Newsletter
MECHANISMS FOR REGULATING TAIWAN'S DEPOSITORY RECEIPT MARKET
To ensure that underwriters help regulate supply and demand in the market, on 3 February 2010, the Taiwan Securities Association announced and implemented the Supply and Demand Regulation Mechanism for Underwriters of First Time Foreign Issuers of Taiwan Depository Receipts. This will require, under certain conditions, underwriters of first time foreign issuers of depository receipts to adjust supply and demand in the market from the listing date to the tenth trading day.
Pursuant to this new mechanism, if the price of the depository receipt continues to hit the price cap in the first two trading days following the listing date, the lead underwriter shall maintain market liquidity by ensuring that the daily trading volume reaches at least 50 round lots. If the highest daily price exceeds the underwriting price by 20%, the lead and co-underwriters shall sell 10% to 100% of their positions (whether acquired by own subscription or standby commitment). The actual percentage will be determined by the percentage by which the highest daily price exceeds the underwriting price. Lead and co-underwriters who fail to implement the mechanism are subject to the Regulations for Handling of Negligence by Underwriters.