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[Law Basis]
[Print]
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Chapter 3 Detailed Provisions – Operation and Management of Foreign Exchange Business
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Section 1 Proprietary Trading and Underwriting of Foreign Currency Denominated International Bonds
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Article 17
Securities enterprises that have obtained the qualification to engage in proprietary
trading of domestic bonds may also engage in proprietary trading of foreign currency
denominated international bonds.
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Article 18
Securities enterprises that have been approved by the Bank to underwrite foreign
currency denominated international bonds may also offer financial planning, evaluation
and consulting services relating to foreign currency denominated international bonds
(hereinafter collectively referred to as the “consulting service”).
Securities enterprises that have been approved by the Bank to underwrite foreign
currency denominated international bonds but offers only consulting service mentioned in
the preceding paragraph may not engage in underwriting on a firm commitment basis or a
standby commitment basis.
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Article 19
A securities enterprise that intends to engage in underwriting of foreign currency
denominated international bonds shall apply to the Bank for approval by submitting
documents provided in Article 6 herein, and in addition, documents evidencing its
qualifications as specified below:
1.Having the qualification to underwrite domestic securities.
2.Meeting one of the criteria below:
(1)Having a long-term credit rating of BBB (or equivalent) or higher for the latest
year from acredit rating agency approved or recognized by the FSC or an
internationally known credit rating agency; or
(2)The parent company of a foreign securities enterprise has practical experience in
underwriting foreign securities.
3.The regulatory capital adequacy ratio shall meet one of the following requirements:
(1)For domestic securities enterprises, the regulatory capital adequacy ratio in the
six months before the date of application shall be at least 200%; for banks and
bills finance companies engaging concurrently in securities business, the regulatory
capital adequacy ratio shall reach the statutory ratio;
(2)For branches of foreign securities enterprises in Taiwan, their head office shall
meet the criteria provided in the preceding item or Paragraph 3, Article 59 of the
Regulations Governing Securities firms.
4.Free of any of the following sanctions:
(1)Any sanction imposed by the FSC during the preceding one year acting pursuant to any
of Subparagraphs 2 ~ 4, Article 66 of the Securities and Exchange Act; and
(2)Any sanction during the preceding one year whereby the GTSM, acting pursuant to its
operating rules or bylaws, has suspended or restricted the firm's trading privileges.
5.No accumulated loss as shown in its latest CPA audited or certified financial
statements.
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Article 20
When a securities enterprise engages in the underwriting of a foreign currency
denominated international bond, receipts and payments between the enterprise and the
investors and between the enterprise and issuer shall always be made in the denominated
currency of the international bond.
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Section 2 Proprietary Trading of Foreign Securities
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Article 21
A securities enterprise that intends to engage in proprietary trading of foreign
securities shall apply to the Bank for approval by submitting documents provided in
Article 6 herein, and in addition, photocopies of the latest CPA audited or certified
financial statements, procedure for handling receipt/payment, process description and
other documents required by the Bank, provided such trading is neither an investment
of proprietary funds nor done to meet hedging purpose.
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Article 22
When a securities enterprise engages in business mentioned in the preceding article,
related receipt/payment shall always be made in the denominated currency of the
security.
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Article 23
Securities enterprises may not sell the foreign currency fund they receive from repo
trade for NTD, and the sources of funds for settlement payment upon expiration may not
come from foreign exchange purchase made with NTD.
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Section 3 Spot Transaction Business Between Foreign Currencies
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Article 24
Spot foreign exchange transactions between foreign currencies in connection with
securities business (hereinafter referred to as“spot transaction business between
foreign currencies”) mean spot transactions business between foreign currencies taking
place between an integrated securities enterprise that concurrently engages in
underwriting, dealership and brokerage business provided in Article 16 of the Securities
and Exchange Act and its clients that meet the essential conditions for securities
trading purpose.
The“essential conditions for securities trading purpose”referred to in the preceding
paragraph shall meet the following criteria:
1.The amount of spot transaction between foreign currencies does not exceed the amount of
foreign currency securities transaction and related fees;
2.The spot transaction between foreign currencies and the transaction of foreign currency
securities are carried out contemporaneously with the same client, and the former is
settled by the relevant securities settlement deadline; and
3.The transaction is not on a leveraged, margined or financed basis.
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Article 25
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For a securities enterprise that intends to engage in spot transaction business
between foreign currencies, its head office shall apply to the Bank for approval by
submitting documents provided in Article 6 herein, and in addition, documents
evidencing its qualifications specified below:
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1.Having been approved by the Bank to engage in any of the businesses provided in
the subparagraphs of Paragraph 1, Article 4 herein and having a record of
conducting such business.
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2.Its networth shown in the latest CPA audited or certified financial statement meets
the criteria prescribed by the FSC for a securities enterprise that applies for the
setup of an OSU in Taiwan to engage in all of the businesses provided in the
subparagraphs of Paragraph 1, Article 22-4 of the Offshore Banking Act.
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3.Compliance and sound operation: Free of sanction due to serious violation of rules
during the preceding three years before application, or the securities enterprise with
sanctioned violation has effected specific improvement and has satisfied the competent
authority or the Bank.
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4.Its operations and auditing personnel shall meet the following qualifications:
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(1)An operations personnel must have at least three-month working experience in relevant
foreign exchange business or have completed at least 12 hours of foreign exchange
regulations related courses given by domestic financial training institutions and
have at least 20 business days of practical training in relevant foreign exchange
business at an authorized bank.
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(2) An auditing personnel must have at least six-month working experience in relevant
foreign exchange business, or have completed at least 12 hours of foreign exchange
regulations related courses given by domestic financial training institutions and
have at least 40 business days of practical training in relevant foreign exchange
business at an authorized bank.
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5.Its computer equipment and related operating environment are adequate to properly
handle matters provided in Article 26 herein.
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Branches of securities enterprises may not apply for approval to engage in spot
transaction business between foreign currencies until their head office has been
approved by the Bank to do so and has operated the business smoothly.
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Article 26
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Securities enterprises shall prepare other transaction certificates for their spot
transaction business between foreign currencies, and deliver such certificates to
clients or process them in the method as agreed with the client.
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The“other transaction certificates” mentioned in the preceding paragraph may be
made via electronic form.
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Securities enterprises shall submit relevant data to the Bank on transactions
mentioned in Paragraph 1 hereof on the previous business day by means of electronic
medium before 12:00 noon on the following business day. The format and content of
reporting shall be regulated by the Bank separately.
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Article 27
If relocation or a name change is made by a securities enterprise that has been
approved to engage in spot transaction business between foreign currencies, the
enterprise shall report the change to the Bank for record within seven (7) days after
the receipt of a new business license or permit from the competent authority. In the
case of relocation, the securities enterprise shall also submit the qualification
documents of its operations and auditing personnel.
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Section 4 Foreign Exchange Derivatives Business
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Article 28
A securities enterprise may apply for approval to engage in foreign exchange currency
derivatives business between foreign currencies in connection with securities business
(hereinafter referred to as “currency derivatives business between foreign currencies”)
only if they have been approved by the Bank to engage in spot transaction business
between foreign currencies.
The scope of currency derivatives business between foreign currencies that a
securities enterprise may undertake with its clients includes the following:
1.Foreign exchange forward transactions, foreign exchange swaps (SWAP), foreign exchange
options and cross currency swap (CCS), that do not include structured products; and
2.Products provided in the preceding subparagraph may not involve NTD exchange rate, or
denomination/settlement in NTD.
The currency derivatives business between foreign currencies undertaken by a
securities enterprise shall be based on the foreign currency securities transaction it
undertakes with the same client.
The provisions in Articles 25 ~ 27 shall apply mutatis mutandis to the currency
derivatives business between foreign currencies of securities enterprises.
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Article 29
The scope of foreign exchange derivatives business other than currency derivatives
that may be undertaken by securities enterprises includes the following:
1.Equity foreign exchange derivatives comprising equity options, equity swaps and equity
forward contracts with the underlying limited to the following:
(1)Stock prices, stock indices or exchange-traded funds in foreign markets ;
(2)Domestic stock prices, stock indices or exchange-traded funds with notional amounts in
foreign currency; and
(3)Underlying equity products that do not involve Taiwan stock indices listed on a
foreign stock exchange.
2.Foreign currency bond derivatives comprising bond forwards, bond options and further
combinations thereof, with the underlying limited to foreign currency denominated bonds
or bond indices.
3.Foreign currency interest rate derivatives comprising forward rate agreements, interest
rate swaps, interest rate options, interest rate swaptions and further combinations
thereof, with the underlying limited to foreign currency interest rates or interest
rate indices.
4.Foreign currency commodity derivatives comprising commodity forwards, commodity price
swaps, commodity options and further combinations thereof, with the underlying limited
to foreign currency denominated commodities, denominated and settled in foreign
currency. And the counterparties shall be limited to professional juridical persons.
5.Foreign currency credit derivatives, in which all transactions exclude structured
products, comprising credit default options and credit default swaps, with the
underlying credits referring to the default risk, credit spread risk or credit rating
downgrade risk associated with governments or corporations, or their debt. The credit
derivatives shall be denominated and settled in foreign currency and done with
professional institutional investors as counterparties.
The term “professional juridical persons and professional institutional investors”
referred to in the preceding paragraph shall meet the criteria or scope set out by the
FSC according to Paragraph 2, Article 4 of the Financial Consumer Protection Act.
Where the underlying assets of the derivatives mentioned in the preceding paragraph
are foreign currency denominated bonds or interest rate indices, the following rules
shall be observed:
1.Information on the bonds or interest rate indices is available on a publicly accessible
website or extensively used trading system.
2.The constituents of the bonds or interest rate indices do not contain any products that
are convertible or can be swapped for shares (e.g. convertible bonds or exchangeable
bonds).
3.The constituents of the bonds or indices do not contain any securitization products.
4. Client’s return may be expressed by formulas.
The underlying foreign securities shall be complied with the scope of securities
firms’ proprietary trading of foreign securities prescribed by the FSC, or other
securities as approved by the FSC.
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Article 30
A securities enterprise that intends to engage in foreign exchange derivatives
business shall apply to the Bank for approval by submitting documents provided in
Article 6 herein, and in addition, documents specified below:
1.Document evidencing that its financial derivatives business has not been suspended or
terminated by GTSM pursuant to the GreTai Securities Market Regulations Governing
Over-the-Counter Trading of Financial Derivatives by Securities firms (hereinafter
referred to as “Derivatives Trading Regulations”) during the preceding six months;
and
2.Business plan (including product profiles, operational guidelines, risk management,
risk disclosure statements, curriculum vitae of the operations and auditing personnel,
and risk disclosure statement). Business plan is not required for securities
enterprises applying for foreign exchange forward transactions and/or foreign exchange
swaps (SWAP).
Application for approval is not required if a securities enterprise invests in foreign
exchange derivatives with its own funds or carries out foreign exchange derivative
transactions for hedging purposes as a client with an authorized bank approved by the
Bank to engage in foreign exchange derivatives business or with an overseas financial
institution.
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Article 31
When a securities enterprise conducts foreign exchange derivatives business, the
procedure for verifying that the counterparty meets the criteria for professional
clients, trading rules, implementation of risk management, information disclosure, and
the related internal control and audit systems shall be complied with relevant
regulations set out by the FSC. And in addition, the following rules shall apply:
1.Receipt/payment between the enterprise and its client related to settlement and fees,
and payment due to early termination of contract or expiration of contract shall be
made in the denominated currency. Except for payments that are transferred from the
client’s deposit account, the client shall carry out foreign exchange settlement
against NTD through an authorized bank in accordance with the Declaration Regulations.
The securities enterprise shall not be entrusted to handle the transaction for the
client.
2.Securities enterprises shall not, for themselves or for clients, utilize foreign
exchange derivatives to defer or hide losses, misrepresent or recognize income earlier,
or use other illicit means to do window dressing or manipulate financial statements.
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[Related Regulations]
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Article 32
Securities enterprises shall forthwith inform the Bank when their financial
derivatives business is suspended or terminated by the GTSM in accordance with the
Derivatives Trading Regulations and when their business qualification is reinstated.
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Section 5 Structured Products Business
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Article 33
The structured products business linked to foreign currency denominated financial
products undertaken by securities enterprises (hereinafter referred to as “structured
products business”) may be linked to the following underlying:
1.Foreign securities;
2.Foreign stock indices and futures indices;
3.Foreign currency interest rate indices;
4.A combination of underlying products provided in the preceding three subparagraphs;
5.Foreign currency denominated international bonds issued in Taiwan and listed on GTSM;
and
6.Other underlying products as approved by the Bank.
The underlying products mentioned in the preceding paragraph exclude credit risk and
exchange rate indices. Where the target buyers of the underlying assets are restricted
according to the applicable regulations of the FSC, the target buyers of the structured
products concerned shall also be restricted by the same regulations.
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Article 34
The provisions in Paragraphs 3 & 4 of Article 29, and Articles 30 ~ 32 shall apply
mutatis mutandis when securities enterprises conduct the structured products business.
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Section 6 Offshore or Foreign Currency Warrant Business
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Article 35
The scope of business involving call (put) warrant issued overseas or denominated in
foreign currency (hereinafter referred to as “offshore or foreign currency warrant
business”) that may be undertaken by securities enterprises includes the following:
1.For domestic call (put) warrants issued with a link to 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 issued with a link to 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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Article 36
A securities enterprise that intends to engage in offshore or foreign currency warrant
business shall apply to the Bank for approval by submitting documents provided in Article
6 herein, and in addition, documents specified below:
1.Qualification certificates issued by the FSC and the competent authority in the place
where the offshore warrants will trade; and
2.Business plan (including product profiles, operational guidelines and risk management).
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Section 7 Accepting Orders to Trade Foreign Securities
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Article 37
A securities enterprise that intends to accept orders to trade foreign securities for
the first time shall apply to the Bank for approval by submitting documents provided in
Article 6 herein, and in addition, a business plan (including operational principles and
business practice, procedures of handling of receipt/payment and operation).
when a securities enterprise already approved by the Bank to accept orders to trade
foreign securities with receipt/payment of settlement and fees in foreign currency
intends to engage in receipt/payment in NTD, the securities enterprise only needs to
submit the following additional documents to the Bank to apply for approval:
1.A photocopy of the Bank’s letter of approval for the securities enterprise to accept
orders to trade foreign securities with receipt/payment of settlement and fees in
foreign currency;
2.A photocopy of letter of approval from the FSC;
3.A statement supporting that the applicant’s computer system is able to meet the
requirements set out in Article 38 herein regarding receipts and payments in different
currencies; and
4.A description of the controls for receipts and payments of settlement and fees in
different currencies.
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Article 38
When a securities enterprise accepts orders to trade foreign securities, the
securities enterprise shall comply with the following rules with regard to
receipt/payment of settlement and fees with clients:
1.When a client designates the settlement to be made in a foreign currency, the related
receipt/payment shall be made in the foreign currency; and
2.When a client designates the settlement to be made in NTD, the related receipt/payment
shall be made in NTD.
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Section 8 Trading Foreign Bonds as an Agent
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Article 39
A securities enterprise that intends to trade foreign bonds as an agent shall apply
to the Bank for approval by submitting documents provided in Article 6 herein, and in
addition, a business plan (including business introduction, operating procedure and risk
management).
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Article 40
When a securities enterprise trades foreign bonds as an agent, payment shall be
remitted by the buyer directly into an account designated by the foreign financial
institution. The receipt/payment for investment, redemption, and settlement, fees
charged by the foreign financial institution and other fees shall be made in foreign
currency.
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Section 9 Offshore Fund Master Agency Business
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Article 41
A securities enterprise that intends to act as the master agent of an offshore fund
institution in the offering and sale of its funds in Taiwan (hereinafter referred to
as the“offshore fund master agency business” shall apply to the Bank for approval by
submitting documents provided in Article 6 herein, and in addition, the following
documents:
1.A photocopy of document evidencing the approval or effective registration with the
FSC for offering and sale of offshore funds in Taiwan;
2.Business plan (including business introduction, operating and receipt/payment
procedure); and
3.List of sub-distributors and a statement supporting the qualifications of those
sub-distributors.
If the offshore ETF is listed in NTD, the application shall be filed on a case-by-case
basis.
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Article 42
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 a foreign securities
brokerage agreement 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 denominated currency of the fund at the time of redemption.
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Article 43
When a master agent files a report with the FSC in events referred to in Article 12 of
the Regulations Governing Offshore Funds, it shall send the Bank a copy of the report.
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Section 10 Private Placement of Offshore Funds
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Article 44
When a securities enterprise intends to act as the local mandated agent of an offshore
fund institution and conduct private placement to specified counterparties (hereinafter
referred to as “offshore fund private placement business”), the securities enterprise
shall apply to the Bank for approval by submitting documents provided in Article 6
herein, and in addition, the following documents:
1.A statement to comply with the provisions in Article 52 of the Regulations Governing
Offshore Funds. Such statement is not required if the counterparties are entities
provided in Subparagraph 1, Paragraph 1, Article 52 of the Regulations.
2.Business plan (including business introduction, primary data of the offshore fund,
operating and receipt/payment procedure).
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Article 45
All receipt/payment for settlement and fees between the local mandated agent of a
privately placed offshore fund and the counterparties shall be made in the denominated
currency of the fund.
When the local mandated agent of a privately placed offshore fund purchases fund
shares from the offshore fund institution, it shall do so in the name of the counterparty.
When the offshore fund institution reports to the institution designated by the FSC
within five days from the date that the price of the privately placed offshore funds has
been paid in full, it shall send a copy of the report to the Bank.
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Section 11 Purchase and Redemption of Offshore ETFs Business
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Article 46
When a securities enterprise intends to act as a participating dealer for an offshore
ETF to process (on a brokerage basis) or engage in (on a proprietary basis) purchase
or redemption of offshore ETFs in Taiwan (hereinafter referred to as “purchase and
redemption of offshore ETFs business”), the securities enterprise shall, after
obtaining approval from or completing effective registration with the FSC, apply to
the Bank for approval by submitting documents provided in Article 6 herein and a
business plan (including business introduction, operating process, receipt/payment
procedure, and hedging transactions).
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Article 47
Receipts and payments between the participating dealers and investors for the purchase
and redemption of an offshore ETF shall be made in NTD only.
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Section 12 Wealth Management Business Involving Non-discretionary Money Trust
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Article 48
When a securities enterprise intends to engage in wealth management business by means
of non-discretionary individually managed money trust with the underlying products
denominated in foreign currencies (hereinafter referred to as “wealth management
business involving non-discretionary money trust”), the securities enterprise shall
apply to the Bank for approval by submitting documents provided in Article 6 herein and
a business plan (including business description, business counterparties, framework of
trust account, receipt/payment principles and filing of foreign exchange settlement).
Securities enterprises that have been approved by the Bank to engage in wealth
management business involving non-discretionary money trust that subsequently increase
or decrease the number of branches to handle the business shall, within seven days
after obtaining approval from the competent authority, report to the Bank for record.
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Article 49
When a securities enterprise engages in wealth management business involving
non-discretionary money trust, related receipt/ payment shall be handled according
to the following rules:
1.Foreign currency non-discretionary money trust: Receipt/payment of trust money and
repayment of trust principal and income between a securities enterprise and the
principal shall be made in foreign currency. The trust assets may only be invested
in foreign products or products denominated in foreign currency, and the foreign
currency funds may not be converted to NTD through exchange settlement.
2.NTD non-discretionary money trust with investment in foreign products or products
denominated in foreign currency:
(1)Receipt/payment of trust money and repayment of trust principal and income between
a securities enterprise and the principal shall be made in NTD. Proceeds from the
sale of foreign product or products denominated in foreign currency shall be
exchanged into NTD and deposited into the NTD trust asset deposit account –
principal sub-account. Foreign currency deposits shall be used exclusively for
settlement purpose.
(2)When the purchase or sale of foreign product or product involving foreign exchange
through the same trust account involve exchange settlement against NTD, the
securities enterprise shall carry out gross settlement through an authorized bank
without offsetting or settling on a net basis. However, for accounts receivable
or payable arising from the purchase or sale of underlying assets or sale first
and then buyback before the settlement of the sale through the same trust account
on the same date, the securities enterprise may, according to the principal's
instruction, combine and net off all the received (paid) money in the same currency
and then exchange the net received (paid) amount into NTD.
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Article 50
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When a securities enterprise conducts wealth management business involving
non-discretionary money trust, the qualifications of the principal shall meet the
criteria set out in Subparagraph 2 of Point 9 and Subparagraph 4 of Point 10 of the
Operating Directions.
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[Related Regulations]
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When the trust assets are invested in foreign products or products denominated foreign
currency, such products must be denominated in foreign currency and not linked directly
or indirectly domestic products.
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There shall be no transfer of funds between the NTD and foreign currency
non-discretionary money trust accounts of the same principal. And there shall
be no transfer of funds between the discretionary money trust accounts of
different principals.
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