In order to improve the flexibility of business operations of securities firms, the Financial Supervisory Commission has proposed to amend Article 19 and Article 31-3 of the Regulations Governing Securities Firms (the Regulation). Key amendments are as follows:

I.To improve the flexibility of hedging operations of securities firms issuing exchange-traded notes, after referring to the existing business practices of securities firms handling call and put warrants and engaging in financial derivatives, The Regulation will allow securities firms to be exempt from the restriction on hedging operations, where it is no longer subject to the cap on investment cost of securities firms in holding equity securities issued by the related parties (Amended Article 19).

II.To improve the transaction flexibility of securities dealers, The Regulation will allow securities dealers to engage in trading foreign bonds and foreign financial derivatives with overseas affiliated enterpriseswithin the scope of Subparagraph 1 of Article 19-1 and Article 31-1 of the Regulations upon supermajority resolution of the board. The conditions of giving the managing department general authorization to engage in those transactions and the transaction limits are as follows: (Amended Article 31-3)

(1)It is allowed to give the managing department general authorization to engage in those transactions according to the operational rules upon supermajority resolution of the board if the trading counterparties are overseas affiliated enterprises registered in the jurisdictions of IOSCO MMoU signatories, licensed and supervised by the local government authority, and the transactions are with stated, open market prices or the transaction amounts are not material.

(2)The aggregate amount of transactions with a single overseas affiliated enterprise shall not exceed 10% of the net worth of the securities firm, and the aggregate amount of transactions with all overseas affiliates shall not exceed 20% of the net worth of the securities firm.

The FSC said that the amendment draft will be published in the Executive Yuan''s bulletin, and the FSC''s website will have a full description of the draft and a comparison table for the original and revised articles available. For any suggestions, please visit Advance Notice Forum for Regulation Draft on FSC''s Laws and Regulations Retrieving System (http://law.fsc.gov.tw/) to leave opinions or contact the Securities and Futures Bureau of the Financial Supervisory Commission within 60 days after the announcement.

Securities Firms Division of the Securities and Futures Bureau

Contact Person: Section Chief Hsu

Telephone: 02-27747161

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