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[Law Basis]
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〈Scope of foreign exchange business〉 Article 4
The term "foreign exchange business" as used in these Regulations comprises the
following categories:
1. Securities related businesses involving foreign exchange：
(1) Foreign currency denominated international bonds business;
(2) Proprietary trading of foreign securities business;
(3) Issuance of call (put) warrants business involving foreign exchange ;
(4) Business of accepting orders to trade foreign securities ;
(5) Business of trading foreign bonds as an agent;
(6) Business of acting as a participating dealer of an offshore exchange traded
fund;
(7) Business involving domestically issued foreign currency denominated
exchange traded funds;
(8) Business of acting as the master agent of an offshore fund institution;
(9) Business of acting as a local mandated agent of an offshore fund institution
; and
(10)Business of conducting wealth management involving foreign exchange by means
of trust.
2. Spot foreign exchange transactions in connection with securities businesses.
3. Foreign exchange derivatives business.
4. Other foreign exchange businesses related to the securities business approved
by the Bank.
When any of the businesses mentioned in the preceding paragraph involves foreign
securities or offshore funds, such foreign securities or offshore funds shall
not be denominated in New Taiwan dollar (NTD) and shall not involve or be linked
to NTD exchange rate or NTD interest rate indices.
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〈Suspension, revocation or cancellation of approval〉 Article 10
The Bank may suspend, revoke or cancel its approval in part or in whole the
foreign exchange business engaged by a securities enterprise, or suspend the
application of the securities enterprise for new foreign exchange business or
for adding branches to conduct foreign exchange business in the event of any of
the following:
1.The securities enterprise fails to commence operation within six months after
being issued a letter of approval. The applicant may request for an extension
with valid reasons. If agreed by the Bank, the securities enterprise may have
an one-time extension of no more than three months;
2.The securities enterprise did not engage in a foreign exchange business again
within one year after reporting to the Bank the date of commencing the
business;
3.The securities enterprise has violated the provisions of these Regulations or
other relevant laws and regulations and the violation is of a serious nature,
or was asked by the Bank to rectify the situation within the period specified
by the Bank, but has failed to do so;
4.After the securities enterprise has been approved to engage in various foreign
exchange businesses, its original application documents were found to contain
false information or misrepresentation of a serious nature;
5.The securities enterprise suspends operations, is dissolved, or declares
bankruptcy; or
6.Other facts that are sufficient to indicate that the securities enterprise
may hinder sound operations of the business, or that the securities enterprise
is unable to meet financial policy requirements.
For the securities enterprise whose approval is revoked or cancelled according
to the preceding paragraph, the Bank will announce to nullify the approval.
A securities enterprise that is ordered by the Bank or the relevant competent
authority to suspend or stop applying for business for a specified period of
time shall not commence any foreign exchange business that requires reporting
for record according to these Regulations by reporting the business to the Bank
for record if the suspension period has not expired, if it fails to propose
proper and concrete improvement measures during the suspension period, or if its
proposed improvement measures have not been accepted by the competent authority.
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〈Receipt/payment and foreign exchange settlement〉 Article 17
Unless otherwise provided in these Regulations, a securities enterprise that
engages in foreign exchange business involving outward and inward remittance
of fund or foreign exchange settlement against NTD shall deal with an authorized
bank in accordance with the “Regulations Governing the Declaration of Foreign
Exchange Receipts and Disbursements or Transactions” (hereinafter referred to
as the “Regulations for Declaration”), “Directions Governing Banking
Enterprises for Operating Foreign Exchange Business” (hereinafter referred to
as “Operating Directions”), and “Directions for Banking Enterprises on
Assisting Customers to Declare Foreign Exchange Receipts and Disbursements or
Transactions”.
Unless special provisions apply to the foreign exchange settlement, securities
enterprises shall observe the following rules when handling receipt/payment
associated with their foreign exchange business:
1.Where the receipt/payment of the foreign exchange business is in foreign
currency, the customer shall carry out foreign exchange settlement at an
authorized bank in accordance with the “Regulations for Declaration”, or
the payment may be transferred from the customer’s foreign exchange deposit
account;
2.When accepting orders to trade foreign securities, conducting wealth
management business involving foreign exchange by means of trust, or acting
as a master agent or its mandated sub-distributors of an offshore fund
institution to purchase or redeem offshore funds in NTD, the securities
enterprise shall carry out foreign exchange settlement at an authorized bank
in accordance with the “Regulations for Declaration”; and
3.Foreign exchange settlement shall be carried out at an authorized bank based
on the exact amount of the transaction. Unless with the Bank’s approval,
settlement on a net basis after offset of receipt/payment is not allowed.
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〈Scope of offshore or foreign currency warrant business〉 Article 25
The business scope of call (put) warrant issued by securities enterprises
involving foreign exchange (hereinafter referred to as “offshore or foreign
currency warrant business”) includes the following:
1.For domestic call (put) warrants involving foreign securities or indices of
foreign securities markets, the scope of the underlying shall conform to
relevant regulations stipulated by the FSC.
2.For offshore call (put) warrants involving domestic securities or indices,
the scope of the underlying shall be limited to domestic stocks or baskets of
stocks, domestic exchange traded securities investment trust funds, offshore
ETFs, and Taiwan depositary receipts.
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〈Receipt/payment associated with sales of offshore funds〉 Article 37
When a securities enterprise acting as a master agent for an offshore fund
institution sells the funds or mandates its sub-distributors to handle the
offering and sale of the offshore funds, the related receipt/payment shall be
handled according to the following rules:
1.When the investor pays and receives funds directly to and from an offshore
account designated by the offshore fund institution, the related
receipt/payment for purchase and redemption between the investor and the
offshore fund institution shall be made in foreign currency.
2.When the investor purchases the offshore fund through the account opened by
the master agent at a domestic bank in the name of the offshore fund
institution, or a bank account designated by the centralized securities
depository enterprise, or a non-discretionary money trust managed by a trust
enterprise, or accepting orders to trade foreign securities by a securities
enterprise, the following applies:
(1)When the purchase is paid in NTD, relevant receipt/payment shall be made in
NTD.
(2)When the purchase is paid in foreign currency, relevant receipt/payment shall
be made in foreign currency.
(3)Upon receiving purchase payments and redemption proceeds that involve
exchange settlement against NTD, the securities enterprise shall carry out
exchange settlement promptly and remit the payments out to the offshore fund
institution or remit the proceeds into the account designated by the investor.
3.When an investor purchases an offshore fund with foreign currency, and then
switches into another offshore fund with a different currency, the investor
may be paid with the fund with denominated currency at the time of redemption.
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〈Application to conduct wealth management business by means of non-discretionary or semi-discretionary individually managed money trust〉 Article 41
A securities enterprise concurrently conducting trust business that engages in
wealth management business by means of non-discretionary or semi-discretionary
individually managed money trust involving foreign exchange (hereinafter
referred to as “wealth management business involving non-discretionary or
non-discretionary individually managed money trust”) shall apply to the Bank
for approval by submitting documents provided in Article 7 herein and a
business plan (including business description, business counterparties, trust
framework, receipt/payment principles and declaration of foreign exchange
settlement).
When a securities enterprise that has been approved by the Bank to engage in
wealth management business involving non-discretionary or semi-discretionary
individually managed money trust subsequently increases or decreases the
number of branches handling the business, the securities enterprise shall
report to the Bank for record within seven (7) days after obtaining approval
from the competent authority.
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〈Receipt/payment associated with wealth management business involving non-discretionary or semi-discretionary individually managed money trust〉 Article 42
When a securities enterprise engages in business under the preceding article,
related receipt/ payment shall be handled according to the following rules:
1.Foreign currency non-discretionary or semi-discretionary money trust:
Receipt/payment of the trust funds between a securities enterprise and the
trustor or the beneficiary shall only be handled in foreign currency and not
paid in NTD.
2.NTD non-discretionary or semi-discretionary money trust with investments in
products involving foreign exchange:
(1) Receipt/payment of trust funds between a securities enterprise and the
trustor or the beneficiary shall only be handled in NTD. Proceeds from the
sale of foreign currency denominated products invested by the trust shall
be exchanged into NTD immediately and deposited into the NTD trust asset
deposit account – trustor sub-account. Foreign currency deposits shall be
used exclusively for settlement purpose only.
(2) When the purchase or sale of foreign currency denominated products through
the same trust account involves exchange settlement against NTD, the
securities enterprise shall carry out gross settlement through an authorized
bank or by itself if it is a DSF without offsetting or settling on a net
basis. However, for accounts receivable or payable arising from the purchase
or sale of underlying assets on the same date or sale first and then buyback
before the settlement of the sale through the same trust account of the
trustor, the securities enterprise may, according to the trustor's
instruction, combine and net off all the received (paid) money in the same
foreign currency and then exchange the net received (paid) amount into NTD.
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〈Application to engage in collective investment trust account business〉 Article 43
Before establishing a foreign currency denominated collective investment trust
account for the first time, a securities enterprise concurrently conducting
trust business that engages in foreign currency denominated collective
investment trust account business shall apply to the Bank for approval by
submitting documents provided in Article 7 herein, and in addition, the
following documents:
1.A FSC approval letter, but exempted for the collective investment trust
accounts that accept funds from professional investors only, provided it is
stated so in the application letter and reported to the FSC for record in
accordance with the “Regulations Governing Management and Utilization of
Collective Investment Trust Funds”;
2.A management and utilization plan for the foreign currency denominated
collective investment trust account;
3.The risk level of the collective investment trust account and the risk
tolerance level of investors who could bear the risk of the account, but
exempted for the collective investment trust accounts that accept funds from
professional investors only, provided it is stated so in the application
letter; and
4.Terms and conditions of the collective investment trust account agreement.
A securities enterprise establishing a NTD denominated collective investment
trust account that involves foreign exchange settlement against NTD shall apply
to the Bank for permission to carry out foreign exchange settlement by
submitting documents provided in Subparagraphs 1 and 4 of the preceding
paragraph, a declaration statement and an account asset schedule.
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〈Receipt/payment associated with collective investment trust account business〉 Article 44
Securities enterprises shall observe the following rules when handling
receipt/payment associated with business under the preceding article:
1.Foreign currency denominated collective investment trust account:
Receipt/payment of trust funds between a securities enterprise and the
trustor or the beneficiary shall only be handled in foreign currency instead
of NTD.
2.NTD denominated collective investment trust account with investments in
products involving foreign exchange: Receipt/payment of trust funds between
a securities enterprise and the trustor or the beneficiary shall be handled in
NTD only.
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〈Matters for compliance when engaging in wealth management business by means of trusts〉 Article 45
When a securities enterprise concurrently conducting trust business that engages
in wealth management business by means of non-discretionary or
semi-discretionary individually managed money trust, the qualifications of the
trustor shall meet the criteria set out in Subparagraph 1 of Point 9 and
Subparagraph 1 of Point 10 of the “Operating Directions”.
There shall be no transfer of funds between the NTD and foreign currency
denominated non-discretionary or semi-discretionary money trust accounts of the
same trustor or different trustors.
When a securities enterprise concurrently conducting trust business with
investments in products involving foreign exchange, such products must be
denominated in foreign currency and shall not involve or be linked to NTD
exchange rate or NTD interest rate index.
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〈Scope of foreign exchange derivatives business not involving exchange rates〉 Article 61
A securities enterprise that engages in foreign exchange derivatives business
not involving exchange rates shall observe the following provisions:
1. Credit default swap and credit default option business:
(1) Counterparties are limited to legal entities who are also professional
customers.
(2) Where the counterparty is a domestic customer, unless the competent
authority agrees it could be a protection seller, the domestic customer
should be the protection buyer in a credit derivatives transaction.
(3) Where a domestic customer is the protection seller in a credit derivatives
transaction, the reference entity shall meet the requirements set out by
its competent authority and shall not be a government or company in Mainland
China Area or any company directly or indirectly owned by which with at
least 30% shares.
(4) Where the securities enterprise itself is the protection seller and the
reference entity is an interested party, the terms of the transaction shall
not be more favorable than those offered to other counterparties in the same
category, and shall comply with relevant laws and regulations.
(5) Where the contracts under this subparagraph are combined into a structured
product, the counterparties are limited to professional institutional
investors and foreign legal entities who are also professional customers.
2.Where the foreign exchange derivative contracts are combined into a synthetic
contract or a structured product, restrictions and rules applicable to
individual products and underlyings shall be followed.
3.Unless it is otherwise provided by the Bank, the business shall not be linked
to any of the following:
(1) Asset securitization related securities or products.
(2) Unlisted individual stocks, stock indices or exchange-traded funds in
Mainland China Area.
(3) Securities privately placed domestically or abroad.
(4) Certificates of beneficial interest that are issued overseas by domestic
securities investment trust enterprises and are not listed for trading on
a securities market.
(5) Any Taiwan stock index compiled by a domestic or foreign institution and
related financial products, but this restriction does not apply to an
index compiled by TPEx or TWSE, or those two institutions in collaboration
with another institution.
The underlying foreign securities and counterparties shall comply with the scope
and relevant rules and guidelines of securities firms accepting orders to trade
foreign securities as prescribed by the FSC, or other securities as approved by
the FSC.
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〈Application procedure for foreign exchange derivatives business〉 Article 62
A securities enterprise may engage in the following foreign exchange derivatives
businesses without making an application:
1.Combinations of foreign exchange derivatives not involving exchange rate and
already approved by the Bank or reported to the Bank for record that are linked
to the same underlying asset with the same risk and combined through the same
transaction contract, but excluding complex high-risk foreign exchange
derivatives transactions entered with customers other than professional
institutional investors and high net worth corporate investors.
2.Foreign exchange derivatives transactions undertaken as a customer for
investing with its own funds or carrying out for hedging purposes with
authorized banks that have been approved by the Bank to engage in foreign
exchange derivatives business or foreign financial institutions.
3.Domestic and foreign futures contracts not involving NTD exchange rate traded
as a futures trader.
To engage in any foreign exchange derivatives business other than those provided
in the preceding paragraph, a securities enterprise shall apply to the Bank for
approval or report to the Bank for record based on the following criteria:
1.Application for approval before commencing:
(1)First-time application for foreign exchange derivatives business.
(2)Foreign exchange derivatives business not yet approved by the Bank or has
been approved for less than six months, and foreign exchange derivatives
linked thereof.
(3)Foreign exchange derivatives business involving exchange rates.
(4)The business of sales of foreign exchange derivatives products already
approved by the Bank or reported to the Bank for record by the branch under
the authorization of its head office.
2.Reporting for record after commencing: Only for securities enterprises that
have been approved to engage in any of the foreign exchange derivatives
businesses.
(1)Foreign exchange derivatives business approved by the Bank for over six
months and not involving exchange rates.
(2)Foreign exchange derivatives business provided to professional institutional
investors and high net worth corporate investors not involving exchange rates
and not yet approved by the Bank or approved by the Bank for less than six
months, which should comply with the relevant rules of the competent authority.
When a securities enterprise engages in business under this article with a
professional institutional investor, if the professional institutional investor
accepts trading orders, signing a trust agreement or discretionary investment
services agreement, or offering privately placed funds, and carries out
transactions provided in Item 2, Subparagraph 2 of the preceding paragraph as a
professional institutional investor, the customer/trustor/mandatory or
subscriber shall also be a professional institutional investor or high net
worth corporate investor.
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