These Rules are adopted pursuant to Article 10 of the Regulations Governing Securities Firms and Article 6 of the TWSE Rules for Administration of the Joint Responsibility System Clearing and Settlement Fund.
The TWSE may, upon a resolution by the Special Management Committee of the Joint Responsibility System Clearing and Settlement Fund (the “Committee”), notify a securities firm to make an additional deposit to the Clearing and Settlement Fund (the “Fund”) if any of the following circumstances occurs to the securities firm:
- Irrevocable execution of assets by a court.
- Dishonor of any issued negotiable instrument due to insufficient funds, where the record of dishonor thereof has not been canceled.
- A substandard rating under the TWSE Operational Rules for Early Warning of Operational Risk of Securities Firms, or consecutive deficits and net worth lower than three-fifths of paid-in capital.
- A substandard rating for internal auditing, where improvements still have not been made after repeated guidance and evaluation
- Any deficiency in credit review or credit extension operations, where improvements have not been made or are substandard after repeated notices to make improvements.
- Any material violation of laws or regulations or TWSE rules or bylaws, where improvements still have not been made after repeated sanctions by the competent authority or the TWSE.
- Other material unforeseen event or upon the instructions of the competent authority.
If any relevant unit of the TWSE finds any circumstance under the preceding paragraph with respect to a securities firm in the course of auditing the business and finances of the securities firm or through the surveillance system, the unit shall submit regular reports to the Committee.
If any circumstance under the preceding Article applies to a securities firm, the TWSE may, depending on the severity of the circumstance, submit a concrete proposal to the Committee and request a resolution as to whether the securities firm should be required to make an additional deposit to the Fund and the amount of the additional deposits.
When the TWSE, upon a resolution by the Committee, notifies a securities firm to make an additional deposit to the Fund, the securities firm shall, within three days from the date of the notice by the TWSE, make the additional deposit.
The TWSE shall calculate each month a securities firm's daily average value at risk (the "calculated value"), and notify the securities firm to make a supplemental deposit to the Fund, or make a refund to the securities firm from the Fund, as follows:
- If 80 percent of the calculated value is greater than the basic amount the securities firm has already deposited to the Fund, the securities firm shall make a supplemental deposit to cover the difference.
- If 80 percent of the calculated value is less than the basic amount the securities firm has already deposited to the Fund, the TWSE shall refund the difference. The securities firm's amount in the Fund after refunding of the difference may not be less than the basic amount deposited to the Fund by the securities firm.
"Basic amount" in the preceding paragraph means the amount payable to the Fund by a securities firm as calculated by the TWSE under Article 10 of the Regulations Governing Securities Firms. "Daily average value at risk" means the daily average value calculated by the TWSE by the risk value calculation model.
For any difference that a securities firm deposits to the Fund under the preceding article, or any difference refundable from the Fund by the TWSE to the securities firm under the preceding article, the deposit or refund shall be made within 3 business days from the date of the notice by the TWSE.
If a securities firm fails to make a deposit to the Fund as required by a notice under Article 4 or 6, or makes an insufficient deposit, the TWSE will proceed forthwith to adjust the trading amount that the firm may report on a daily basis pursuant to Article 6 of the TWSE Rules for Administration of the Joint Responsibility System Clearing and Settlement Fund, and the adjusted amount may not exceed five times the amount that it has deposited to the Fund.
If the securities firm makes the deposit to the Fund after the TWSE has adjusted the trading amount that the firm may report on a daily basis pursuant to the preceding paragraph, the TWSE may restore the trading amount that the firm was permitted to report before the adjustment.
Amounts deposited by securities firms under Article 3 and Article 5 of these Rules are exempt from the application of the provisions of Article 9, paragraph 1, subparagraph 2 of the TWSE Rules for Administration of the Joint Responsibility System Clearing and Settlement Fund regarding sharing pro-rata to the amounts of the allocations of the securities firms.
If any of the following circumstances occurs on the central exchange market, the TWSE shall submit the matter to the Committee for deliberation and a resolution, upon the passage of which it shall notify all securities firms to make additional deposits to the Fund within a designated time limit:
- The total number of securities firms experiencing any event in any subparagraph of Article 2, paragraph 1 of the Regulations in the same calendar month exceeds one-fifth of all securities firms.
- The total number of securities firms whose daily average value at risk for any month reaches twice the basic amount that the firm has already deposited to the Fund exceeds one-fifth of all securities firms.
- A securities firm defaults on its settlement obligations.
- The TWSE judges there to be any event with a material effect on market settlement order.
- Any other event as approved by the competent authority.
A circumstance under subparagraph 4 of the preceding paragraph shall also be reported to the competent authority for approval.
All amounts that are required to be additionally deposited by all, and by individual, securities firms under paragraph 1, shall be additionally deposited after the method of calculation and the scale of allocations have been deliberated and passed by a resolution of the Committee. A securities firm that, upon notice by the TWSE, fails to make a deposit or makes an insufficient deposit shall have its trading on the TWSE market halted.
If a circumstance under Article 2, paragraph 1 no longer applies to the securities firm after it has made an additional deposit to the Fund, upon a resolution by the Committee, all or part of the amount of the additional deposit may be reimbursed to the firm.
These Rules, and any amendments hereto, shall be passed by the Committee, and shall be implemented by public announcement of the TWSE following submission to and approval by the Competent Authority.