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Home > Products & Services > Trading System >Trading Mechanism  
 
 Trading Mechanism
 
New Stock
The trading system of the Exchange operates in a consolidated limit order book environment where only limit orders are accepted. During the regular trading session from 9:00 a.m. to 1:30 p.m., buy and sell orders can interact to determine the executed price subject to applicable auto matching rules. Orders can be entered half an hour before the trading session starts at 9:00 a.m. Orders are in standard unit or multiples of standard units.

In the after-hour fixed price trading session, the system accepts orders from 2:00 p.m. to 2:30 p.m. and then matches buy and sell orders at regular session’s closing prices.

In order to maintain a stable stock market, the daily price fluctuation limits of stocks, beneficiary certificates, Taiwan Depository Receipts (TDRs) and convertible bonds are set at 10% of the closing price of the preceding business day. For bonds, the limits are set at 5%. Day trade is allowed only for investors with margin accounts.

• Fully Automated Securities Trading( "FAST" )
• Matching system
• Continuous Trading for Warrants
• System of Suspending and Resuming Trading of TDR
• Real-time trading information disclosure
• Information disclosure before market opening and closing Summary
• Trading Units
• Daily price fluctuation limit
• Minimum Tick Size
• Dual-Currency Trading ETFs

• Fully Automated Securities Trading( "FAST" )

Effective May 3, 1993, all securities listed on the Exchange are traded through Fully Automated Securities Trading ( "FAST" ). Orders are executed in strict price and time priority. An order entered into the system at an earlier time must be executed in full before an order at the same price entered at a later time is executed.

• Matching system

All securities listed on the Exchange are traded through Fully Automated Securities Trading (FAST). Orders are executed in strict price and time priority. An order entered into the system at an earlier time must be executed in full before an order at the same price entered at a later time is executed.

To better reflect the interaction of market demand and supply, every matched price is allowed to fall anywhere in the price limit of the trading day. However, in order to limit extreme price fluctuation, intra-day volatility interruption is in place. Whenever the trading system detects that the potential execution price of a specific stock will fall out of a specified range (+/-3.5%) of the last traded price, matching for that stock is postponed for two to three minutes. Market participants are informed of this situation and may modify their existing orders or enter new orders to cope with the order imbalance of that security. However, volatility interruption is not applicable during the opening session and the last 10 minutes of regular trading hours (i.e. 1:20 p.m. to 1:30 p.m.). Those stocks whose reference price for the opening call auction is below 1 NT$ or whose matching is restricted to every 5、10、20、25、45 or 60 minutes are not subject to intra-day volatility interruption.

Given that the closing price of securities is widely used by market participants as a benchmark for portfolio valuation as well as index calculation, the system accumulates orders for 5 minutes (from 1:25 p.m. to 1:30 p.m.) before the closing call auction.

• Continuous Trading for Warrants

I. Matching
Orders for warrants are executed either through call auction or through continuous trading.

II. Applicable Time
(1) Orders are executed on a continuous basis during intraday regular trading sessions.
(2) Orders are still matched by call auction at the opening and closing of the regular trading session.
(3) Warrants are subject to trading by call auction as a result of dispositional measures or full cash settlement requirement during regular trading sessions, following the prescribed cycle time frame (e.g. every 5, 10, or 30 minutes).

III. Principles of Continuous Trading
(1) Principles for Determining Execution Prices
In continuous trading, buy and sell orders are executed on an order-by-order basis. The execution price is determined according to the following principles:
1. If a bid quote is placed at a price higher than or equal to the lowest price of unexecuted ask quotes, the bid quote will be executed against one or more of these ask quotes, in ascending order of ask price, until the bid quote is completely satisfied, or until the price of the bid quote is lower than the price of unexecuted ask quotes.
Please see Figure 1.1 for an illustrative example.
Figure 1.1

2. If an ask quote is placed at a price lower than or equal to the highest price of unexecuted bid quotes, the ask quote will be executed against one or more of these bid quotes, in descending order of bid price, until the ask quote is completely satisfied, or until price of the ask quote is higher than the prices of unexecuted bid quotes.
Please see Figure 1.2 for an illustrative example.
Figure 1.2

(2) Principles for order execution priority
Orders is matched and executed sequentially based on the principles of price priority and time priority.
1. Principle of price priority: Bid quotes with higher prices take precedence over those with lower prices, and ask quotes with lower prices take precedence over those with higher prices. If two or more quotes are placed at the same price, order execution will be determined according to the principle of time priority.
2. Principle of time priority: Quotes placed before market opening take precedence over those placed after market opening. Quotes placed before market opening are sequenced randomly by computer, while those placed after market opening is determined by time they are placed.

IV. Intra-day Volatility Interruption
To allow the trading prices of warrants to move in line with the prices of underlyings, no intra-day volatility interruption will be taken for warrants.

V. Disclosure of information on the prices and volumes of executed and unexecuted bid and ask quotes
(1) The execution prices and volumes are disclosed in real time when orders are matched. A further disclosure is made after the final matching, indicating the prices and volumes of the five highest unexecuted bid quotes and five lowest unexecuted ask quotes.
(2) Take an example from the matching status given in Figure 1.1. After the buy order is executed, three separate, real-time disclosures are made on the execution prices and volumes, namely NT$103.00/10 lots for the first matching, NT$103.50/20 lots for the second matching, and NT$104.00/20 lots for the third matching. At the time of the third disclosure, a further disclosure is made simultaneously, disclosing the prices and volumes of five best unexecuted bid and ask quotes, which in this case are, respectively, NT$102.50/10 lots, NT$102.00/20 lots, NT$101.50/30 lots, and NT$101.00/40 lots for unexecuted bid quotes, and NT$104.00/10 lots, NT$104.50/40 lots, and NT$105.00/50 lots for unexecuted ask quotes. The information disclosure is shown in Figure 1.3.
Figure 1.3

(3) Take another example from the matching status given in Figure 1.2. After the sell order is executed, three separate, real-time disclosures are made on the execution prices and volumes, namely NT$103.00/10 lots for the first matching, NT$102.50/20 lots for the second matching, and NT$102.00/20 lots for the third matching. At the time of the third disclosure, a further disclosure is made simultaneously, disclosing the prices and volumes of five best unexecuted bid and ask quotes, which in this case are, respectively, NT$102.00/10 lots, NT$101.50/40 lots, NT$101.00/50 lots for unexecuted bid quotes, and NT$103.50/10 lots, NT$104.00/20 lots, NT$104.50/30 lots, NT$105.00/40 lots for unexecuted ask quotes. The disclosure information is shown in Figure 1.4.
Figure 1.4


VI. The system of continuous trading for warrants was implemented on 28 June 2010.
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• System of Suspending and Resuming Trading of TDR

1. Applicable Securities
Taiwan Depositary Receipts (TDRs) and call (put) warrants of which the underlying securities are TDRs and foreign securities.

2. Applicable Trading: the following types of trading could be suspended and resumed:
(1) Regular trading.
(2) Other types of trading: block trading, after-market fixed-price trading, odd-lot trading, auction trading, and ordinary reserve auctions.
(3) Securities borrowing and lending trading: newly borrowed securities and provision of collateral.

3. Time to suspend/resume trading
(1) Trading Suspension
A trading suspension could be implemented anytime before 5:00 p.m. Given that when a trading suspension is in effect, in addition to regular trading (trading from 8:30 a.m. to 1:30 p.m.), other types of trading are also suspended, the time period that a trading suspension may be implemented would accommodate the trading session for each different type of trading. Among all types of trading, the longest trading session is that for block trading (from 8:00a.m. to 8:30 a.m. and from 9:00 a.m. to 5:00 p.m.). As such, a suspension of trading could be implemented anytime before 5:00 p.m.
For example, if the trading session is suspended at 9:30 a.m., regular trading and block trading are suspended. If the trading session is suspended at 2:10 p.m., block trading, odd-lot trading and after-market fixed-price trading are suspended.
(2) Trading Resumption
a. The resumption of trading could be implemented by 12:50 p.m.
If the trading of the underlying securities is suspended due to pending announcement of sensitive stock price information, the trading could be resumed by 12:50 p.m., when the reason for trading suspension no longer exists due to full announcement of such information.
b. No trading may be resumed after 12:50 p.m. even if the reason for suspending trading no longer exists.
This restriction is mainly to avoid not having sufficient time to accept investors' orders again after regular trading is resumed.
c. Special management
If the TDRs are placed in disposition securities or subject to an altered trading method and periodic trading, the first matching following resumption of trading will be done at the matching time originally set.
An example of altered trading method and periodic trading: If the trading session is resumed at 9:50 a.m., although 30 minutes after the investors placed orders is 10:20 a.m., as the securities should be matched at the matching time originally set (matching time is every thirty minutes starting from 9:00 a.m., which is 9:30 a.m., 10:00 a.m. 10:30 a.m., etc), the first matching time would actually be 10:30 a.m..

4. Method for Suspending Trading
(1) The time of trading suspension shall be as announced by the TWSE.
(2) After trading suspension, no orders may be accepted and all matching shall cease in all of the abovementioned types of trading.
(3) Unexecuted orders placed by a securities firm before suspension of trading are effective on the date they are placed. After the trading suspension, the unexecuted orders may be cancelled or the volume of the unexecuted orders may be reduced, and new orders may not be placed.

5. Method for Resuming Trading
The time of trading resumption shall be as announced by the TWSE.
(1) Regular Trading
Upon the resumption of trading, the TWSE will first accept orders entered by securities firms. The first matching will be conducted 30 minutes thereafter through call auction. Call (put) warrants will be matched by continuous trading after the call auction.

(2) Other Types of Trading and Borrowing of Securities
Following resumption of trading, orders may be entered by securities firms and matched in accordance with the original rules. For example, block trade is resumed at 11:30 a.m. on the date of the order, the order will be accepted and matched immediately.

6. Auction Reference Price at Market Opening
The auction reference price at market opening of TDRs and call (put) warrants on the business day after the suspension of trading shall be subject to Paragraph 2, Article 58-3 of the Operating Rules for the TWSE. When trading is suspended during regular trading hours and has not been resumed, if there is no trade price prior to the trading suspension, the auction reference price at market opening on the following business day will be: (1) the highest buy order's price, if on the day when trading is suspended, the highest buy order's price at the close of market was higher than the auction reference price at market opening that day; (2) the lowest sell order's price, if on the day when trading is suspended, the lowest sell order's price at the close of market was lower than the auction reference price at market opening that day; or (3) the auction reference price at market opening of the following business day, if neither (1) nor (2) applies.

7. Information Disclosure
(1) Information
a. Information regarding suspension/resumption of trading
b. Including the security code & time of the securities whose trading was suspended/resumed
(2) Time of Information Disclosure
a. Information regarding suspension of trading will be announced immediately after the trading is suspended.
b. Information about the resumption of trading will be announced 30 minutes before the trading is resumed.

(3) Where to obtain the Latest Information
a. Market Observation Post System(http://mops.twse.com.tw/
When an issuer of the underlying shares of TDRs or an issuer of calls (puts) warrants with foreign securities (such as red chip stocks) as the target shares applies to the TWSE for suspension or resumption of trading, the issuer will announce such information on the Market Observation Post System simultaneously.
b. Market Information System(http://mis.twse.com.tw/stock/index.jsp?lang=en_us
Messages regarding suspended or resumed trading will be immediately published on the Market Information System by the TWSE.
c. Information Vendors' Systems
TWSE will sends messages regarding suspended or resumed trading to information vendors in real time so that such messages can be forwarded to the information vendors' clients. However, how the messages are presented may vary depending on the layouts designed by each vendor.
d. Securities Firms
TWSE will also send messages with regard to suspended or resumed trading to the securities firms in real time and investors can obtain such information by contacting the securities firms.
(4) Historical Trading Information Query
a. Notes of Suspended Trading on Daily Quotes
http://www.twse.com.tw/en/
TWSE Web Page/Market Info/Historical Trading Info/Daily Quotes
b. Details of Suspended and Resumed Trading
http://www.twse.com.tw/en/
TWSE Web Page/Market Info/Historical Trading Info/Data/Trading Halt of Securities

8. Miscellaneous
(1) If securities firms or securities finance enterprises seek to impose sanctions on the short sellers who did not cover before the final recall date on the next trading day, the securities firms or securities finance enterprises may put the securities up for reverse auctions if they had been suspended.
(2) A securities firm may not lend suspended securities to its clients. If suspended securities had been received as collateral, a securities firm should evaluate the market liquidity and the risk profile of the suspended securities and should ask the securities borrower to replace the collateral if necessary.
(3) Securities firms that engage in money lending in connection with securities business may not extend credit with the securities still on suspension at 11 a.m. on the second business day following the day the securities were bought.

9. Notes
Given that order accepted but not executed before a trading suspension are considered valid, the investors may cancel or reduce volume of orders after the trading is suspended and if the trading is resumed on the same day it was suspended, the original and the new orders will be matched by call auction 30 minutes after the trading is resumed.
Messages regarding trading suspension will be disclosed on a real time basis, while messages regarding trading resumption will be disclosed 30 minutes prior to the actual resumption of trading. The investors shall closely monitor the trading status of the securities that it intends to order to buy or to sell and adjust the orders timely.

• Real-time trading information disclosure

The volume of unexecuted orders of 5 best bids and ask are disclosed on a real-time basis. This allows market participants to make an informed judgment when placing orders. This information can be accessed at: http://mis.twse.com.tw/stock/index.jsp?lang=en_us

• Information disclosure before market opening and closing Summary

Starting on June 29th, 2015, Taiwan Stock Exchange (hereinafter TWSE) and Taipei Exchange (hereinafter TPEX) will disclose simulated transaction prices, simulated trading volumes, simulated best five bid/ask prices, and simulated bid/ask volumes for investors’ reference in making orders before market opening (08:30~09:00) and during the last five minutes before market closing (13:25-13:30).
According to the current system in Taiwan, orders are matched approximately every five seconds during the current intraday call auction. The prices and volumes of trading and the simulated best five bid/ask prices and volumes from order-matching are also disclosed for investors' reference. Orders made preopening (08:30-09:00) are not matched, only accepted, and there is no information disclosure during this period. Starting on February 20th, 2012, for orders made during the last five minutes before market closing (13:25-13:30), the highest bid price and the lowest ask price of the order-matching simulation have been provided, and in event of extremely volatile price changes, a corresponding measure of temporary suspension from closing on the last minute has been implemented.
Starting on June 29th, 2015, an intraday volatility interruption system similar to that applied before market closing will be applied before market opening. If in the last 1 minute before market opening (08:59-09:00), there is a volatile change of a securities reference price that reaches a specific rate simulated by the order-matching system, market opening will be temporarily suspended 2 minutes for those individual stocks.
During suspension, investors’ new orders, cancellations and revision requests will continue to be accepted and information of simulated transaction prices, simulated trading volumes, and simulated best five reported bid/ask prices and volumes will continually be disclosed to provide investors with an opportunity to consider adding, cancelling or altering an order of a stock with high price volatility before market opening.
For more detail information, please see the attachment.

• Trading Units

Orders may be in one Trading Units or multiples Trading Units as shown in the following tables. Orders below 1,000 shares are considered as odd-lot orders.
Types of securities Trading units
1. stocks, a primary listing of a foreign stock, certificate of payment or document of title to new shares, certificate of entitlement to new shares and special shares with call warrants. 1,000 shares
2. Stock Warrant, Securities Investment Trust Funds closed-end beneficiary certificate, REITs, depository receipt, ETF comprising only domestic securities, ETF comprising foreign securities, Futures ETF, Leveraged or Inverse ETF/company warran 1,000 units
3. a secondary listing of a foreign stock, offshore ETF Not limited for 1000 shares(units)
4. Convertible Bond, Central Registered Government Bond, Corporate Bond, Corporate Bond with Warrant par value of NT$ 100,000.


• Daily price fluctuation limit

Price variation limit is increased to 10% on June 1st, 2015, and account collateral maintenance ratio of margin trading has been adjusted to 130% since May 4th, 2015.
For more detail information, please see the attachment.
Types of securities Price limit
Stocks/ Foreign Stock primary listing / Securities Investment Trust Fund Closed-end Beneficiary Certificates/REITs/TDRs /ETF comprising only domestic securities/ Futures ETF / Certificate of Entitlement to New Shares/ Certificate of Payment of Shares /Convertible Bonds 10 percent above and below the auction reference price at market opening for the given day.
For a Leveraged or Inverse ETF of which the component securities of the underlying index are all domestic securities The relevant daily price fluctuation limit for the beneficial certificates is 10 percent multiplied by the multiple of the fund.
Warrants
1.  Limits on call (put) warrants for which the underlying is a domestic single stock or an exchange-traded securities investment trust fund announced by the TWSE shall be calculated as follows:
(1) For call warrants
Limit-up price = Auction reference price at market opening for the given day + (Limit-up price of the underlying security for the given day –Auction reference price at market opening for the underlying security for the given day) × Exercise ratio
Limit-down price = Auction reference price at market opening for the given day - (Auction reference price at market opening for the underlying security for the given day - Limit-down price of the underlying security for the given day) × Exercise ratio
(2) For put warrants
Limit-up price = Auction reference price at market opening for the given day + (Auction reference price at market opening for the underlying security for the given day – Limit-down price of the underlying security for the given day) × Exercise ratio
Limit-down price = Auction reference price at market opening for the given day – (Limit-up price of the underlying security for the given day – Auction reference price at market opening for the underlying security for the given day) × Exercise ratio
2.  Fluctuation limits on call (put) basket warrants shall be calculated for each underlying security within the basket using the following formulas: (1) (Limit-up price of each underlying security in the basket for the given day –Auction reference price at market opening for each underlying security for the given day) × Sum of exercise ratios for each underlying security in the basket; and (2) (Auction reference price at market opening for each underlying security for the given day – Limit-down price of each underlying security for the given day) × Sum of the exercise ratios for each underlying security in the basket. The larger of these two figures shall be plugged into the formulas in the preceding sub-paragraph to calculate the daily fluctuation limits.
3.  Limits on index call (put) warrants for which the underlying is an index as announced by the TWSE shall be calculated using one of the following two formulas:
(1) Limit-up price for call (put) warrants = Auction reference price at market opening for the given day + (Closing index of the underlying index on the previous day × corresponding monetary value per index point × Exercise ratio × 10%).
(2) Limit-down price for call (put) warrants =Auction reference price at market opening for the given day - (Closing index of the underlying index on the previous day × corresponding monetary value per index point × Exercise ratio × 10%).
4.  No price fluctuation limit is imposed on call (put) warrants for which the underlying is an exchange-traded fund with foreign component securities, or an offshore exchange-traded fund, or a foreign security, or a foreign index.
Preferred Shares with Warrants Limit-up price = Auction reference price at market opening for the given day *(1+10%) + (Limit-up price of the underlying security for the given day –Auction reference price at market opening for the underlying security for the given day) × Exercise ratio
Limit-down price = Auction reference price at market opening for the given day *(1-10%)- (Auction reference price at market opening for the underlying security for the given day - Limit-down price of the underlying security for the given day) × Exercise ratio
Corporate Bonds with Warrants Limit-up price = Auction reference price at market opening for the given day *(1+5%) + (Limit-up price of the underlying security for the given day –Auction reference price at market opening for the underlying security for the given day) × Exercise ratio
Limit-down price = Auction reference price at market opening for the given day *(1-5%)- (Auction reference price at market opening for the underlying security for the given day - Limit-down price of the underlying security for the given day) × Exercise ratio
Company Warrants Limit-up price = Auction reference price at market opening for the given day + (Limit-up price of the underlying security for the given day –Auction reference price at market opening for the underlying security for the given day) × Exercise ratio
Limit-down price = Auction reference price at market opening for the given day - (Auction reference price at market opening for the underlying security for the given day - Limit-down price of the underlying security for the given day) × Exercise ratio
Corporate Bonds 5 percent above and below the auction reference price at market opening for the given day.
Government Bonds/Foreign Bonds/ Foreign Stocks secondary listing/ newly listed common stocks on the first 5 days/ETF comprising foreign securities/offshore ETF / Leveraged or Inverse ETF of which the component securities of the underlying index contain one or more foreign securities No price fluctuation limit.


• Minimum Tick Size

Price Range *Equity Product Stock Warrant & company warrant Convertible Bond & Corporate Bond with Warrant ETF comprising only domestic securities, ETF comprising foreign securities, futures ETF, leveraged or inverse ETF, offshore ETF & REITs Corporate Bond Foreign Bond Central Registered Government Bond
0.01<=P<5 0.01 0.01 0.05 0.01 0.05 0.01
(** foreign currency)
0.01
5<=P<10 0.05
10<=P<50 0.05 0.10
50<=P<100 0.10 0.50 0.05
100<=P<150 0.50 1.00
150<=P<500 1.00
500<=P<1000 1.00 5.00
1000 and above 5.00 5.00
The tick increment of price quotes for block trades is 0.01.

*Equity Products include stocks, certificate of entitlement to new shares, securities investment trust funds closed-end beneficiary certificate, depository receipt, foreign stocks, certificate of payment or document of title to new shares, and special shares with call warrants.
**Ticks for foreign bonds are determined by foreign currencies.