Taiwan Semiconductor 30 Futures, Shipping and Transportation Sector Futures, Electronics Sector Index Options and Finance Sector Index Options added to Dynamic Price Banding[...]

Futures Market Dynamic Price Banding Mechanism

I. Applicable products

Item	Products
Domestic Equity Index Futures	TAIEX Futures, Mini-TAIEX Futures, Electronic Sector Index Futures, Mini Electronics Sector Futures, Finance Sector Index Futures, Mini Finance Sector Futures, Taiwan 50 Futures, Non- Finance Non- Electronics Sub-Index Futures, Taipei Exchange Stock Index Futures, TPEx 200 Futures, F4G TIP TW ESG Futures , TIP Taiwan Bio Futures
Foreign Equity Index Futures	TOPIX Futures, DJIA Futures, S&P 500 Futures, Nasdaq-100 Futures, FTSE® 100 Index Futures
ETF Futures	Yuanta/P-shares Taiwan Top 50 ETF Futures, W.I.S.E. Yuanta/P-shares CSI 300 ETF Futures, Fubon SSE180 ETF Futures, Yuanta/P-shares SSE50 ETF Futures, Fuh Hwa CSI300 A Shares ETF Futures, Cathay FTSE China A50 ETF Futures, Fubon SZSE 100 Index ETF Futures, Capital SZSE SME Price Index ETF Futures, Yuanta/P-shares Taiwan Dividend Plus ETF Futures
FX Futures	USD/CNT FX Futures, USD/CNH FX Futures, EUR/USD FX Futures, USD/JPY FX Futures, GBP/USD FX Futures , AUD/USD FX Futures
Single Stock Futures	Please refer to the website.
Commodity Futures	TAIFEX Gold Futures, TAIFEX NT Dollar Gold Futures, TAIFEX Brent Crude Oil Futures
Domestic Equity Index Options	TAIEX Options

II. How dynamic price banding works

1.	TAIFEX will check each new order (including limit orders, market orders and market with protection orders) and simulate a matched price based on the order book at the time. TAIFEX will reject buy (sell) orders with a simulated matched price above (below) the upper (lower) limit of TAIFEX' dynamic price band. Buy Orders: simulated matched price > the upper limit of dynamic price band → reject order Sell Orders: simulated matched price < the lower limit of dynamic price band → reject order
2.	Only new orders that may cause abnormal price movements will be rejected. Price modifications are treated as new orders and are subject to dynamic price banding.
3.	Implied orders of Futures constructed by TAIFEX' trading system are not actual orders and therefore not subject to dynamic price banding.
4.	Upon receiving a combination order of TAIEX Options, each component (leg) of the combination order will be checked. If any simulate matched price of the components (legs) exceed its price band, the combination order will be rejected.

III.Calculation of the limits of dynamic price band

1.	Upper limit and lower limit of price band Equity Index Futures, ETF Futures, Single Stock Futures, Commodity Futures and TAIEX Options Upper limit of price band: base price＋variation range Lower limit of price band: base price－variation range FX Futures Upper limit of price band: base ask price＋variation range Lower limit of price band: base bid price－variation range
2.	Base Price (1)Equity Index Futures, ETF Futures, Single Stock Futures and Commodity Futures Base price determination sequence: i. The last effective traded price: In principal, base price is the last traded price prior to the time at which the base price is determined. The last traded price has to fulfill the criteria of the effective traded price. The time lag between the effective traded price and the base price must be within a predetermined number of seconds. The last traded price must be within a predetermined range from the effective mid-price of bid and ask. The difference between the effective traded price and the price of relevant foreign or domestic product must be lower than a predetermined threshold set by TAIFEX. ii. Effective mid-price of bid and ask: If the last effective traded price isn't available, base price is effective mid-price of bid and ask. The effective mid-price is a volume-weighted average price of a series of bid and ask prices starting from the best ones. The accumulated bid/ask volume used in calculating the effective mid-price should reach a predetermined threshold set by TAIFEX. (The volume-weighted average ask price ÷ The volume-weighted average bid price) The difference between the effective mid-price and the price of relevant foreign or domestic product must be lower than a predetermined threshold set by TAIFEX. iii. Price decided by TAIFEX: When neither i nor ii is available, TAIFEX will determine the base price by referring to the underlying index price, the impact of index-component dividends, and relevant global and domestic product prices. (2)TAIEX Options：Base Price is calculated using options pricing model with the following parameters: Underlying Price Volatility Interest Rate Strike Price Time to expiration (3)FX Futures：Outright Contracts: Base bid and ask price determination sequence Effective bid and ask price: The effective bid and ask is volume-weighted average price of a series of bid and ask prices starting from the best ones. The accumulated bid/ask volume and spread used in calculating the effective bid and ask price should reach a predetermined threshold set by TAIFEX. Price decided by TAIFEX: TAIFEX will determine the base bid and ask price by referring to the underlying foreign currency products prices Calendar Spread: Base bid price = Longer-dated FX futures contract base bid price - Shorter-dated FX futures base sell price. Base sell price = Longer-dated FX futures contract base ask price - Shorter-dated FX futures base bid price.
3.	Variation Range(DPM Rejection Base Reference and Rejection Threshold) (1)Futures Domestic Equity Index Futures TAIEX Futures and Mini-TAIEX Futures Spot Month Contract and Next Calendar Month Contract = the most recent closing price of underlying index × outright rejection threshold (1%). Weekly Contract, Third Calendar Month Contract and Next Three Quarterly Months Contracts = the most recent closing price of underlying index × outright rejection threshold (2%) Calendar Spread = the most recent closing price of underlying index × spread rejection threshold (1%) Electronic Sector Index Futures, Mini Electronics Sector Index Futures, Finance Sector Index Futures, Mini Finance Sector Index Futures, Non-Finance Non-Electronic Sub-Index Futures, Taiwan 50 Futures, Taipei Exchange Stock Index Futures and TPEx 200 Futures, and F4G TIP TW ESG Futures. Outright Contracts = the most recent closing price of underlying index × outright rejection threshold (2%) Calendar Spread = the most recent closing price of underlying index × spread rejection threshold (1%) TIP Taiwan Bio Futures Outright Contracts = the most recent closing price of underlying index × outright rejection threshold (3%) Calendar Spread = the most recent closing price of underlying index × spread rejection threshold (1.5%) Foreign Equity Index Futures and FX Futures: Including TOPIX Futures, DJIA Futures, S&P 500 Futures and Nasdaq 100 Future,USD/CNT FX Futures, USD/CNH FX Futures, EUR/USD FX Futures, USD/JPY FX Futures, GBP/USD FX Futures , AUD/USD FX Futures. Outright Contracts = the most recent daily settlement price of the nearest month futures contract× outright rejection threshold (2%) Calendar Spread = the most recent daily settlement price of the the nearest month futures contract × spread rejection threshold (1%) ETF Futures Yuanta/P-shares Taiwan Top 50 ETF Futures, Yuanta/P-shares Taiwan Dividend Plus ETF Futures Outright Contracts and Calendar Spread = Referred Opening Price of the nearest month contract of the ETF futures × rejection threshold(2%) W.I.S.E. Yuanta/P-shares CSI 300 ETF Futures, Fubon SSE180 ETF Futures, Yuanta/P-shares SSE50 ETF Futures, Fuh Hwa CSI300 A Shares ETF Futures, Cathay FTSE China A50 ETF Futures, Fubon SZSE 100 Index ETF Futures, Capital SZSE SME Price Index ETF Futures Outright Contracts and Calendar Spread = Referred Opening Price of the nearest month contract of the ETF futures × rejection threshold(3.5%) Single Stock Futures Before the underlying security opening Outright Contracts and Calendar Spread = Referred Opening Price of the nearest month contract of the single stock futures × rejection threshold (7%) After the underlying security opening Outright Contracts and Calendar Spread = Referred Opening Price of the nearest month contract of the single stock futures × rejection threshold (3.5%) Commodity Futures Gold Futures and NT Dollar Gold Futures Outright Contracts and Calendar Spread = the most recent daily settlement price of the nearest month futures contract × rejection threshold (2%) Brent Crude Oil Futures Outright Contracts and Calendar Spread = the most recent daily settlement price of the nearest month futures contract× rejection threshold (3%) (2)TAIEX Options：The most recent closing price × rejection threshold (2%), adjusted with the Delta value and expiry of each contract. i. For Weekly Contracts and the Front month contract: variation range is determined based on Delta value: a. Prior to the latest volatility parameter of the trading session is available: variation range equals the most recent closing price of underlying index × rejection threshold (2%) b After the latest volatility parameter of the trading session is available: variation range equals the most recent closing price of underlying index × rejection threshold (2%) × Delta × 2 When the absolute value of Delta is less than 0.25, Delta value will be replaced with 0.25. When the absolute value of Delta is greater than 0.5, Delta value will be replaced with 0.5. ii. For other expiration months: variation range equals the most recent closing price of underlying index × rejection threshold (2%) (3)Examples of Variation Range calculation Examples for TAIEX Futures and TAIEX Options: Assuming that the most recent last closing price of the TAIEX index is 11,000 points, the variation range for the following night trading session and regular trading session are calculated as follow： For TAIEX Futures The variation range of spot month contract and next calendar month contract is 110 points (= 11,000×1%). The variation range of weekly contract, third calendar month contract and next three quarterly months contracts is 220 points (= 11,000×2%). The variation range of calendar spread is 110 points (= 11,000×1%). For the weekly contracts and the front month contract of TAIEX Options Prior to the latest volatility parameter of the trading session is available: variation range = 11,000 × 2% = 220 points After the latest volatility parameter of the trading session is available: When the absolute value of Delta = 0.1 (less than 0.25), variation range = 11,000 × 2% × 0.25 × 2 = 110 points When the absolute value of Delta = 0.3, variation range = 11,000 × 2% × 0.3 × 2 = 132 points When the absolute value of Delta = 0.5, variation range = 11,000 × 2% × 0.5 × 2 = 220 points If the absolute value of Delta = 0.7 (greater than 0.5), variation range = 11,000 × 2% × 0.5 × 2 = 220 points For other expiration months of TAIEX Options Variation range = 11,000 × 2% = 220 points Examples for DJIA Futures and S&P 500 Futures: Assuming that the daily settlement price of the nearest month contract of DJIA Futures is 26,000 points, the daily settlement price of the nearest month contract of S&P 500 Futures is 2,900 points , the variation range for the following night trading session and regular trading session are calculated as follow： For DJIA Futures The variation range of outright contract is 520 points (= 26,000×2%). The variation range of calendar spread is 260 points (= 26,000×1%). For S&P 500 Futures The variation range of outright contract is 58 points (= 2,900×2%). The variation range of calendar spread is 29 points (= 2,900×1%). Examples for EUR/USD Futures: Assuming that the daily settlement price of the nearest month contract of EUR/USD Futures is 1.1234 points, the variation range for the following night trading session and regular trading session are calculated as follow： The variation range of outright contract is 0.022468 points (= 1.1234×2%). The variation range of calendar spread is 0.011234 points (= 1.1234×1%). Examples for ETF Futures: Assuming that the referred opening price of the nearest month contract of Yuanta/P-shares Taiwan Top 50 ETF futures and Yuanta/P-shares SSE50 ETF futures are 80 and 30 points respectively, the variation range of Yuanta/P-shares Taiwan Top 50 ETF futures and Yuanta/P-shares SSE50 ETF futures are calculated as follow： For Yuanta/P-shares Taiwan Top 50 ETF Futures The variation range of outright contract is 1.6 points (= 80×2%). The variation range of calendar spread is 1.6 points (= 80×2%). For Yuanta/P-shares SSE50 ETF Futures The variation range of outright contract is 1.05 points (= 30×3.5%). The variation range of calendar spread is 1.05 points (= 30×3.5%). Examples for Single Stock Futures: Assuming that the referred opening price of the nearest month contract of Taiwan Semiconductor Manufacturing Co., Ltd. Stock Futures is 600 points, the variation range for Taiwan Semiconductor Manufacturing Co., Ltd. Stock Futures before and after its underlying opening are calculated as follow： Before common stocks of Taiwan Semiconductor Manufacturing Co., Ltd. opening The variation range of outright contract is 42 points (= 600×7%). The variation range of calendar spread is 42 points (= 600×7%). After common stocks of Taiwan Semiconductor Manufacturing Co., Ltd. opening The variation range of outright contract is 21 points (= 600×3.5%). The variation range of calendar spread is 21 points (= 600×3.5%). Examples for Commodity Futures Assuming that the daily settlement price of the nearest month contract of Brent Crude Oil Futures is 2,000 points, the variation range for the following night trading session and regular trading session are calculated as follow： For Brent Crude Oil Futures The variation range of outright contract is 60 points (= 2,000×3%). The variation range of calendar spread is 60 points (= 2,000×3%).

IV.Applicability within trading sessions

Dynamic Price Banding is applicable to Continuous matching, not applicable to Call auction (Including opening call auction and the call auction of resumption of trading). Please refer to products specification for trading hours.

V.Dynamic price banding with different order types

• Rest of Session (ROD) or Immediate or Cancel (IOC): Any portion of the order of which the simulated matched price is above (below) the upper (lower) limit of TAIFEX' dynamic price band will be rejected, while the remainder of the order with simulated matched prices within the dynamic price band will be executed.
• Fill or Kill (FOK): If any of the simulated matched prices are above (below) the upper (lower) limit of TAIFEX' dynamic price band, the whole order will be rejected.
• Example: an investor submits a limit order to buy 5 lots of the TX spot month contract. The simulated matched prices of 4 lots are within the dynamic price band, while the simulated match price of 1 lot exceeds the upper limit.
  • If the limit order is an ROD or IOC order: 4 lots will be executed, while 1 lot will be rejected.
  • If the limit order is an FOK order: the whole order (5 lots) will be rejected.

VI. The suspension of dynamic price banding mechanism for Single Stock Futures

• When Single Stock Futures encounter the following conditions, dynamic price banding mechanism will be suspended.
  • Considering that underlying securities will stop trading or suspend trading for a period due to capital reduction, mergers, disposition and major information to announce, prices usually obviously fluctuate on the resumption date. Therefore, on the trading resumption date, dynamic price banding mechanism is not applicable to Single Stock Futures until the underlying security opening. Considering that underlying securities s encounter a significantly positive or negative event, there is a volatile change of a price on several days. If the closing price of the underlying security hits the limit up or limit down on the previous day, dynamic price banding mechanism will not be applicable to Single Stock Futures until the underlying security opening.
  • In order to reduce system risk, dynamic price banding mechanism for all Single Stock Futures will be suspended until the stock market opening if the pre-market quantitative suspension standard is reached (which means domestic or foreign futures market or spot market raise or decline to reach certain degree set by TAIFEX) before the futures market opening.

VII.Special situations resulting in adjustment or suspension of dynamic price band, when the quantitative or non-quantitative standards listed below are met:

(1)	Non-Quantitative standards
	In the event of a natural disaster, riot, war or other force majeure events that may affect the trading at TAIFEX, TAIFEX may announce adjustments to the variation range or the suspension of dynamic price banding For other circumstances deem necessary, TAIFEX may announce adjustments to the variation range. For circumstances that may affect the normal operation of dynamic price banding, TAIFEX may announce the suspension of dynamic price banding.
(2)	Quantitative standards
	When the futures trading volatility index reaching the limit set at TAIFEX' discretion, TAIFEX may announce adjustments to the variation range. When domestic or foreign futures market or spot market raise more than a certain ratio set by TAIFEX, TAIFEX may double the variation range of TAIEX Call Options upper limit and Put Options lower limit. When domestic or foreign futures market or spot market decline more than a certain ratio set by TAIFEX, TAIFEX may double the variation range of TAIEX Call Options lower limit and Put Options upper limit.

VIII.Disclosure of dynamic price banding

Regular Trading Session

After-Hour Trading Session

IX.Notice for the Dynamic Price Banding Mechanism

1.Each new order is checked base on the simulated matched price and the real-time upper/lower limit of price band at the time of entry. Therefore, even for two consecutive orders with the same buy/sell price, their results may differ in fast market.

Example: An investor submits two 10300 limit orders to buy TAIEX Futures.

2.The bid or ask can be non-executable when the quote is outside the price bands.

Example: the quote is outside the price bands due to volatile market

3. The Dynamic Price Banding Mechanism can only provide price stability within a certain range. Market participants shall still pay attention to the reasonableness of various order types and order prices when trading. In addition, the operation of Dynamic Price Banding Mechanism may differ as the variation range (or price band) may be expanded due to special market condition, or the mechanism may be suspended due to malfunction. Market participants shall pay close attention to the reasonableness of order price and market liquidity and shall not rely solely on the mechanism.

X.Examples

1. Domestic Equity Index Futures

Example 1: Assuming that the last closing price of the TAIEX index is 10,000 points and that the last traded price of the third quarterly month of TAIEX Futures contract prior to the time at which the base price is determined at 10,005 points, then the upper and lower limits of the dynamic price band will be 10,205 points (=10,005+(10,000×2%)) and 9,805 points (=10,005-(10,000×2%)), respectively. If an investor submits a market order to sell 1 lot of TAIEX Futures, and the simulated matched price is 9,600, which is below the lower limit of 9,805 points, the order will be rejected.

Example 2: Assuming that the last closing price of the TAIEX index is 10,500 points and the last traded price of the third quarterly month of TAIEX Futures contract prior to the time at which the base price is determined at 10,505 points, then the upper and lower limits of the dynamic price band will be 10,715 points (=10,505+(10,500×2%)) and 10,295 points (=10,505－(10,500×2%)), respectively. If an investor submits a market order to buy 1 lot of TAIEX Futures, and the simulated matched price is 10,800, which is above the upper limit of 10,715 points, the order will be rejected.

2. TAIEX Options

Example 1: Assuming that the last closing price of the TAIEX index is 10,000 points, the variation range of the front month contract of TAIEX 9600 PUT Option for the day session is 200 points and Base Price is 200 points. The upper and lower limits of the dynamic price band will be 400 points (=200+(10,000×2%)) and 0.1 points (=200－(10,000×2%)), respectively. If an investor submits a market order to buy 1 lot of TAIEX 9600 PUT Option contract, and the simulated matched price is 402, which is above the upper limit of 400 points, the order will be rejected.

Example 2: Assuming that the upper limit of the second month contract of TAIEX 9600 PUT options is 250 points and the lower limit is 0.1 points. Also, the upper limit of the second month contract of TAIEX 9500 PUT options is 240 points and the lower limit is 0.1 points. If an investor submits a long calendar spread combination order to buy 1 lot of 9500 PUT and sell 1 lot of 9600 PUT when the order books are below. As the simulated matched price of the 9500 PUT is 244 points, which is above the upper limit of 240 points, the combination order will be rejected.

3. Foreign Equity Index Futures

Example 1: Assuming that the daily settlement price of the nearest month contract of DJIA Futures is 26,000 points and that the base price of the nearest month contract of DJIA Futures is 26,020 points, then the upper and lower limits of the dynamic price band will be 26,540 points (=26,020+(26,000×2%)) and 25,500 points (=26,020-(26,000×2%)), respectively. If an investor submits a market order to buy 1 lot of DJIA Futures, and the simulated matched price is 26,550, which is above the upper limit of 26,540 points, the order will be rejected.

Example 2: Assuming that the daily settlement price of the nearest month contract of S&P 500 Futures is 2,900 points and that the base price of the nearest month contract of S&P 500 Futures is 2,901 points, then the upper and lower limits of the dynamic price band will be 2,959 points (=2,901+(2,900×2%)) and 2,843 points (=2,901-(2,900×2%)), respectively. If an investor submits a market order to sell 1 lot of S&P 500 Futures, and the simulated matched price is 2,842, which is below the lower limit of 2,843 points, the order will be rejected.

4. FX Futures

Example 1: Assuming that the daily settlement price of the nearest month contract of USD/CNT Futures is 6 points and that the base bid and ask price of the nearest month contract of USD/CNT Futures are 6.1221 and 6.1234 points, then the upper and lower limits of the dynamic price band will be 6.2434 points (=6.1234+(6×2%)) and 6.0021 points (=6.1221-(6×2%)) respectively. If an investor submits a market order to buy 1 lot of USD/CNT Futures, and the simulated matched price is 6.2501, which is above the upper limit of 6.2434 points, the order will be rejected.

Example 2: Assuming that the daily settlement price of the nearest month contract of EUR/USD Futures is 1.2 points and that the base bid and ask price of the nearest month contract of EUR/USD Futures are 1.2567 and 1.2570 points, then the upper and lower limits of the dynamic price band will be 1.2810 points (=1.2570+(1.2×2%)) and 1.2327 points (=1.2567-(1.2×2%)) respectively. If an investor submits a market order to sell 1 lot of USD/CNT Futures, and the simulated matched price is 1.232, which is below the lower limit of 1.2327 points, the order will be rejected.

5. ETF Futures

Example 1: Assuming that the referred opening price of the nearest month contract of W.I.S.E. Yuanta/P-shares CSI 300 ETF Futures(NZF) is 18 points and that the base price of the nearest month contract of NZF is 18.2 points, then the upper and lower limits of the dynamic price band will be 18.83 points (=18.2+(18×3.5%)) and 17.57 points (=18.2-(18×3.5%)) respectively. If an investor submits a market order to buy 1 lot of NZF, and the simulated matched price is 18.85, which is above the upper limit of 18.83 points, the order will be rejected.

Example 2: Assuming that the referred opening price of the nearest month contract of Yuanta/P-shares Taiwan Top 50 ETF Futures(NYF) is 75 points and that the base price of the nearest month contract of NYF is 75 points, then the upper and lower limits of the dynamic price band will be 76.5 points (=75+(75×2%)) and 73.5 points (=75-(75×2%)) respectively. If an investor submits a market order to sell 1 lot of NYF, and the simulated matched price is 73, which is below the lower limit of 73.5 points, the order will be rejected.

6. Single Stock Futures

Example 1: Assuming that the referred opening price of the nearest month contract of Formosa Plastics Corp. Futures(CFF) is 100 points and that the base price of the nearest month contract of CFF is 100.5 points, then the upper and lower limits of the dynamic price band will be 107.5 points (=100.5+(100×7%)) and 93.5 points (=100.5-(100×7%)) respectively. If an investor submits a market order to buy 1 lot of CFF, and the simulated matched price is 108, which is above the upper limit of 107.5 points, the order will be rejected.

Example 2: Assuming that the referred opening price of the nearest month contract of Taiwan Semiconductor Manufacturing Co., Ltd. Futures(CDF) is 600 points and that the base price of the nearest month contract of CDF is 599 points, then the upper and lower limits of the dynamic price band will be 620 points (=599+(600×3.5%)) and 578 points (=599-(600×3.5%)) respectively. If an investor submits a market order to sell 1 lot of CDF, and the simulated matched price is 577, which is below the lower limit of 578 points, the order will be rejected.

7. Commodity Futures

Example 1: Assuming that the daily settlement price of the nearest month contract of Gold Futures is 1,800 points and that the base price of the nearest month contract of Gold Futures is 1,790 points, then the upper and lower limits of the dynamic price band will be 1,826 points (=1,790+(1,800×2%)) and 1,754 points (=1,790-(1,800×2%)), respectively. If an investor submits a market order to buy 1 lot of Gold Futures, and the simulated matched price is 1,840, which is above the upper limit of 1,826 points, the order will be rejected.

Example 2: Assuming that the daily settlement price of the nearest month contract of Brent Crude Oil Futures is 2,000 points and that the base price of the nearest month contract of Brent Crude Oil Futures is 2,010 points, then the upper and lower limits of the dynamic price band will be 2,070 points (=2,010+(2,000×3%)) and 1,950 points (=2,010-(2,000×3%)), respectively. If an investor submits a market order to sell 1 lot of Brent Crude Oil Futures, and the simulated matched price is 1,930, which is below the lower limit of 1,950 points, the order will be rejected.

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