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Article NO. Content

Title:

Operating Rules for Securities Firms Handling Non-Restricted Purpose Loan  CH

Amended Date: 2017.11.27
Article 20     In non-restricted purpose loan business conducted by a securities firm, the client's overall-account collateral maintenance ratio shall be calculated as follows:
    Collateral maintenance ratio=(market value of the collateral+market value of the supplementary collateral) ÷ (financing amount)×100%
    In regard to the market value of collateral referred to in the preceding paragraph, the market value of TWSE and TPEx listed securities is the closing price of the current day; that of central book-entry bonds is 80 percent of their face value; that of municipal bonds, common corporate bonds and financial bonds is 60% of their face value; that of physical gold is the Closing Average of the current day, and that of TPEx traded beneficial certificates of open-end funds, open-end securities investment trust funds and futures trust funds is the net asset value of the preceding business day. If there is no current day's closing price for a given TWSE or TPEx security, the market value shall be determined by the following principles:
  1. If the current day's highest buy order price at the close of market is higher than the current day's auction reference price at market opening for a TWSE listed security, or than the current day's benchmark price at trade opening for a TPEx listed security, the market value shall be the highest buy order price.
  2. If the current day's lowest sell order price at the close of market is lower than the current day's auction reference price at market opening for a TWSE listed security, or than the current day's benchmark price at trade opening of trading for a TPEx listed security, the market value shall be the lowest sell order price.
  3. When neither of the above circumstances applies, the market value shall be the current day's auction reference price at market opening for a TWSE listed security, or the current day's benchmark price at trade opening for a TPEx listed security.
    A securities firm shall calculate a client's overall account collateral maintenance ratio each business day. If a client's overall account collateral maintenance ratio is lower than 130% due to a change in the value of the collateral or supplementary collateral, the securities firm shall notify the client to cover the collateral shortfall and bring the collateral maintenance ratio above 166% within 2 business days from receipt of the notice, and the following provisions shall be complied with, unless the parties agree otherwise:
  1. If the client fails to cover the collateral shortfall within 2 business days from the date on which the notice is served and the overall account collateral maintenance ratio is still lower than 130%, from the third business day, the securities firm shall dispose of the client's collateral under the mutatis mutandis application of Article 25, Paragraph 1.
  2. If the client fails to cover the collateral shortfall within 2 business days from the date on which the notice is served and the overall account collateral maintenance ratio has risen to 130% or higher, the securities firm may temporarily refrain from disposing of the collateral on the third business day. However, if on any subsequent business day in which its overall account collateral maintenance ratio again falls below than 130% and the client does not deposit additional collateral on its own initiative in the afternoon of that day, its collateral shall be disposed of from the next business day under the mutatis mutandis application of Article 25, paragraph 1.
  3. If the collateral maintenance ratio rises to 166% or higher even though the client has not covered, or has covered only a portion of, the collateral shortfall, or if the total collateral deposits made by the client is sufficient to cover the shortfall notified to cover in the notice before its collateral has been disposed of according to the preceding subparagraphs, the record of the collateral call shall be expunged.
    The covering of shortfall under the preceding paragraph is for the situation where the overall account collateral maintenance ratio of the financing account is below 130%.
    If, as a result of any change in share price, there is an increase in the net value of the collateral in a client's financing account less the client's obligations, the securities firm is prohibited from delivering to the client any cash or securities equivalent to the amount of the increase. However, this does not apply when the client applies to change the credit limit, and the securities firm reapproves its credit limit.
    The disposal of collateral under subparagraph 1 and 2, Paragraph 3 shall be carried out in accordance with Article 25 of these Operating Rules. If the proceed from such disposal is insufficient to make repayment, the client shall be notified to make repayment within a certain time period, with interest accruing at the financing interest rate from the date on which the claim occurred until the date of repayment.
    The supplementary collateral under these Operating Rules means the securities or other commodities provided by the client or any third party when the overall account collateral maintenance ratio is lower than the required ratio and such collateral is supplemented to make up the shortfall upon the notification made by the securities firm.