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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 Securities Related Business Involving Foreign Exchange
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Subsection 1 Foreign Currency Denominated International Bond Business
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〈Proprietary trading of foreign currency denominated international bonds〉
Article 19 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 without making an
application.
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〈Financial consulting business involving foreign currency denominated international bonds〉
Securities enterprises that have obtained the qualification to underwrite
domestic bonds may also offer financial planning, evaluation and consulting
services relating to foreign currency denominated international bonds in
accordance with the following rules without making an application:
1.The securities enterprise may not engage in underwriting on a firm commitment
basis or a standby commitment basis;
2.The securities enterprise may not be involved in receipt/payment between the
issuer and the investors.
3.The securities enterprise may not report the commencement of underwriting
foreign currency denominated international bonds business by offering
financial planning, evaluation and consulting services relating to foreign
currency denominated international bonds.
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〈Application to engage in underwriting of foreign currency denominated international bonds business〉
Article 21 A securities enterprise that intends to engage in the underwriting of foreign
currency denominated international bonds shall apply to the Bank for approval
by submitting documents provided in Article 7 herein and 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 a credit rating agency approved or recognized by the FSC
or an internationally known credit rating agency; or
(2)For a branch of a foreign securities firm in Taiwan, its head office has
practical experience in underwriting foreign securities.
3. The regulatory capital adequacy ratio shall meet one of the following
requirements:
(1)For domestic securities firms, 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 firms 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 TPEx, 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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〈Receipt/payment associated with underwriting foreign currency denominated international bonds business〉
Article 22 When a securities enterprise engages in the underwriting of a foreign currency
denominated international bond, receipt/payment between the enterprise and the
investors/issuer shall always be made in the denominated currency of the
international bond.
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Section 2 Proprietary Trading of Foreign Securities Business
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〈Application to engage in proprietary trading of foreign securities〉
Article 23 A securities enterprise that has obtained the qualification to engage in
proprietary trading of domestic bonds may also engage in proprietary trading of
foreign securities without making an application. However if such trading is
neither an investment of proprietary funds nor done to meet hedging purposes,
the securities enterprise shall apply to the Bank for approval by submitting
documents provided in Article 7 herein and photocopies of the latest CPA
audited or certified financial statements, procedures for handling
receipt/payment, process description and other documents required by the Bank.
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〈Receipt/payment associated with proprietary trading of foreign securities〉
Article 24 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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Subsection 3 Offshore or Foreign Currency Warrant Business
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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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〈Application to engage in offshore or foreign currency warrant business〉
Article 26 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 7 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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Subsection 4 Business of Accepting Orders to Trade Foreign Securities
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〈Application to engage in the business of accepting orders to trade foreign securities〉
Article 27 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 7 herein, and in addition, a business
plan (including operational principles and business practice, procedures of
handling of receipt/payment and operating process).
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 28 herein regarding receipt/payment in
different currencies; and
4.A description of the controls for receipt/payment of settlement and fees in
different currencies.
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〈Receipt/payment associated with the business of accepting orders to trade foreign securities〉
Article 28 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 customers:
1.When a customer 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 customer designates the settlement to be made in NTD, the related
receipt/payment shall be made in NTD.
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Subsection 5 Business of Trading Foreign Bonds as an Agent
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〈Application to engage in trading in foreign bonds as an agent〉
Article 29 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 7
herein, and in addition, a business plan (including business profile, operating
process and risk management).
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〈Receipt/payment associated with the business of trading foreign bonds as an agent〉
Article 30 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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Subsection 6 Business of Acting as a Participating Dealer of an Offshore Exchange Traded Fund
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〈Application to act as a participating dealer of an offshore ETF〉
Article 31 When a securities enterprise intends to act as a participating dealer for an
offshore exchange traded fund (hereinafter referred to as “ETF”) to process
(on a brokerage basis) or engage in (on a proprietary basis) purchase or
redemption of an offshore ETF in Taiwan (hereinafter referred to as “offshore
ETF participating dealer business), the securities enterprise shall apply to
the Bank for approval or report to the Bank for record by submitting the
following documents before commencing the business:
1.When acting as a participating dealer of an offshore ETF for the first time,
the securities enterprise shall apply to the Bank for approval by submitting
documents provided in Article 7 herein, and in addition, documents evidencing
approval from or completing effective registration with the FSC for the ETF
and a business plan (including business profile, operating process,
receipt/payment procedure, and hedging arrangements).
2.When the securities enterprise subsequently intends to act as a participating
dealer for another offshore ETF, it only needs to report to the Bank for
record before commencement by submitting documents evidencing approval from
or completing effective registration with the FSC for that ETF.
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〈Receipt/payment associated with the Offshore ETF Participating Dealer Business〉
Article 32 When a securities enterprise engages in Offshore ETF Participating Dealer
Business, receipt/payment between the participating dealer and investors
shall always be made in the denominated currency of that offshore ETF as
listed on the centralized securities exchange market.
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Subsection 7 Business Involving Domestically Issued Foreign Currency Denominated ETFs
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〈Participating Dealer Business of Domestically issued Foreign Currency Denominated ETFs〉
Article 33 When a securities enterprise intends to act as a participating dealer for a
domestically issued foreign currency denominated ETF to process (on a brokerage
basis) or engage in (on a proprietary basis) purchase or redemption of foreign
currency denominated ETFs, the securities enterprise shall apply to the Bank for
approval or report to the Bank for record by submitting the following documents
before commencing the business:
1.When acting as a participating dealer for a domestically issued foreign
currency denominated ETF for the first time, the securities enterprise shall
apply to the Bank for approval by submitting documents provided in Article 7
herein, and in addition, the following documents:
(1)Qualification approval letter from the Taiwan Stock Exchange (hereinafter
referred to as “TWSE”);
(2)Participation contract of that foreign currency denominated ETF; and
(3)A business plan (including business profile, foreign exchange settlement
matters involved in the planning for the foreign currency funds, and
hedging arrangements).
2.When the securities enterprise subsequently intends to act as a participating
dealer for another domestically issued foreign currency denominated ETF, it
only needs to report to the Bank for record before commencement by submitting
documents provided in Items (1) and (2) of the preceding paragraph.
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〈Acting as a liquidity provider for domestically issued foreign currency denominated ETFs〉
Article 34 For a securities enterprise to act as a liquidity provider for a domestically
issued foreign currency denominated ETF, the provisions of the preceding article
shall apply mutatis mutandis to the procedure and documentation required for
applying for the business. Notwithstanding the foregoing, the documents
provided in Item (2), Subparagraph 1 of the preceding article shall be
substituted with the liquidity contract on the domestically issued foreign
currency denominated ETF.
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〈Proprietary or broker trading of domestically issued foreign currency denominated ETFs〉
Article 35 Securities enterprises that have obtained the qualification to engage in
proprietary trading of securities or to accept orders to trade securities
on the centralized securities exchange market may also engage in proprietary
or broker trading of foreign currency denominated ETFs without making an
application.
When engaging in the business mentioned in the preceding paragraph, a
securities enterprise shall comply with the following rules:
1.Receipt/payment between the securities enterprise and investors regarding
the purchase and sale of a foreign currency denominated ETF shall be made in
the denominated currency of that ETF.
2.A foreign currency denominated ETF may not be an underlying product in margin
purchase and short sales, securities borrowing and lending, borrowing or
lending money in connection with securities business, or borrowing or lending
money without specific purposes by securities firms, and other relevant
businesses.
3.NTD denominated ETF positions acquired through margin purchase or borrowing
may not be converted into foreign currency denominated ETFs.
4.When the trading order of an investor to buy a foreign currency denominated
ETF fails to be executed and if the securities broker has collected payments
from the investor in advance, the securities broker shall return the advance
payments no later than the next business day following the trading day.
5.When an investor’s amount receivable is greater than the amount payable on
the same settlement day, the securities enterprise may sign an intra-day
overdraft contract with the settlement bank to facilitate timely settlement
with the investor.
6.In the case of out-trade, an investor default on a sale, or an overseas
Chinese or foreign investor requesting a delay in settlement, the securities
enterprise may apply to TWSE for borrowing securities to cover the settlement.
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Subsection 8 Offshore Fund Master Agency Business
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〈Application to engage in offshore fund master agency business〉
Article 36 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 7 herein, and in
addition, the following documents:
1.A photocopy of document evidencing the approval from or effective registration
with the FSC for offering and sale of offshore funds in Taiwan;
2.Business plan (including business profile, operating process and
receipt/payment procedure); and
3.List of sub-distributors and a statement supporting the qualifications of
those sub-distributors.
When a securities enterprise acts as the master agent of an offshore ETF that
is listed in NTD, the securities enterprise shall apply to the Bank for approval
on a case-by-case basis.
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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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〈The reporting obligation of master agent〉
Article 38 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 notify
the Bank.
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Subsection 9 Private Placement of Offshore Funds business
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〈Application to engage in private placement of offshore funds〉
Article 39 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 7 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 profile, primary information of the offshore
fund, operating process and receipt/payment procedure).
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〈Receipt/payment associated with private placement of offshore funds〉
Article 40 When a 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, and the receipt/payment for settlement and fees shall be made in
the denominated currency of that fund.
When the agent reports to the institution designated by the FSC within five (5)
days from the date that the price of the privately placed offshore funds has
been paid in full, it shall notify the Bank.
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Subsection 10 Business of Conducting Wealth Management involving Foreign Currencies by Means of Trust
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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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Section 2 Spot Foreign Exchange Transactions in Connection with Securities Business
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〈Scope of spot foreign exchange transaction business〉
Article 46 The scope of spot foreign exchange transactions that a DSF may carry out with
its customers is limited to the following:
1.The DSF is handling a business with the same customer under any subparagraph
other than Subparagraph 2 of Paragraph 1, Article 4 herein that has been
approved by the Bank;
2.The same securities firm acts as an recommending securities firm for an
emerging stock company and has foreign exchange settlement needs in order to
subscribe the stocks of foreign issuers as required by the competent
authority; and
3.The same securities firm acts as the lead underwriter, paying agent or
registrar agent for NTD denominated securities issued by a foreign issuer
in Taiwan under the approval of the competent authority and has related
foreign exchange settlement needs.
When carrying out spot foreign exchange transactions under Subparagraph 1 and 2
of the preceding paragraph, a DSF shall also observe the following rules:
1.The amount of spot foreign exchange transaction shall not exceed the
transaction amount and fees of the related securities business;
2.The spot foreign exchange transaction shall be carried out only after the
customer concluding the transaction of related securities business and shall
be completed prior to the settlement date of the related securities business
transaction;
3.The transaction is not on a leveraged, margined or financed basis; and
4.When the business involves repo trade of foreign currency securities with
customers, only spot foreign exchange transaction between foreign currencies
may be carried out.
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〈Application to engage in spot foreign exchange transactions〉
Article 47 Only securities firms that are concurrently a securities underwriter, a
securities dealer, and a securities broker provided under Article 16 of the
“Securities and Exchange Act” may apply to engage in spot foreign exchange
transaction business.
A securities firm that intends to engage in spot foreign exchange transaction
business shall apply to the Bank for approval by submitting the following
documents:
1.Documents provided under Article 7 herein;
2.Description of operations, including business hours and cutoff time for
accounting dates and ways to reconcile the “Daily Foreign Exchange Position
Report” submitted to the Bank’s Department of Foreign Exchange pursuant to
Paragraph 1 of Article 52 herein;
3.Documents evidencing that the securities firm has been approved by the Bank
to engage in any business under the subparagraphs other than Subparagraph 2
of Paragraph 1, Article 4 herein and having a solid record of conducting such
business;
4.The net worth shown in the latest CPA audited or certified financial statement
meets the criteria prescribed by the FSC for a securities firm 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;
5.Documents evidencing 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; and
6.Documents evidencing that its operations and auditing personnel meet the
following qualification requirements:
(1)An operations personnel must have at least three months of working experience
in relevant foreign exchange business, or have completed at least 12 hours of
foreign exchange regulations related courses (including regulations on
foreign exchange business and reporting of foreign exchange receipts,
disbursements or transactions by securities enterprises and foreign exchange
risk management) given by domestic financial training institutions and
received certificates therefor and also have at least 20 business days of
practical training in relevant foreign exchange business at an authorized
bank.
(2)A controlling personnel must have at least six months of working experience
in relevant foreign exchange business, or have attended courses provided in
the preceding item and also have at least 40 business days of practical
training in relevant foreign exchange business at an authorized bank.
A securities firm that has been approved by the Bank to engage in spot
transactions between foreign currencies may apply to the Bank for approval to
expand the business to spot foreign exchange transactions involving NTD by
submitting the following documents:
1.A resolution of the board of directors resolving to apply for the business;
2.A statement of regulatory compliance; and
3.Documents provided in Subparagraphs 2 and 5 of the preceding paragraph.
Changes to the description of operations mentioned in Subparagraph 2 of
Paragraph 2 herein shall be reported to and agreed by the Bank in advance.
The head office of a DSF that applies for its branches to engage in spot
foreign exchange transaction business shall observe the following rules:
1.The head office of a DSF shall apply the business after it has been approved
by the Bank to engage in the business and has a solid record of conducting
such business; and
2.The head office shall apply to the Bank for approval by submitting a photocopy
of the branch’s license and documents evidencing the qualifications of its
operations and controlling personnel as provided in Subparagraph 6 of
Paragraph 2 hereof.
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〈Total position on transactions between NTD and foreign currency〉
Article 48 A DSF shall set its total position limit for transactions between NTD and
foreign currency which shall be submitted along with the resolution of the
board of directors to the Bank’s Department of Foreign Exchange for approval.
The position of NTD exchange rate options shall not exceed one-fifth of the
afore-mentioned total position limit.
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〈Qualifications and procedure for applying to participate in interbank foreign exchange market〉
Article 49 A DSF that intends to participate in the interbank foreign exchange market
involving NTD shall first make sure that it is free of the situations in
Subparagraphs 2 ~ 5, Paragraph 1 of Article 9 herein and apply to the Bank
for approval by submitting the following documents:
1.A statement of regulatory compliance;
2.Document evidencing that the DSF has been approved to engage in business
under Subparagraph 2, Paragraph 1 of Article 4 herein and a solid record of
conducting such business;
3.Document evidencing that the DSF is free of any sanction imposed by the FSC
pursuant to Subparagraphs 2 ~ 4, Article 66 of the “Securities and Exchange
Act” in the preceding one year; and
4.Document evidencing that the DSF has not been suspended or restricted from
trading by TWSE, TPEx or Taiwan Futures Exchange pursuant to their operating
rules or bylaws in the preceding one year.
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〈Position covering〉
Article 50 A DSF may, in the capacity of a customer, purchase/sell foreign currency from/to
selected cooperating authorized banks to cover its long or short foreign
currency positions against NTD.
DSFs that have been approved by the Bank to carry out position covering in
accordance with the preceding article may purchase or sell foreign currencies
in the interbank foreign exchange market and be a counterparty to each other
in the transactions of foreign currency position covering provided in
Paragraph 1 of Article 13 herein and in raising foreign currency funds provided
in Subparagraphs 1 and 3, Paragraph 1 of Article 14 herein.
A DSF may hold long or short positions within the total position limit mentioned
in Paragraph 1 of Article 48 herein.
A DSF participating in the interbank foreign exchange market shall comply with
the trading rules formulated by the Taipei Foreign Exchange Market Development
Foundation with reference to international practices after coordinating with
the Bankers Association of the Republic of China and reported to the Bank for
record.
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〈Foreign exchange position management〉
Article 51 A DSF shall draw up its position limits such as "transaction positions for
individual currencies" and an "overnight position for each trader". All its
units shall abide by these limits, and carry out audits regularly.
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〈Reporting of foreign exchange positions〉
Article 52 DSFs shall fill out a "Foreign Exchange Position Daily Report" for all foreign
exchange transactions involving NTD on a daily basis. The reported foreign
exchange positions shall be consistent with those recorded on the internal
books or foreign exchange transaction datafile, and reconciled and checked on a
daily basis.
DSFs shall report the estimated foreign exchange positions for the day to the
Bank’s Department of Foreign Exchange by telephone at the end of each business
day.
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〈Exchange settlement by DSFs〉
Article 53 When the foreign exchange business provided in Subparagraph 2, Paragraph 1 of
Article 4 herein conducted by a DSF involves exchange settlement against NTD or
conversion between foreign currencies, the DSF shall handle the matter in
accordance with the “Regulations for Declaration” and “Directions for
Domestic Securities Firm Approved to Conduct Foreign Exchange Business while
Assisting Customers to Declare Foreign Exchange Receipts and Disbursements or
Transactions.”
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〈Issuing memo/certificate and reporting relevant data〉
Article 54 A DSF shall issue a foreign exchange purchase (sale) memo for foreign exchange
receipts and disbursements or transactions involving exchange settlement against
NTD from its foreign exchange business and shall issue other transaction
certificates if exchange settlement against NTD is not involved, and deliver
such memo/certificate to customers or process them in a manner as agreed with
the customer.
The “purchase (sale) memo or other transaction certificates” mentioned in the
preceding paragraph may be made in electronic form.
DSFs shall transmit relevant data mentioned in Paragraph 1 hereof and the Daily
Foreign Exchange Receipts (Disbursements) Transaction Report of the previous day
to the Bank’s Foreign Exchange Data Processing System before 12:00 noon on the
following business day.
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〈Reporting of large exchange settlement transaction data〉
Article 55 When DSFs engage in large NTD spot, swap or cross currency swap transactions
with customers, they shall transmit relevant data to the Bank’s Foreign
Exchange Data Processing System pursuant to the following regulations:
1.When a DSF engages in foreign exchange purchase or sale with a company,
limited partnership or firm with the amount no less than an equivalent of
US$ 1,000,000 or with an individual or association with the amount no less
than an equivalent of US$500,000, the DSF shall transmit the data immediately
on the contract day after verifying relevant supporting documents.
2.When a DSF engages in a NTD swap or cross currency swap transaction with a
customer with the amount no less than an equivalent of US$1,000,000, the DSF
shall transmit the data before 12:00 noon on the next business day following
the contract day after verifying the relevant supporting documents.
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〈Obligation to disclose exchange rates〉
Article 56 The exchange rates used for foreign exchange transactions between a DSF and a
customer may be solely determined by the DSF.
The NTD exchange rate for a single foreign exchange transaction with a customer
for an amount of less than US$10,000 shall be posted at the DSF's business
premises before 9:30 AM on each business day and disclosed on a publicly
accessible website or made through other public means.
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〈Relocation and name change〉
Article 57 If a relocation or a name change is made by a DSF that has been approved to
engage in spot foreign exchange transaction business, the securities
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 a relocation, the securities enterprise shall also
submit the qualification documents of its operations and auditing personnel as
provided in Subparagraph 6, Paragraph 2 of Article 47 herein.
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〈Application for approval to conduct electronic business and matters for compliance〉
Article 58 To engage in electronic transaction business involving currency conversion with
customers, the DSF shall apply to the Bank for approval by submitting a
description of relevant operations related to the declaration of foreign exchange
receipts and disbursements or transactions.
The term "electronic transaction" referred to in the preceding paragraph shall
mean transactions carried out with customers not over the counter but through
various electronic and communications equipments.
A DSF that engages in the business mentioned in Paragraph 1 hereof with
customers over the Internet shall observe the following provisions:
1.The Internet system shall be capable of performing computerized verification
of transaction details such as classification of foreign exchange receipts
(disbursements).
2.Before offering services in foreign exchange receipts and disbursements or
transactions over the Internet, a DSF shall verify the customer's
identification documents or basic registration information.
3.When applying to the Bank to engage in NTD exchange settlement with values
equal to or over an equivalent of NT$500,000, or large exchange settlement
transactions, the DSF’s Internet system shall conform to the provisions of
Article 59 herein.
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〈Matters for compliance in connection with the Bank’s Foreign Exchange Data Processing System〉
Article 59 The computer equipment and relevant operating environment of a securities firm
must be capable of properly handling operations regulated in Articles 54 and 55
herein and the query of aggregate settlement amount of the current year, and
must pass the test of connection with the Bank’s Foreign Exchange Data
Processing System before the securities firm apply to engage in spot foreign
exchange transaction business.
A securities firm shall connect with the Bank’s Foreign Exchange Data
Processing System by one of the means below:
1.If the securities firm opts to develop its own server for server-to-server
connection, it shall follow the interagency specifications for connection
operation of the Foreign Exchange Data Processing System.
2.If the securities firm opts to use the Bank’s Foreign Exchange Data Reporting
System, it shall follow the user manual of the Foreign Exchange Data Reporting
System software.
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Section 3 Foreign Exchange Derivatives Business
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〈Scope of exchange rate derivatives business〉
Article 60 A securities enterprise that applies for approval to engage in foreign exchange
derivatives business involving exchange rates must be a DSF.
A DSF that engages in foreign exchange derivatives business involving exchange
rates shall observe the following provisions:
1.The DSF shall only offer an individual derivative contract without structuring
it into a synthetic contract or combining it with other derivatives products,
NTD or foreign currency principal, other products or businesses;
2.The DSF shall conduct the business based on the customer’s actual needs and
the related transaction documents for any Bank-approved business under
Subparagraphs 1 and 4, Paragraph 1 of Article 4 herein with the same customer;
and
3.Transaction documents for repo trade of foreign currency securities with
customers can only be used to undertake foreign currency swap between foreign
currencies.
In addition to the provisions in the preceding paragraph, the scope of business
and other rules for a DSF conducting the foreign exchange derivatives business
involving NTD exchange rate are as follows:
1. NTD foreign currency swap business (FX SWAP):
(1) FX swap is a simultaneous purchase and sale of identical amounts of one
currency for another with two different value dates.
(2) Counterparties are limited to domestic legal entities, foreign natural
persons and foreign legal entities.
(3) In the settlement of a FX swap, the DSF shall examine whether the customer
has filled out a Declaration Statement in accordance with the Regulations
for Declaration and whether the customer has entered information under the
"Nature of Foreign Exchange Receipts and Disbursements or Transactions" of
the Declaration Statement according to the nature of the actual transaction,
and also note it as a "foreign exchange swap". In addition, the "foreign
exchange receipts (disbursements) classification and code number" provided
by the Bank’s Department of Foreign Exchange shall be indicated on the
foreign exchange memo, and included in the Daily Foreign Exchange Receipts
(Disbursements) Transaction Report along with the Declaration Statement; the
preceding provision applies when the contract is rolled over.
(4) When conducting the business under this subparagraph, the DSF shall also
fill out a “Daily Report on FX Swap and Standard CCS Forward Positions.”
(5) The SWAP Transaction amount need not be included in the aggregate settlement
amount of the current year as specified in Subparagraph 3, Paragraph 1,
Article 4 of the Regulations for Declaration.
(6) When the contract is rolled over, the price shall be set based on the
current market exchange rates rather than the rates of the original
contract.
2. NTD cross currency swap business (CCS):
(1) Counterparties are limited to domestic and foreign legal entities.
(2) NTD CCS shall be limited to exchange of principal both at inception and
maturity. Both the principal and interest need not be included in the
aggregate settlement amount of the current year as specified in
Subparagraph 3, Paragraph 1, Article 4 of the Regulations for Declaration
at the time of settlement.
(3) In the settlement of NTD cross currency swaps, the DSF shall examine whether
the customer has filled out a Declaration Statement in accordance with the
Regulations for Declaration and whether the customer has entered information
under the "Nature of Foreign Exchange Receipts and Disbursements or
Transactions" of the Declaration Statement according to the nature of the
actual transaction, and also note it as a "cross currency swap transaction".
In addition, the "foreign exchange receipts (disbursements) classification
and code number" provided by the Bank’s Department of Foreign Exchange
shall be indicated on the foreign exchange memo, and included in the Daily
Foreign Exchange Receipts (Disbursements) Transaction Report along with the
Declaration Statement.
(4) When conducting the business under this subparagraph, the DSF shall also
fill out a “Daily Report on FX Swap and Standard CCS Forward Positions.”
3.NTD exchange rate option business:
(1) Counterparties are limited to domestic and foreign legal entities.
(2) An option may be settled by net settlement or gross settlement, but the
settlement method shall be specified in the contract.
(3) The currency used for option premium and settlement when the option is
exercised may be either in the denominated foreign currency or NTD, but
shall be specified in the contract.
(4) Only "plain vanilla" options may be transacted.
(5) When conducting the business under this subparagraph, the DSF shall also
fill out a “Daily Report on NTD Exchange Rate Option Transactions.”
When conducting foreign exchange derivatives business involving exchange rates
between foreign currencies, a DSF shall observe the following provisions in
addition to the provisions in Paragraph 2 hereof:
1.When a foreign exchange forward or swap contract is rolled over, the price
shall be reset based on the current market exchange rate rather than the
original contract rate.
2.In carrying out FX swap or CCS transactions between foreign currencies, the
appropriate "foreign exchange receipts (disbursements) classification and code
number" should be indicated on other transaction certificates and included in
the Daily Foreign Exchange Receipts (Disbursements) Transaction Report at the
time of settlement.
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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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〈Application documents for foreign exchange derivatives business〉
Article 63 A securities enterprise that applies for approval to engage in businesses under
Items 1 and 2, Subparagraph 1, Paragraph 2 of the preceding article shall submit
documents provided in Article 7 herein, and in addition, documents specified
below:
1.Document evidencing that its financial derivatives business has not been
suspended or terminated by TPEx pursuant to the “Taipei Exchange Regulations
Governing Over-the-Counter Trading of Financial Derivatives by Securities
Firms” (hereinafter referred to as “Derivatives Trading Regulations”)
during the preceding six months;
2.Curriculum vitae of operations and relevant managing personnel;
3.Risk disclosure statement;
4.Product profiles;
5.Operational guidelines; and
6.Risk management related documents.
A DSF that applies for approval to engage in business provided in Item 3,
Subparagraph 1, Paragraph 2 of the preceding article shall submit documents
provided in the preceding paragraph, and in addition, documents evidencing
compliance with Subparagraphs 2 and 5, Paragraph 2 of Article 47 herein, and
the provisions of Articles 54, 55 and 59 applies mutatis mutandis to the
application.
A securities enterprise that applies for approval to engage in business
provided in Item 4, Subparagraph 1, Paragraph 2 of the preceding article
shall submit documents provided in Article 7 herein, and in addition,
documents specified below:
1.Authorization guidelines approved by the board of directors;
2.List of products to be sold; and
3.List of branches authorized to sell the product and the list of personnel
at each branch meeting the sales qualifications.
Within one week of carrying out the first transaction under Subparagraph 2,
Paragraph 2 of the preceding article, a securities enterprise shall report to
the Bank for record with the following documents and may carrying out the next
transaction only after receiving a letter of acknowledgement from the Bank:
1.Documents provided in Article 7 herein;
2.Product description of the first transaction (must be a product actually
transacted with the date of transaction, date of settlement, expiration date,
notional principal amount, exercise price or other relevant indexes and
parameters); and
3.Documents provided in Subparagraphs 1 ~ 4 of Paragraph 1 hereof.
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〈Qualifications of personnel handling foreign exchange derivatives business〉
Article 64 Article 14 of the Regulations Governing Foreign Exchange Business of Banking
Enterprises shall apply mutatis mutandis to the qualification and training
requirements for personnel of securities enterprises handling foreign exchange
derivatives business, wherein the provisions in the same article governing
personnel handling the recommendation of foreign exchange derivatives apply to
the personnel of securities enterprises handling the sales of foreign exchange
derivatives.
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〈Receipt/payment associated with the foreign exchange derivatives business and other matters for compliance〉
Article 65 When a securities enterprise conducts foreign exchange derivatives business,
the procedure for verifying that the counterparty meets the criteria for
professional customers, 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. 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 the early termination of a contract or
expiration of a contract shall be made in the denominated currency. Except
for payments that are transferred from the customer’s deposit account, the
customer shall carry out foreign exchange settlement against NTD through an
authorized bank or the securities enterprise if it is a DSF in accordance with
the “Regulations for Declaration”. The securities enterprise shall not be
entrusted with handling the foreign exchange settlement against NTD for the
customer.
2.Securities enterprises shall not, either for themselves or for customers,
utilize foreign exchange derivatives to defer or hide losses, misrepresent or
recognize income earlier, or use other illicit means to engage in window
dressing or manipulate financial statements.
3.A head office authorizing its branch to carry out the sale of foreign exchange
derivatives products that have been approved by the Bank or reported to the
Bank for record shall comply with the provisions of the “Taipei Exchange
Directions Governing Sales of Financial Derivatives Products by Associated
Persons of Securities Firms Accepting Orders to Trade Securities”.
When the foreign exchange business under Subparagraph 3, Paragraph 1 of Article
4 herein conducted by a DSF involves exchange settlement against NTD or
conversion between foreign currencies, the DSF shall handle the matter in
accordance with the “Regulations for Declaration” and “Directions for
Domestic Securities Firm Approved To Conduct Foreign Exchange Business while
Assisting Customers to Declare Foreign Exchange Receipts and Disbursements
or Transactions.”
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〈Obligation to report sanctions〉
Article 66 Securities enterprises shall forthwith inform the Bank when their financial
derivatives business is suspended or terminated by the TPEx in accordance with
the “Derivatives Trading Regulations” and when their business qualification
is reinstated.
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