In order to improve the business flexibility of securities firms, the Financial Supervisory Commission (FSC) has proposed to amend Article 19 and Article 31-3 of the Regulations Governing Securities Firms (hereinafter referred to as the “Regulations”). The descriptions of the amendments are as follows:

 

I.In order to improve the flexibility of hedging operation of securities firms issuing exchange traded notes (ETNs), the FSC refers to the existing business practices of securities firms handling call and put warrants and engaging in over-the-counter derivative financial product trading business, to loosen the restriction on hedging operation of ETNs business, where it is no longer subject to the upper limit of total amount in holdings of equity securities issued by related parties. (Amended Article 19).

 

II.In order to improve the transaction flexibility of securities dealers, the FSC plans to allow securities dealers to engage in trading foreign bonds and financial derivatives within the scope of Subparagraph 1 of Article 19-1 and Article 31-1 of the Regulations upon supermajority resolution of the board, and the conditions and transaction limits for the authorized responsible departments are as follows: (Amended Article 31-3)

 

(I)The trading counterparties are overseas affiliates registered in the member territory inside the Multilateral Memorandum of Understanding (MMoU) signatories of the International Organization of Securities Commissions (IOSCO) who have financial business licenses and are supervised by the local government authority. If the market price of the trading target is publicized or the transaction amount is not material, it may be commissioned to the responsible department to handle the matter according to the internal rules upon the supermajority resolution of the board.

(II)The total balance of transactions between a securities firm and a single overseas affiliate shall not exceed 10% of the net worth of the firm, and the total balance of transactions among a securities firm and all of its overseas affiliates shall not exceed 20% of the net worth of the firm.