| I. Preface |
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In the efforts to address this issue, provide a legal, secure and transparent market, the Securities and Futures Commission (SFC) under the Ministry of Finance asked GreTai Securities Market to embark on the planning for establishment of a market system. GTSM then organized a task force and after one year of vigorous planning and collaborative efforts, the SFC approved the planned Emerging Stock Market on July 19, 2001 and commenced trading on the following year of January 2nd. This market created a proper and legal channel for small-and-medium sized businesses to involve in trading of unlisted stocks.
One year after the debut of the emerging stock market, GTSM has modified the regulatory and legal constrains of the market under supervision of related government institutions. In June of 2003, more legal issues were stipulated in terms of the following aspects:
For further information or inquiries about Emerging Stocks, please refer to the following sessions in this pamphlet for information on recommending securities firms, trading system, and transaction. For any additional inquiries, please contact GTSM service hotline at 886-2-2366-6102 or contact us. In addition, please visit us at www.gretai.org.tw.
Preface of the new edition dated June 2004
The computerized trading system embracing the negotiated pricing function for the emerging stocks came on line on September 29, 2003, providing a networked environment for securities brokers and enabling recommending brokers to offer quotes on-line. The system certainly helps in terms of increasing trading volumes. To further expand the Emerging Stock Market's turnover, GreTai Securities Market, after consulting with the investment community and learning the experiences from overseas markets, amended the following four regulations, with effect from May 31, 2004.
1. Securities brokers shall handle investors' trade orders with the highest confidentiality and use the orders strictly for the trading purpose.
2. The bid-offer-spread should not exceed 7% for recommending brokers.
3. Designated trade orders automatically become undesignated after 20 minutes if the orders remain unmatched.
4. Settlement date is now T+2, in line with the TSE market.
In addition, to encourage more public companies registering with the Emerging Stock Market, the following regulations had been amended and took place from May 26, 2004:
1. Public companies need to engage securities brokers as advisors. The same broker may recommend the company to register with the Emerging Stock Market.
2. The recommending brokers acting as advisors should present the financial statements and other important information of the company when filing for registration.
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| Q2-1.What are emerging stocks? What is the definition of them? |
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Ans︰
Emerging stocks are common stocks traded on GTSM by means of negotiation. These stocks are those of companies that have registered their supervision agreement with recommending securities firms to GTSM. |
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| Q2-2.For a public company, what are the requirements to register? |
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Ans︰
Since there are no requirements on the revenue, market capitalization, years of operating and numbers of shareholders, a company only needs to meet all three of the following criteria:
（1）To register their supervision agreement with recommending securities firms to GTSM
（2）To have at least two recommending securities firms. The recommending securities firms should provide recent one month financial statements and other important information of the company
（3）To obtain the service of registered house in the Taipei metropolitan area |
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| Q2-3.Where can I find the information on the underwriter of the Emerging Stock Market? And what will I find? |
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Ans︰
(1)Prior to trading：
(A)When the underwriter submits the application, it is required to post its most recent prospectus on the web site of Securities & Futures Institutes (www.mops.tse.com.tw)
(B)After GTSM examines the application, the following information will be disclosed on GTSM web site for 5 business days and on the 6th day, it is allowed to begin trading (www.gretai.org.tw):
- Stock code, company name, name of the Chairman and the President, market capitalization, major operating items, major products, past 5 years of simplified income statements and balance sheets.
(2)Post to trading：
Investors can find the following information on GTSM's web site under "Stock Watch":
(A)Financial Report: CPA approved annual and semi-annual reports
(B)Monthly Operation Report: Include sales revenue, total of endorsed borrowing, loan, and derivative trading Significant Event: Under Securities Law, Article 7, Code 9, companies are obligated to disclose significant news one business day after the occurring date or before trading commence.
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| Q2-4.Under what conditions will a stock be suspended on Emerging Stock Board? |
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Ans︰
If any of the following occur:
（1）Only one recommending securities firms remains.
（2）Although a company has two recommending securities firms, none of them sign a supervision contract with it.
（3）Failed to disclose annual or semi-annual financial reports
（4）Failed to disclose significant events and not improved in a given period
（5）A company's service of registered house is not provided according to the regulation or there is no such service and not improved in a given period |
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| Q2-5.Under what condition will a stock be terminated on Emerging Stock Board？ |
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Ans︰
If any of the following occur：
（1）Becomes a TSE or GTSM listed stock
（2）Suspended for more than 3 months and no improvement
（3）No more recommending securities firm or the supervision agreement has been terminated
（4）Order to file bankruptcy by the court
（5）Order to cancel registration by commercial law
（5）Other conditions that meet the commercial law 251 or 271 or other reasons according to the supervision institutions |
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| Q3-1.What is the difference in trading method between emerging stock and listed stock? |
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Ans︰
Unlike the computerized matching, Emerging Stocks are traded by negotiation. It begins with the quotation by the recommending securities firms as a reference. Investors can entrust a broker to place their orders in the GTSM emerging stock electronic trading system or directly negotiate with the market makers if their order volume exceeds 100,000 shares.
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| Q3-2.Where can I find recommending securities firms' quotes? |
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Ans︰
You can find them in the GTSM web site, every securities firm, and/or from market data vendors' real time system. From the above sources, you can obtain all the bid & asking price, volume, name of recommending securities firms, and contact info. |
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| Q3-3.If I am interested in buying emerging stocks, how should I negotiate with the recommending securities firms? |
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Ans︰
After reviewing the quote from the recommending securities firm, if an investor is interested in trading, the following two ways can be used:
（1）Entrusts a broker: On be half of the investor, brokers may proceed to negotiate with market makers and settle the price according to the appointed price by the investor; but the designated trade orders automatically become undesignated after 20 minutes if the orders remain unmatched.
（2）Direct Negotiation: Negotiate with the market maker directly via phone or in person if their order volume is above 100,000 shares |
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| Q3-4.What is the spread of the recommending brokers? What's the legal ceiling of the spread currently? What's the purpose of the legal ceiling? |
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Ans︰
（1）The spread is the difference between the bid and offer prices.
（2）Recommending brokers are obliged to offer the information of bid and offer prices on a continuous basis during the trading hour for emerging stocks they advise. The bid-offer-spread should not exceed 7% at any time for any emerging stock.
（3）The purpose of the legal ceiling is to prevent excessive spread quoted by the recommending brokers, which may dampen liquidity and discourage investors' interest. |
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| Q3-5.If I am satisfied with one of the quote from a recommending securities firm, can he/she refuse to transact with me? |
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Ans︰
No. Once the recommending sercurities firm quotes a price, it is obligated to transact with investors accordingly. Therefore, once the investors' order price falls in the bid-offer range, the recommending securities firms must execute the transaction immediately. |
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| Q3-6.Where can I open an account to trade in Emerging Stock Market? |
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Ans︰
(1)Direct Negotiation (Outside the negotiation clicking system): Must open a GTSM account at the designated underwriter
(2)Entrusts a broker (Inside the negotiation clicking system): Open a GTSM account at any securities firm and through the broker, investors can negotiate with all the underwriters to trade in the Emerging Stock Market. |
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| Q3-7.If I already have a GTSM account, can I use it to trade in the Emerging Stock Market? |
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Ans︰
bsolutely! You will only need to sign a risk disclosure letter. |
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| Q3-8.Is the trading hour same as the other markets? |
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Ans︰
No, the trading hour is from 9am to 3pm, longer than the general markets. |
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| Q3-9.What is the minimum trading order? |
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Ans︰
The minimum is 1 share. |
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| Q3-10.Is there any rule on the fluctuation? |
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| Q3-11.What is the rule on trading tax? |
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Ans︰
Like the market of TSE and GTSM, trading tax will only be imposed when a security is sold and it is 3/1000 of the total transaction value. |
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| Q3-12.How much is the commission? |
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Ans︰
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Depends on the trading method：
（1） Direct negotiation: no charge
（2） Entrusts a broker：
1. 5/1000 upper-limit commission. The minimum charge is NT$50. |
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| Q3-13.What kind of real-time information can be obtained by investors during trading hours? |
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Ans︰
The following information can be found at GTSM's web site (www.gretai.org.tw), securities firms, and market data vendors：
（1）Best bid and asking prices from all market makers
（2）Info on the most recent executed trade (price, volume, and accumulated trading volume) |
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| Q3-14.What type of information can be obtained by investors after trading hours? |
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Ans︰
Investors can acquire information such as daily volume, high & low, and daily weighted average price from GTSM web site, securities firms, and/or market data vendors. |
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Q3-15.How do I obtain information on ex-right and ex-dividend stocks? Will GTSM provide the ex-dividend and ex-right prices? And will there be any limits on the fluctuations?
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Ans︰
GTSM will disclose the ex-right and ex-dividend stocks to the public and investors can also find them on the GTSM web site. Since Emerging Stock Board is based on negotiation, bid and asking prices vary from each underwriter and thus there is no central data collection for all the quotes. An alternative is that investors can reference quotes from market makers. GTSM does not disclose such information on emerging stocks and on the day of ex-right and ex-dividend, there is also no special limit on the fluctuation. |
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Q4-1.What is the process of payment and securities delivery on Emerging Stock purchase?
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Ans︰
In line with the TSE and other GTSM listed stocks, buyers must remit payment to designated bank account on T+1 for settlement. The buy-in stocks will be delivered to buyer's central depository account on T+2. |
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Q4-2.What is the process of securities delivery and payment on Emerging Stock selling?
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Ans︰
All sold Emerging Stocks but those traded directly with market makers must be cleared via Taiwan Securities Central Depository; TSCD's book-entry securities system for delivery. Different from the TSE and GTSM stocks, those traded in the emerging market must be deposited into TSCD two days prior to the trade date. Payment will be delivered to seller's bank account on T+2 by noon. However some stocks can be transacted on the delivery day if the stocks are officially proven to be authentic or the seller securities houses have earmarked guarantee deposit against flaw and counterfeit. |
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Q4-3.If investors need to receive the buy-in stocks or payments on an urgent matter, what can the investors do?
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Ans︰
Investors may ask market making brokerages for a special settlement through RTGS (Real Time Gross Settlement) in handling payment, delivery or both and vice versa. |
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Q4-4.If investors do not trade via the electronic system but with market makers directly, how should they make payments and deliver stocks?
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Ans︰
Investors and market makers can directly make payments and deliver the stocks in the market maker's counter and after the trade or they can do it in accordance with the TSCD regulations. |
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Q4-5.If I have physical Emerging Stock on hand, can I deliver the stocks to Taiwan Securities Central Depository (TSCD) in custody prior to trading Emerging Stock?
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Ans︰
Yes, you can deposit Emerging Stocks once this company gets permission of trading on GTSM. |
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Q4-6.How soon can the investors sell Emerging Stock after the initial purchase?
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Ans︰
Investors can sell Emerging Stock the following day after the trade date. It is
optional for traders to use RTGS (Real Time Gross Settlement) for special
settlement. |
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Q4-7.Can trades in Emerging Stock settled by offsetting with securities when investors buy and sell Emerging Stocks on the same day?
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Ans︰
This type of settlement can only be operated under the stocks that are traded through the same securities firm and on the same day. If trades are handled by different securities firms, the settlement should operate separately. For example, if John purchases Emerging Stocks with different brokers on the same day ： |
Investor |
Broker |
Buy/Sell |
Stock |
Value (NTD) |
Delivery |
John |
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