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Taiwan Stock Exchange Corporation Operation Directions for the Allocation of Limits for Margin Purchases and Short Sales and for Sales of Borrowed Securities Permitted for Securities Trading  CH

Amended Date: 2015.04.08
1     Stipulated by competent authority according to Article 6 of "Standards Governing Eligibility of Securities for Margin Purchase and Short Sale", paragraph 2 of Article 10 of "Regulations Governing Borrowing or Lending Money in Connection with Securities Business by Securities Firms", and per 3 December, 2013 Order No. Financial-Supervisory-Securities-Trading-1020049612 and per 7 January , 2015 Order No. Financial-Supervisory-Securities-Investment -1030052647.
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2     In the event that the daily balance of margin purchases and margin trading of securities business related money lending or borrowing conducted by securities firms and settlement money performed by securities finance companies reach eighty percent of the ratio for suspending margin purchase set forth in Article 6 of the preceding standards (hereinafter referred to as the "allocation limit"), the Taiwan Stock Exchange Corporation (TWSE) will proceed to conduct the allocation on the next business day; when the daily balance of margin purchases and short sales for securities trading reaches eighty percent of the ratio set forth in the foregoing order (hereinafter referred to as the " allocation limit ") the TWSE will proceed to conduct the allocation on the next business day. The calculation methods for the allocations in the preceding paragraph are as follows:
  1. Margin purchases and money lent or borrowed relating to securities business and settlement money financing:
    1. Allocation for margin purchases
    2.  
      The total daily balance of the numbers of lots of each 
      security for margin purchase from securities firms and 
      securities finance companies 
      ─────────────────────  ×(allocation limit - daily balance)
      The daily balance of the number of lots of each  securities 
      for margin purchase from securities firms and securities 
      finance companies and  the total amount of daily balance 
      of the number of lots of collateral for money lent or borrowed 
      relating to securities business of each security from the 
      securities firm conducting  money lending  relating to securities
      business; and the daily balance of the number of lots of 
      collateral for each security of settlement money financing from 
      securities finance companies.
      
    3. The number of lots for margin purchases allocable to each credit institute :
      1. Where the allocation for margin purchases is sufficient to allocate one lot to each credit institute ( excluding the securities firm commencing to conduct business of margin purchases and short sales on the next business day ), allocate firstly one lot to each credit institute and the remaining number of lots :
      2.  
        The daily balance of the number of lots of each 
        securities for margin purchase from each securities 
        firm and securities finance company
         ───────────────────×  (allocation for margin purchase - the number of credit institutes) 
        The total daily balance of the numbers of lots of 
        each security for margin purchase conducted  by each 
        of  securities firms and securities finance companies
        
      3. Where the allocation for margin purchases is insufficient to allocate one lot to each credit institute( excluding the securities firm commencing to conduct business of margin purchases and short sales on the next business day ):
      4.  
        The daily balance of the number of lots of each 
        securities for margin purchase from each securities 
        firm and securities finance company
        ───────────────────×  allocation for margin purchase
        The total daily balance of the numbers of lots of 
        each security for margin purchase from each of 
        securities firms and securities finance companies
        
    4. Allocation for money lent or borrowed relating to securities business:
    5.  
      The total daily balance of numbers of lots of collateral
      for money lent or borrowed relating to securities business 
      of each security from the securities firm conducting 
      money lending  relating to securities business
      ─────────────────────× (allocation limit - daily balance)
      The daily balance of the number of lots of each securities
      for margin purchase from securities firms and securities
      finance companies; and  the total amount of daily balance 
      of the number of lots of collateral for money lent or 
      borrowed relating to securities business of each security 
      from the securities firm conducting  money lending  relating 
      to securities business; and the daily balance of the number 
      of lots of collateral for each security of settlement money 
      financing from securities finance companies.
      
    6. The number of lots of collateral for money lent or borrowed relating to securities business allocable to each credit institute :
    7. The daily balance of the numbers of lots of collateral 
      for money lent or borrowed relating to securities business
      of each security from the securities firm conducting
      money lending  relating to securities business
      ──────────────────────× allocation for money lent or borrowed relating to securities business
      The total daily balance of the numbers of lots of 
      collateral for money lent or borrowed relating to 
      securities business of each security from securities firms 
      conducting  money lending  relating to securities business
      
    8. Allocation for margin purchase settlement financing:
    9.  
      The total daily balance of the number of lots of 
      collateral for each security of settlement money 
      financing from each of securities finance companies.
       ─────────────────────×(allocation limit - daily balance)     
      The daily balance of the number of lots of each
      securities for margin purchase from securities firms 
      and securities finance companies and  the total amount 
      of daily balance of the number of lots of collateral for 
      money lent or borrowed relating to securities business 
      of each security from the securities firm conducting 
      money lending  relating to securities business; and the 
      daily balance of the number of lots of collateral for each 
      security of settlement money financing from securities finance companies.
      
    10. The number of lots of collateral for margin purchase settlement financing allocable to each credit institute :
    11.      
      The daily balance of the number of lots of collateral
      for each security settlement financing from
      each of the securities finance company.
      ─────────────────────× Allocation for margin purchase settlement financing 
      The total daily balance of the number of lots of collateral 
      for each security settlement financing from 
      each of securities finance companies.
      
  2. short sales and securities lending:
    1. Allocation for securities lending
    2.     
      The daily balance of sales of borrowed 
      securities
      ──────────────── ×(allocation limit - daily balance)
      The total daily balance of short sales and 
      sales of borrowed securities
      
      For the amount of allocation less than 1.5% of the listed stock, use 1.5% for calculation.
    3. Allocation of short sales
    4.  
      Daily balance of short sales
      ──────────────  × (allocation limit - daily balance)
      The total daily balance of short sales 
      and sales of borrowed securities
      
    5. The number of lots of short sales allocable to each credit institute :
      1. Where the allocation for margin purchases is sufficient to allocate one lot to each credit institute ( excluding the securities firm commencing to conduct business of margin purchases and short sales on the next business day ), allocate firstly one lot to each credit institute and the remaining number of lots :
      2.  
        The daily balance of the number of lots of each
        security for margin purchase from each securities 
        firm and securities finance company
         ─────────────────────× (allocation for margin purchase - the number of credit institutes) 
        The total daily balance of the numbers of lots of each 
        security for margin purchase from securities firms and 
        securities finance companies 
        
      3. Where the allocation for margin purchases is insufficient to allocate one lot to each credit institute( excluding the securities firm commencing to conduct business of margin purchases and short sales on the next business day ):
      4. The daily balance of the number of lots of each 
        security for margin purchase from each securities 
        firm and securities finance company
        ─────────────────────× (allocation for margin purchase )
        The total daily balance of the numbers of lots of each 
        security for margin purchase from securities firms 
        and securities finance companies 
        
  3. The allocation limit shall be calculated according to the following calculation method on the first day when securities firm commencing to conduct business of margin purchases and short sales and deducted from the account of the securities finance company:
  4. The daily allocation limit for the securities finance company
    ──────────────────────────
    The number of agent securities firms on the day before the first day securities firm commencing to conduct business of  margin purchases and short sales 
    
  5. Anything less than one trading unit after calculating the allocation limit in accordance with the preceding calculation method for allocation of margin purchase, short sales and securities lending shall not be counted and allocated.
  6. Securities firms conducting securities trading of margin purchase and short sale or securities finance companies under the circumstances of exceeding allocation limit set forth in point 4 which results in deduction, the deductible portion shall be included in the calculation and be reallocated to other securities finance companies and the securities firms.
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3     Securities firms conducting securities trading of margin purchase and short sale shall handle consignment trading within the allocation limit, in the event of exceeding the allocation limit and failing to fill out the consent form for settlement by cash and securities by the client, the exceeding part shall be reported as accounting errors.
    Under the circumstances set forth in the preceding Paragraph, the securities firm may, in addition to handle in accordance with "Directions for Reporting and Handling of Out-Trades and Account Number Corrections by Securities Brokers" or "Directions for Securities Firms Handling Changes to Trading Category", notify the securities firms to correct and improve within the time limit; and may report to the competent authorities where the violations are of a serious nature.
4     In the event that securities firms conducting securities trading of margin purchase and short sale or securities finance companies exceed the limit of allocation set forth in the Point 2, the TWSE would deduct the exceeding number of securities from the allocation of the securities on the second business day of the violation day. In case of insufficiency for deduction, TWSE shall deduct from the allocation limit of other securities, and give priority to the securities with lesser amount of allocation. In the event that the total amount of allocation for all the securities of the day is still insufficient for deduction, TWSE shall continue the deduction on the next business day and report to the competent authorities to deal with it.
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5     These Operation Directions shall take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.