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Article 55
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If, after a securities firm has issued a margin call demanding additional deposit to cover a margin deficiency in accordance with paragraph 1 of the preceding article, the customer fails to make the additional deposit, or makes deposit covering only part of it, within two business days from receipt of the margin call, unless agreed by both parties otherwise, the securities firm shall take the following measures:
- If the overall collateral maintenance ratio of the customer's margin account still falls below the required level on the given day, the securities firm shall dispose of the collateral by the mutatis mutandis application of Article 81, paragraph 3, starting from the next business day.
- If the overall collateral maintenance ratio of the customer's margin account is restored to 130 percent or higher on the given day, the securities firm may refrain for the time being from disposing of the collateral; provided that if the ratio again falls below the required level on any subsequent business day, and if the customer fails to make additional deposit on its own initiative to cover the deficiency that same afternoon, it shall dispose of the collateral by the mutatis mutandis application of Article 81, paragraph 3, starting from the next business day.
- If prior to disposal of collateral pursuant to the provisions of the preceding subparagraph, the customer makes successive deposits sufficient to cover the deficiency stated in the margin call, the securities firm shall expunge the record of the margin call.
- If the overall collateral maintenance ratio of the customer's margin account is restored to 166 percent or higher, the securities firm shall expunge the record of the margin call.
The collateral disposed of under the preceding paragraph shall be the collateral for a given margin purchase or short sale in the customer's margin account for which a margin call has been issued demanding additional deposit of collateral to meet the collateral maintenance ratio. Any surplus amount after the disposal shall be returned. If the disposal proceeds are insufficient to satisfy the obligation, or if, for said collateral for margin purchases and/or short sales that is disposed of, brokerage trading orders have been placed at auction reference price at market opening of the current trading session or at basis price for the opening of trading, ± 10 percent, before market opening for six consecutive days (brokerage trading orders may be placed at market price instead during intraday trading hours other than a given period before market opening and after close of market), and the trades thus cannot be fully executed, the deficiency shall be offset by other funds in the margin account. If there is still a deficiency remaining after such offsetting, the securities firm shall request the customer to make up the remaining deficiency on the next business day.
When a securities firm disposes of the collateral for margin purchases and/or short sales in customer margin accounts where a margin call has been issued demanding additional deposit of collateral to meet the collateral maintenance ratio, and where the customers concerned have failed to make the additional deposit within the specified time limit, the securities firm may take the newly issued rights shares or the stock of the assignee company of the demerger of those customers that are in amounts of less than one trading unit and combine them into trading units for the purpose of disposal.
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Article 60
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If any of the following circumstances applies to any securities deposited or other merchandise by a customer to offset against its margin requirements, the securities firm shall deduct the value of such securities or other merchandise when calculating the collateral maintenance ratio under Article 53, and shall promptly notify the customer to replace such securities within three business days from receipt of the notice with cash of equivalent value or other securities eligible for use as additional collateral in offsetting against margin requirements:
- there is any defect in the rights or any other legal dispute.
- the provisions of Article 57 are not complied with.
If any of the following circumstances applies to any securities deposited or other merchandise by a customer to offset against its margin requirements, upon notice by the securities firm, a customer shall replace the securities with equivalent cash or other securities or merchandise eligible for margin requirements within the following period:
- TWSE or TPEx listed securities, book-entry central government bearer bonds, local government bonds, corporate bonds, financial bonds, gold that is registered for trading over the counter: Upon the approval and public announcement by TWSE or TPEx of the termination of listing on the TWSE or TPEx, a securities firm shall give notice to a customer requesting it to make replacement 10 business days prior to the termination of listing. However, the aforesaid does not apply if (1) the proviso of Article 35-2 applies to the listed securities and (2) an open-end type fund beneficiary certificate for trading over the counter.
- Book-entry central government bearer bonds, local government bonds, corporate bonds, financial bonds: 10 business days prior to the date of partial redemption payment.
- For merger of an open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate: 10 business days prior to the termination of the trust contract or the expiration date of the extension period. However, if the surviving open-end type securities investment trust fund after merger is qualified under Article 57 requirements, the aforesaid is not applicable.
In the event of suspension or halting of trading of any securities deposited by a customer to offset against its margin requirements, no replacement is required.
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Article 62
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A customer giving an order to sell stock to settle (repay) a margin purchase or to buy stock to settle (repay) a short sale shall fill out an order ticket marked RETURN OF MONEY or RETURN OF STOCK, as the case may be; the securities firm receiving the order shall first check and verify that the type and quantity of shares under the settlement trade correspond to those on record for the original margin purchase or short sale before accepting the sell or buy order.
Upon execution of the settlement trade under the preceding paragraph, the securities firm shall prepare a trade report marked RETURN OF MONEY or RETURN OF STOCK, as the case may be, and have it signed/sealed by the customer.
If the execution of the settlement trade specified in the customer's order under paragraph 1 fails to fully satisfy the customer's obligation, the securities firm shall notify the customer to settle the remaining obligation by the second business day after the trade date, or directly use the money in the customer's margin account to offset against the remaining obligation.
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Article 76
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Securities eligible for margin purchases and short sales shall be suspended from being sold short for four days commencing from the sixth business day prior to such book closure; if a short sale has already been made, it shall be covered and closed out by the sixth business day (inclusive) prior to the book closure of the issuing company; where the security has been lent, the securities firm may request early repayment and shall reclaim the security before the last day for assignment (inclusive). A customer applying to settle a short sale with spot securities which are borrowed from the same securities firm through securities lending business as the source of securities shall file its application no later than the seventh business day (inclusive) prior to book closure; the application may be rejected where the securities firm has no source of securities. Provided, this shall not apply where the issuing company closes its books for a reason as follows:
- convening of a special shareholders' meeting.
- a reason that will not affect the exercise of shareholders' rights.
Where a business day under the preceding paragraph is a trading day, but the commencement date of book closure of the issuing company is scheduled to fall on a date from (and inclusive of) the second settlement day after the last trading day before the Lunar New Year Holidays to (and inclusive of) the second trading day following the Lunar New Year Holidays, the following provisions shall apply.
- When the commencement date of book closure is scheduled to fall on the second settlement day after the last trading day before the Lunar New Year Holidays, then the first settlement day after the last trading day is included in the calculation of "business days."
- When the commencement date of book closure is scheduled to fall during the Lunar New Year Holidays or on the first trading day following the Lunar New Year Holidays, then the two settlement days after the last trading day are both included in the calculation of "business days."
- When the commencement date of book closure is scheduled to fall on a weekend or other regular holiday after the first trading day following, or on the second trading day following, the Lunar New Year Holidays, then the first settlement day after the last trading day is included in the calculation of "business days."
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Article 78
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When the TWSE or TPEx has ratified and publicly announced the delisting from the stock exchange or termination of TPEx trading of a collateral eligible for margin purchase and short sale transactions, a securities firm shall request customers to cover and close out any margin purchases or short sales of such collateral by repaying the margin loans or returning the borrowed securities by the tenth business day before the delisting or the termination of TPEx trading. However, these provisions shall not apply under any of the following circumstances:
- The issuing company has applied for conversion of its TPEx listed securities to TWSE listed securities.
- The securities of a TWSE or TPEx listed company are delisted due to the company's merger, and the surviving company uses the securities which are eligible for margin purchase and short sale transactions for payment of all or part of the consideration to shareholders of the non-surviving company.
- The securities of a TWSE or TPEx listed company are delisted due to a share conversion, and the shares after conversion are still eligible for margin purchase and short sale transactions.
If a customer fails to cover and close out any margin purchase or short sale by repaying the margin loan or returning the borrowed security within the deadline, unless agreed by both parties otherwise, the securities firm shall dispose of said collateral on the following business day. Any surplus amount after the disposal shall be returned. If the disposal proceeds are insufficient to satisfy the obligation; or if, for said collateral for margin purchases and/or short sales that is disposed of, brokerage trading orders have been placed at auction reference price at market opening of the current trading session or at basis price for the opening of trading, ± 10 percent, before market opening for six consecutive days (brokerage trading orders may be placed at market price instead during intraday trading hours other than a given period before market opening and after close of market), and the trades thus cannot be fully executed; or if the collateral cannot be disposed of on account of a suspension of trading; or if, after reverse auction is conducted in respect of the collateral in accordance with Article 81, paragraph 5, the proceeds do not sufficiently cover the obligation, then the deficiency shall be offset by other funds in the margin account. If there is still a deficiency remaining after such offsetting, the securities firm shall request the customer to make up the remaining deficiency on the next business day.
After termination of the contract for trading of Over-the-Counter (OTC) securities eligible for margin purchase and short sale to be converted as TWSE listed securities, the customer shall proceed to settlement of the balance of its existing margin purchases and short sales within the time limits for margin purchase and short sale. If prior to listing of these securities to be eligible for margin purchase and short sale, the customer acquired these securities through margin purchase or short sale, redemption shall be made by cash or by delivery of spot securities, respectively.
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