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Taiwan Stock Exchange Corporation Specific Standards and Procedures for Determining Eligibility of Securities for Margin Purchase and Short Sale Transactions  CH

Amended Date: 2016.03.08
1     These Standards and Procedures are adopted pursuant to Article 2, paragraphs 5, 6, and 12 and Article 3, paragraph 2 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale.
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2     For the purposes of these Standards and Procedures, the following terms shall have the following meanings:
  1. Subject securities:
    1. Common shares that have been listed on the TWSE for 6 months and have a net worth per share of not less than par value. However, for shares issued by a TWSE primary listed company with no par value or a par value other than NT$10 per share, the shares shall have been listed on the TWSE for 6 months, with no accumulated deficit posted in the issuer's financial report.
    2. Taiwan depositary receipts that have been listed on the TWSE for 6 months, with no accumulated deficit posted in the issuer's financial report.
    3. Beneficial certificates not traded in foreign currency that have been listed on the TWSE for 6 months. However, the 6-month listing requirement does not apply to beneficial certificates of an exchange-traded fund ("ETF beneficial certificates"), nor to offshore ETF beneficial certificates, nor to futures ETF beneficial certificates.
  2. Review date: The review date is the date on which the exchange listing of a subject security reaches 6 full months. If it falls on a non-business day, it is moved back to the next business day.
  3. Net worth per share: Based on the balance sheet equity attributable to owners of the parent in the published and filed financial report, available as of the review date, for the most recent fiscal year.
  4. Accumulated deficit: With respect to shares issued by a TWSE primary listed company with no par value or a par value other than NT$10 per share, the accumulated deficit shall be based on the publicly disclosed and filed CPA-audited and attested annual financial report for the most recent fiscal year available as of the review date. With respect to Taiwan depositary receipts, the accumulated deficit shall be based on the CPA-audited and attested consolidated annual consolidated financial report or CPA-reviewed semi-annual financial report for the most recent period available as of the review date, prepared in compliance with the laws and regulations of the issuer's home country.
  5. Sampling period: The 90 business days preceding (and inclusive of) the review date constitute the sampling period, which is taken as the acquisition period for the data used in calculations.
  6. Sampled securities: TWSE listed common shares, Taiwan depositary receipts, and beneficial certificates that have not been placed under an altered trading method are the sampled securities, which serve as the basis for comparison with subject securities.
  7. Degree of price fluctuation: Refers to the average daily degree of price fluctuation (absolute value) as calculated during the sampling period for the subject securities, sampled securities, or securities of industry peers.
  8. Spread ratio: Refers to the ratio between: (a) the spread between the highest and lowest prices for the subject securities, sampled securities, or securities of industry peers, as calculated during the sampling period; and (b) the respective average prices thereof.
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3     Where a review of subject securities on the review date reveals none of the following circumstances, the Taiwan Stock Exchange Corporation (TWSE) shall publicly announce the securities as eligible for margin purchase and short sale:
  1. Where either one of the following descriptions applies to subject securities, the share price is too volatile:
    1. The degree of price fluctuation for the securities is equal to the average value for degree of price fluctuation for the sampled securities plus two or more standard deviations, and exceeds 150% of the average value for degree of price fluctuation for the securities of industry peers.
    2. The degree of price fluctuation for the securities is equal to the average value for degree of price fluctuation for the sampled securities plus two or more standard deviations, and exceeds 150% of the average value for degree of price fluctuation for the securities of industry peers.
    3. When the percentage of premium or discount calculated from the closing price of Taiwan depositary receipts and the closing price of the shares they represent on the exchange market of their home country meets any of the following conditions during the sampling period:
      1. When on the current day, the percentage of premium on a Taiwan depositary receipt announced through the Market Observation Post System (MOPS) for the previous business day is in excess of 50 percent, while the current day closing price is also the highest of the most recent 6 business days (inclusive of the current day), provided that if there is no closing price for the most recent 5 business days (excluding the current day), then the current day closing price must also be higher than the opening reference price.
      2. When on the current day, the percentage of discount on a Taiwan depositary receipt announced through the MOPS for the previous business day is in excess of 50 percent, while the current day closing price is also the lowest of the most recent 6 business days (inclusive of the current day), provided that if there is no closing price for the most recent 5 business days (excluding the current day), then the current day closing price must also be lower than the opening reference price.
    Exceptions:
    1. During the period for calculating the standards for subject securities prescribed in item 1 or 2 of this subparagraph, or when making for the subject securities the comparison based on the closing prices for the most recent 6 business days (inclusive of the current day) by the standards prescribed in item 3 of this subparagraph, if price fluctuation occurs due to non trade-related factors (such as ex-rights or ex-dividend factors), those factors in the fluctuation shall be excluded from the calculation.
    2. During the period of making the comparison between the subject securities and securities of industry peers pursuant to item 1 or 2 of this subparagraph, if there are no other TWSE listed securities of industry peers, comparison may be made with GTSM listed securities of industry peers; if there are no GTSM listed securities of industry peers, the requirements for comparison with securities of industry peers shall not apply. Additionally, the requirements for comparison with securities of industry peers also shall not apply if the subject securities do not belong to any particular industry.
  2. Where either one of the following descriptions applies to subject securities during the sampling period, trading volume is excessively abnormal.
    1. The turnover rate for the securities is 10 or more times the average turnover rate for the sampled securities.
    2. The turnover rate for the securities is less than 10 percent of the average turnover rate for the sampled securities, and the total figure for trading volume is less than 3,000 round lots of shares or 3,000 trading units.
  3. Where either one of the following descriptions applies to subject securities, equity ownership or beneficial ownership is overly concentrated:
    1. Shares: Shareholders owning 1,000 to 50,000 shares are fewer than 500 in number. Taiwan depositary receipts: Holders of Taiwan depositary receipts owning 1,000 to 50,000 units are fewer than 500 in number. Beneficial certificates: Persons owning not more than 100,000 beneficial units are fewer than 1,000 in number.
    2. Shares: The holdings of registered shares by all directors, supervisors, managerial officers, and shareholders with a stake of more than 10 percent account for a combined total of 75 percent or more of the company's listed shares when the company's paid-in capital is NT$500 million or less; or the aforementioned holdings account for 80 percent or more when the paid-in capital is greater than NT$500 million and less than NT$5 billion; or the aforementioned holdings account for 85 percent or more when the paid-in capital is greater than NT$5 billion. Taiwan depositary receipts: The holdings of persons owning more than 5 percent of the company's total issued Taiwan depositary receipt units account in combination for more than 80 percent of total issued units as recorded in the register of Taiwan depositary receipt holders. Beneficial certificates: The beneficial units recorded in the register of beneficial owners under the names of beneficial owners holding more than 5 percent of the total dollar amount of a fund account in combination for greater than 80 percent of the total dollar amount of the fund. For shares issued by a TWSE primary listed company with no par value or a par value other than NT$10 per share, however, overconcentration is holdings of registered shares by all directors, supervisors, managerial officers, and shareholders with a stake of more than 10 percent that account for a combined total of 75 percent or more of the company's listed shares when the company's total number of issued shares is 50 million or less; or when the aforementioned holdings account for 80 percent or more when the total number of issued shares is greater than 50 million and less than 500 million; or the aforementioned holdings account for 85 percent or more when the total number of issued shares is greater than 500 million.
  4. Other circumstances where it may be deemed that share price is too volatile, or trading volume is excessively abnormal, or equity ownership of beneficial ownership is overly concentrated.
    The provisions of the preceding paragraph do not apply to ETF beneficial certificates, nor to offshore ETF beneficial certificates, nor to futures ETF beneficial certificates.
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4     To review for the existence of circumstances constituting overly concentrated equity ownership or beneficial ownership as set out in paragraph 3 of the preceding article, prior to the review date the TWSE will first ask the listed company, foreign issuer, or securities investment trust enterprise to furnish equity ownership and beneficial ownership data for the exchange date, to serve as the basis for review.
5     Where it is found upon review that equity ownership or beneficial ownership of subject securities is overly concentrated, the TWSE will wait for the listed company, foreign issuer, or securities investment trust enterprise to furnish the TWSE with records indicating that equity ownership or beneficial ownership is no longer overly concentrated, then conduct another review.
6     Where it is found upon review that share price is too volatile, or trading volume is excessively abnormal, the TWSE will regularly conduct further reviews on the last business day of each month.
7     Securities that are to be listed on the TWSE shall, unless equity ownership is overly concentrated, be announced as eligible for margin purchase and short sale from the date of the exchange listing if they meet the descriptions given below (standards and procedures for making determinations regarding the subject matter of this paragraph shall be subject to the provisions of Point 3, paragraph 1, subparagraphs 3 and 4, as well as the provisions of Point 5):
  1. The securities to be listed on the TWSE are GTSM listed shares, eligible for margin purchase and short sale, that the issuer is applying to switch to an exchange listing.
  2. The securities to be listed on the TWSE are shares, eligible for margin purchase and short sale, issued by a TWSE listed or GTSM listed company that is to be converted in accordance with the Financial Holding Company Act into a financial holding company.
  3. The securities to be listed on the TWSE are shares, eligible for margin purchase and short sale, issued by a TWSE listed or GTSM listed company that is to be converted into an investment holding company through a 100 percent share conversion in accordance with the Business Mergers and Acquisitions Act.
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8     These Standards and Procedures, and any subsequent amendments hereto, shall be implemented upon submission to and ratification by the competent authority.