Laws and Regulations Database of the Central Bank of the Republic of China(Taiwan)

Subsection 7　　Business Involving Domestically Issued Foreign Currency Denominated ETFs

Article 33  
A securities enterprise that 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 shall apply to the Bank for approval or report to the 
Bank for record by submitting the following documents before commencement：
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 TWSE;
　 (2) Participation contract of the foreign currency denominated ETF; and
　 (3) A business plan (including the 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 
　 shall report to the Bank for record before commencement by submitting the 
　 documents provided in Items (1) and (2) of the preceding paragraph.

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.

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.