For the purpose of helping innovative enterprises raise funds in the capital market, the Pioneer Stock Board (PSB) will be introduced to the Emerging Stock Market. The PSB trading mechanism will follow an automatic matching and execution system with recommending securities firms acting as liquidity providers. In addition, given the investment risks with the innovative enterprises, only qualified investors or the PSB companies buying back their own shares in accordance with laws are eligible to buy the PSB stocks. The market structure of the Emerging Stock Market shows as follows:
(I) The PSB trading mechanism will be mostly identical to that of the TPEx Main board stocks, i.e., securities firms can trade PSB Stocks, either in proprietary trading or brokerage through TPEx automated trade matching system and after-hour odd lot trading system; or they can trade in proprietary trading through over-the-counter price negotiation. Key features are described below:
|Item||PSB Trading Mechanism|
|Matching mechanism||Opening/closing sessions: Call auction
Intraday trading session: Continuous trading
|Order placing hours||8:30-13:30|
|Tick size||6 brackets based on the stock price|
|Minimum trading unit||1,000 shares|
|Order types||6 types|
|Clearing/Settlement||To be processed with TPEx Main board stocks|
|Other trading methods||After-hour odd lot trading, over-the-counter price negotiation|
|Daily price fluctuation limit||20% (for both the automated trade matching system and the after-hour odd lot trading system)|
|Threshold for postponed sessions
and intraday volatility interruption
|Recommending securities firms||Acting as liquidity providers|
|Trading limits||The PSB stocks are not allowable to day trading, margin trading, securities borrowing and lending (securities borrowings for settlement permitted), block trading, after-hour fixed-price trading, intraday odd lot trading, or reverse auction. Also, securities firms are not permitted to trade the PSB stocks through omnibus trading accounts (OTA).|
(II) PSB liquidity provider:
The advisory recommending securities firms of the PSB companies shall act as liquidity providers (two or more are required upon registration), and provide market liquidity through their subscribed shares. Furthermore, other qualified securities firms may apply with TPEx to become eligible liquidity providers of the respective PSB stocks after the respective issuers have registered on PSB for one month, without any requisite on subscription amount. The price quoting rules for liquidity providers are as follows:
(III) Guidelines for the PSB investors:：
 A liquidity provider is not required to provide quotes under the following circumstances:
|Item \ Type||TPEx Main board||Pioneer Stock Board (PSB)||Emerging Stock Board (ESB)|
|I.Trading mechanism||Automatic matching and execution||Automatic matching and execution incorporated with liquidity providers acted by recommending securities firms||Negotiated trading based on prices quoted by recommending securities firms|
|(I)Order placing hours||8:30~13:30||9:00~15:00|
|(III)Minimum trading unit||1,000 shares||1 share|
|(IV)Order type||6 types of order||Limit price order valid for the day only|
||Recommending securities firms provide quotes and trade with investors by negotiation. In that way, a recommending securities firm is either the seller or buyer in any transaction.|
|(VI)Daily price fluctuation limit||10%; while no limit for newly listed companies on their first five days of listing||20%; while no limit for newly registered companies on their first five days of registering||None|
|(VII)Threshold for postponed sessions (pre-opening/pre-closing) and intraday volatility interruption||3.5%||7%||None|
|II.Recommending securities firms||None||Yes, to act as a liquidity provider to provide quotes||Yes, to be responsible for quoting prices and be obliged to buy and sell shares|
|III.Investors signing Risk Disclosure Statement||Not required (except for purchasing foreign stocks)||Required(A qualified natural person is required to sign a Risk Disclosure Statement before buying the PSB stocks for the first time)||Required(except for professional institutional investors)|
|IV.Restriction on investors||None||Buyers must be qualified investors or the PSB companies buying back their own shares in accordance with laws.||None|
|V.Overseas Chinese and foreign investors (OC/FI)||Allowed||Allowed (excluding Mainland area investors)||Allowed (excluding Mainland area investors)|
|VI.Day trading, margin trading, and securities borrowing and lending (SBL)||Allowed||Not allowed (only securities borrowing for settlement is permitted)||Not allowed|
|VII.OTA trading||Allowed||Not allowed||Allowed|
|VIII.Other trading methods||After-hour/Intraday odd lot trading, after-hour fixed-price trading, block trading, reverse auction and over-the-counter negotiation||After-hour odd lot trading and over-the-counter negotiation||None|
|IX.Clearing/Settlement||TPEx Main board stocks and the PSB stocks are processed together||Processed by TDCC|
|X. Business Service Fee||0.00585% of traded value||0.00325% of traded value|
|XI. Handling Fee||A securities broker may set the fee rate. (If the fee rate exceeds 0.1425 percent, the securities broker shall notify its customers of this fact before implementing the rate.)||A securities broker may set the fee rate. (If the fee rate exceeds 0.5 percent, the securities broker shall notify its customers of this fact before implementing the rate.)|
Q1、One of the qualifications for natural persons meeting the criteria for qualified investors is net assets of NT$10 million or more. What’s the definition of the net assets?
Ans: The qualification for natural persons meeting the criteria for qualified investors is amended by referring to the qualification currently in effect for natural persons who are offerees of public companies‘ private placements. (Per 13 June 2002 Letter No. Taiwan-Finance-Securities-I-0910003455 of the Securities and Futures Commission, Ministry of Finance, the net assets represent the value of domestic and foreign assets at market price after liability is deducted.) Accordingly, there is already a way of examination relevant to the net assets in practice.
It is suggested that securities firms should comply with the current KYC regulations, ask proof of personal financial resources of qualified natural persons, and ask the qualified natural persons to provide personal Credit Reports issued by Joint Credit Information Center or to provide credit reports/personal liability statements relevant to their banks based on the securities firms’ risk considerations in order to be the references of application for approval.
About aforesaid personal liability statements, it is suggested that securities firms should adopt rules for relevant documentation and examination procedures based on their risk management needs and clients’ status. As for the content of the statements, it should include the status of clients’ liabilities, and a declaration that the statements contain no misrepresentations or nondisclosures. Besides, the statements may be signed at the counter, by fax, or by email.
Q2、One of the qualifications for natural persons meeting the criteria for qualified investors is average income for the most recent 2 years of NT$1.5 million or more. What’s the definition of the income?
Ans: Per 13 June 2002 Letter No. Taiwan-Finance-Securities-I-0910003455 of the Securities and Futures Commission, Ministry of Finance, the income represents the consolidated income filed and approved in accordance with Income Tax Act plus other domestic and overseas income with concrete evidence.
Q3、What’s the specific standard of “experience in securities investment” regarding the regulation, qualified natural persons are required to have 2 or more years of experience in securities investment?
Ans: Experience in securities investment is that the time period between first trading under one of client’s securities accounts and the examination of the qualifications for qualified natural person should be at least 2 years. Besides, it is suggested that securities firms can adopt rules for the specific standard of “experience in securities investment” based on their internal control systems and risk management needs.
Q4、What’s the specific standard of “periodic review” regarding the regulation, re-reviewing evidence periodically to examine whether a customer continues to meet the qualifying conditions?
Ans: Securities firms should adopt rules for the frequency of periodic review and incorporate them into their internal control systems based on their risk considerations by referring to Article 18 of Taiwan Securities Association Self-Regulatory Rules for Know-Your-Customer and Credit Checking and Credit Line Management in the Conduct of Brokerage Trading by Members, securities firms should investigate and update annually the credit information on customers whose single-day trading limits are at least of NTD 10 million, and Article 6 of Taipei Exchange Regulations Governing Over-the-Counter Trading of Financial Derivatives by Securities Firms, securities firms should re-review at least once a year to examine whether a customer continues to qualify as a professional customer.
Q5、Can PSB Stock Risk Disclosure Statement be consolidated with the Taiwan Innovation Board (TIB) Stock Risk Disclosure Statement for investors to sign at the same time? Can the aforesaid Risk Disclosure Statement be signed by using electronic signature?
Ans: Securities firms can consolidate risk disclosure statement of different financial products based on their needs for internal procedures and the statement can be signed by using electronic signature. The content of the statement must be checked article by article and there must be enough time to read the complete content when the statement is signed by using electronic signature. Besides, securities firms should provide investors with a copy of the statement by email, website, or text message. The statement will be in effect after investors confirm the correctness of the content.
Q6、What’s the calculation methods, price evaluation methods, and accounting principles for securities firms’ capital adequacy ratio with respect to PSB Stocks?
Ans: Pioneer Stock Board Stock is categorized into Emerging Stock Market. Therefore, the calculation methods, price evaluation methods, and accounting principles for securities firms’ capital adequacy ratio with respect to PSB Stocks should be subject to relevant regulations or rules for Emerging Stock Board Stocks.
Q7、How does a securities firm file out-trades, corrections of the account number, delayed settlement, and default with respect to PSB Stocks?
Ans: The settlement of PSB Stocks should be completed together with the settlement of TPEx listed stocks and PSB Stocks are subject to the regulations of the Joint Responsibility System Clearing and Settlement Fund. Accordingly, the filing of out-trades, corrections of the account number, delayed settlement, and default with respect to PSB Stocks by securities firms should be subject to relevant regulations or rules for TPEx listed stocks.
Q8、In the case of a PSB Stock being re-registered as an ESB Stock, is the stock subject to the trading halt rules of ESB Stocks?
Ans: The trading halt rules should not apply to the first five business days on which ESB Stocks begin to be traded on the TPEx. Consequently, the first five business days on which a PSB Stock begin to be re-registered as an ESB Stock will not be subject to the trading halt rules.
Q9、What’s the category of PSB stocks’ securities transaction tax collected and paid by securities firms?
Ans: PSB stocks can be traded through TPEx automated trade matching system and the clearing/settlement of the PSB stocks are processed together with TPEx Main board stocks. Therefore, the securities transaction tax of PSB stocks is collected and paid together with TPEx Main board stocks by securities firms. (the tax rate for PSB stocks and TPEx Main board stocks is 0.3%)
Q10、Does the transaction data of PSB stocks belong to Emerging Stock Market or TPEx Main board?
Ans: PSB stocks belong to Emerging stocks. The statistics for Emerging stocks on TPEx official website is divided into PSB and ESB. The statistics for TPEx Main board doesn’t include the statistics for PSB.
Q1.How does an investor trade the PSB stocks?
Ans:Investors can use their existing securities accounts to buy or sell the PSB stocks. However, buyers of the PSB stocks are exclusively to the qualified investors, and qualified natural persons are required to sign a "Pioneer Stock Board Risk Disclosure Statement". Order placing hours and order types are identical to those for trading the TPEx Main board stocks. There are six types of order, three of limit price (ROD, IOC, and FOK) and three of market price (ROD, IOC, FOK). The orders are matched in call auction trading during opening/closing sessions and in continuous trading during mid-session, respectively. The clearing and settlement of the PSB stocks will be processed together with the TPEx Main board stocks.
Q2.What is the criterion for qualified investors of PSB?
Q3.What shall the investors pay more attention to when trading the PSB stocks?
Ans: The PSB companies are emerging stock companies, on which TPEx does not perform on-site examination. Given that the PSB companies may have characteristics such as small-sized, relatively young, and not profitable yet, their stock prices would be more volatile. Investors are highly suggested to assess their own risk tolerance before investing.
Furthermore, the trading mechanism of the PSB stocks are identical to that of the TPEx Main board stocks in general, while different from the way the ESB stocks are traded. Investors should notice that the daily price fluctuation limit for the PSB stocks is 20% (while 10% for the Main board stocks); besides, the threshold for intraday volatility interruption and postponed sessions (pre-opening/pre-closing) is 7% (while 3.5% for the Main board stocks).
Q1.What are the trading hours for the PSB stocks?
Ans: The trading hours for the PSB stocks are the same as those for the TPEx Main board stocks. The hours for trading through the automated trade matching system are 9 a.m. to 1:30 p.m.; the hours for trading through the after-hour odd lot trading system are 1:40 p.m. to 2:30 p.m.
Q2.What is the trading unit of the PSB stocks?
Ans: The trading unit of the PSB stocks is the same as that of the TPEx Main board stocks, i.e., 1,000 shares or multiples of 1,000 shares.
Q3.What is the tick size of the PSB stocks?
Ans: The six brackets of tick size for the PSB stocks are the same as those for the TPEx Main board stocks, i.e., NT$0.01 for the market value of each share less than NT$10; NT$0.05 for NT$10 to less than NT$50; NT$0.1 for NT$50 to less than NT$100; NT$0.5 for NT$100 to less than NT$500; NT$1 for NT$500 to less than NT$1,000; NT$5 for NT$1,000 and above.
Q4.Is there daily price fluctuation limit on the PSB stocks?
Ans: Except that the newly registered companies are free from price fluctuation limit for the first five consecutive trading days, the PSB stocks are subject to a daily price fluctuation limit at 20% calculated on the reference price. However, when the fluctuation range calculated is less than the minimum tick size, it shall be set by the minimum tick size and the price may not fall below the minimum tick. This is different from what applies to the TPEx Main board stocks and the ESB stocks, to which the investors need to pay attention.
Q5.Does intraday volatility interruption system apply to the PSB stocks?
Ans: Yes. To mitigate wild volatility of the PSB stocks in a short period of time, TPEx will impose intraday volatility interruption on the PSB stocks, with exceptions of newly registered stocks during the fluctuation limit exemption period (i.e., the first five consecutive trading days), stocks subject to extended matching intervals implemented pursuant to the TPEx regulations, and stocks with basis price of opening trade at less than NT$1.
In specific, during the period starting from the first matching to a certain time prior to closing session, if the upward or downward movement of any given trade price calculated prior to matching exceeds 7% of reference price, TPEx will take the same volatility interruption measures as on the TPEx Main board stocks.
Q6.Is odd-lot trading permitted for the PSB stocks?
Ans: Yes. The PSB stocks can be traded through the TPEx after-hour odd lot trading system (trading hours 13:40 - 14:30). However, intraday odd lot trading is not permitted.
Q7.What are the method and timing for clearing and settlement of the PSB stocks??
Ans: Clearing and settlement for the PSB stocks are processed together with those for the TPEx Main board stocks. In other words, both securities and payments will be settled by the book-entry transfer method. The clearing and settlement should be completed before 10 a.m. of the second business day following the transaction date.
Q1.How do liquidity providers of the PSB stocks quote prices?
Ans: PSB liquidity providers should quote prices at least once every 10 minutes. A quote should comprise “bid” and “ask” prices, and the spread between best bid-ask prices shall not exceed 5%
Q2.What is the minimum quantity per quote by the PSB liquidity providers?
Ans: The minimum quantity per single quote is identical to the minimum trading unit (i.e., 1,000 shares).
Q3.Are there circumstances under which the PSB liquidity providers will not provide a quote?
Ans: Yes, the PSB liquidity providers will be allowed not to provide quotes under the following circumstances:
Q1.Where can investors find market information of the PSB stocks?
Q1.Do investors have to pay the securities transaction tax on the PSB stocks transaction? What is the tax rate?
Ans: As with the TWSE/TPEx Main board listed stocks and the ESB stocks, the securities transaction tax is levied on the sellers of the PSB stocks. The securities brokers, as collecting agents, will collect a transaction tax from its customers who sell the PSB stocks at the rate of 0.3% of the transaction amount.
Q2.What are the fees for investors trading the PSB stocks?
Ans: As with the ESB stocks, the fee schedule for the PSB stocks is determined by securities brokers based on their clients' transaction amounts, sometimes with discounts and minimum fees set in place. Their clients shall be notified by the brokers of any rates exceeding 0.5% before effective.