy-sell spread is the same as provided in the preceding subparagraph.
A liquidity provider 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. It may not give a quote that deviates from a reasonable price, thereby impairing the formation of fair prices.
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| Article 8 |
A liquidity provider need not provide quotes on a given day where either of the following conditions is satisfied:
- Where it has already executed buy or sell transactions over the ITBS on the given day reaching a total of 10 or more trading units.
- Where it is unable to provide normal quotes due to significant market fluctuations or a force majeure contingency, with respect to which an approval has been obtained from the TPEx.
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| Article 9 |
A liquidity provider that has cumulatively sold the bonds over the ITBS or at its places of business in a combined total of 10 percent or more of the nominal amount of issuance of the bonds, need not provide quotes over the ITBS but shall still provide two-way buy and sell quotes for negotiated trading at its places of business in accordance with Article 6.
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| Article 10 |
When a liquidity provider violates these Operation Directions, the TPEx may notify it to make corrections within a prescribed period.
When either of the following circumstances applies to a liquidity provider, in addition to notifying the liquidity provider to issue a warning to the negligent personnel and managers, the TPEx may impose a penalty of not less than NT$30,000 but not more than NT$100,000:
- A notice has been given to the liquidity provider to make corrections within a prescribed period under the preceding paragraph 3 times or more within the last half year.
- The liquidity provider has committed a material violation sufficient to affect the normal trading order of the market.
When either of following circumstances applies to a liquidity provider, the TPEx may suspend or terminate all or part of its liquidity providing business operations and report to the competent authority in writing:
- A penalty has been imposed on the liquidity provider under the preceding paragraph 3 times or more within the last half year.
- The liquidity provider fails to pay the penalty under the preceding paragraph.
When a bank without a concurrently operated securities dealer business violates any provision of these Operation Directions in its capacity as a liquidity provider, the bank without a concurrently operated securities dealer business shall solely bear all resulting liability.
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| Article 11 |
These Operation Directions, and any amendments hereto, shall be implemented by public announcement after submission to and approval by the competent authority.
Any addition, deletion, or amendment to relevant attachments to these Operation Directions, and any amendments thereto, shall be enforced after approval by the president of the TPEx.
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