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Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities(2022.09.08) |
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Article 6
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A securities firm shall fix, and file with the competent authority for recordation, the interest and fee rates with respect to the margin loan interest and short sale handling fees receivable from customers, as well as short sale proceeds and short sale margin interest payable to customers, for conducting securities trading margin purchase and short sale operations.
Before providing securities borrowed through the TWSE securities lending system, securities borrowed from customers in money lending conducted in connection with securities business, securities borrowed from securities firms or securities finance enterprises conducting money lending in connection with securities business or conducting margin purchases and short sales of securities (“Borrowed Securities”), or its proprietary shares of securities (“Proprietary Securities”), to a customer for short selling, a securities firm shall determine the rate, calculation, and method of collection of the short sale fee with the customer, where the interest rate shall be below 16% per annum.
Upon adjustment to any interest rates or fee rates described in the preceding two paragraphs, the adjusted interest or fee rates shall apply to any and all open positions in margin purchases and short sales as from the date of the adjustment.
The payment and receipt of interests and fees are determined by the securities firm where the extension in paragraph 6 of the preceding article exceeds the duration of the margin purchase and short sale.
A securities firm shall charge a short sale handling fee from customers for providing securities acquired through margin purchases to them for short selling, and shall charge a short sale fee from customers for providing Borrowed Securities or Proprietary Securities to them for short selling.
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Article 22
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The TWSE or TPEx will suspend the margin purchases and short sales of TWSE or TPEx listed securities that are otherwise eligible for margin purchases and short sales, from the business day after the date of public announcement, if any of the circumstances in Article 4, paragraph 1, subparagraphs 1 to 7, and subparagraph 11, and Article 5, paragraph 1, subparagraphs 1 to 3, and subparagraph 7 applies, unless the trading method has altered or trading has been halted with respect to TWSE or TPEx listed shares and Taiwan depository receipts or trading of beneficial certificates has been halted as in subparagraph 1 below, or the Surveillance Operations Oversight Committee of the TWSE or TPEx resolves on such suspension as in subparagraph 8 below:
- Where the trading method is altered or trading is halted with respect to TWSE or TPEx listed shares and Taiwan depository receipts, or such shares or receipts are delisted from the TWSE or TPEx, or trading of beneficial certificates is halted or such certificates are delisted from the TWSE or TPEx, margin purchases and short sales of such securities will be suspended as of the effective date of the event upon the public announcement by the TWSE and TPEx of the alteration of the trading method or halt of the trading of TWSE or TPEx listed shares or Taiwan depository receipts or the halt of trading of beneficial certificates, with the suspension publicly announced concurrently; and margin purchases and short sales of such securities will be suspended, upon the public announcement by the TWSE and TPEx of the TWSE and TPEx delisting of shares, Taiwan depository receipts and beneficial certificates, with the suspension publicly announced concurrently. Notwithstanding, this does not apply where the trading is halted either under any of the circumstances in the proviso of Article 78 applies or due to a difference in rights and obligations between the existing securities and new securities after share exchange.
- The TWSE or TPEx will immediately announce publicly the suspension of margin purchases and short sales of the beneficial certificates concerned, should a SITE fail to make a report and publish the financial reports of any of its securities investment trust funds on schedule as required or the circumstance in Article 96, paragraph 1 of the Securities Investment Trust and Consulting Act apply to the SITE managing the securities investment trust fund.
- The TWSE or TPEx will immediately announce publicly the suspension of margin purchases and short sales of the beneficial certificates concerned, should a futures trust enterprise fail to make a report and publish the financial reports of any of its futures trust funds on schedule as required or the circumstance in Article 38, paragraph 1 of the Regulations Governing Futures Trust Enterprises apply to the futures trust enterprise managing the exchange-traded futures trust fund.
- The TWSE or TPEx will publicly announce the suspension of margin purchases and short sales of TWSE or TPEx listed shares with a net asset value per share below par value if, on the fifth business day after the deadline to publish and file the annual financial reports and financial reports for the first, second and third quarters of each fiscal year, a review of the latest financial reports that are published and filed as required reveals that the net asset value per share is below par value or, in the event of a TWSE or TPEx primary listed company with no face value or in the event of a par value per share other than NT$10, the financial reports indicate accumulated losses.
- The TWSE or TPEx will publicly announce the suspension of margin purchases and short sales of Taiwan depository receipts where the foreign securities they represent suffer accumulated losses if, on the last business day of the third month after the deadline to make a public notice and to make a filing with the competent authority, TWSE or securities market as required by the laws and regulations of the country of the foreign issuer and the country of listing, the latest annual consolidated financial reports audited and certified by the CPA or biannual consolidated financial reports reviewed by the CPA indicate accumulated losses.
- The TWSE will publicly announce, on the following business day, the suspension of margin purchases and short sales of the Taiwan depository receipts where the number of listed units is less than 60 million after redemption.
- The TWSE will publicly announce, on the following business day, the suspension of margin purchases and short sales of the shares or Taiwan depository receipts where the cumulative reported amount of defaulting single-day trades of TWSE listed securities is at least NT$200 million, or the cumulative reported amount of defaulting single-day trades of TPEx listed shares is at least NT$50 million, and if the balance of margin purchases or short sales of the day in question is at least 15% of the number of such TWSE or TPEx shares or units.
- The TWSE or TPEx will immediately announce publicly the suspension of margin purchases and short sales of the securities concerned if the Surveillance Operations Oversight Committee of the TWSE or TPEx so resolves or such margin purchases and short sales are otherwise inappropriate in the circumstances.
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Article 24
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Where TWSE or TPEx securities are subject to suspension of margin purchases and short sales according to Article 22, subparagraph 4, the issuer may apply for resumption, with the latest financial reports that have been published and filed as required submitted. The TWSE or TPEx will make an announcement on the MIS and review the application on the fifth business day thereafter, and announce publicly the resumption of margin purchases and short sales from the following business day if the net asset value per share reaches the par value or above or, where the TWSE or TPEx primary listed company has no face value or the par value per share is not NT$10, there are no accumulated losses suffered.
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Article 25
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Where margin purchases and short sales of Taiwan depository receipts are suspended pursuant to Article 22, subparagraph 5, the foreign issuer may apply for resumption, with the latest annual consolidated financial reports audited and certified by the CPA or biannual consolidated financial reports reviewed by the CPA submitted. The TWSE will then make an announcement on the MIS and review the application on the fifth business day thereafter, and announce publicly the resumption of margin purchases and short sales from the following business day if the review reveals no accumulated losses suffered.
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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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Article 81
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Where any of the following circumstances applies to a customer, the securities firm may, within the extent required to satisfy the obligation, dispose of the balance in the customer's margin account in accordance with the provisions of paragraph 3, unless agreed otherwise by both parties. If there is any surplus remaining after the obligation is satisfied by proceeds of the disposition, it shall be returned to the customer. If the proceeds of the disposal are insufficient to fully satisfy the obligation, or if, for the balance in the margin account being 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 securities firm shall request the customer to satisfy the remaining obligation within a specified time limit and, if the customer fails to the remaining obligation within such specified time limit, the securities firms shall report the case to the TWSE or the TPEx as an event of default and cancel the customer's margin account accordingly. The TWSE or the TPEx shall promptly forward the message to securities finance enterprises and to all securities firms engaged in margin purchase and short sale business:
- Failure to make up a deficiency in accordance with Article 55, paragraph 2.
- Failure to settle an obligation in accordance with Article 62, paragraph 3.
- Failure to make up a deficiency in accordance with Article 78, paragraph 2.
Where any of the following circumstances applies to a customer on a margin purchase or short sale, unless agreed otherwise by both parties according to subparagraphs 2 and 3, the securities firm shall return any surplus amount after the disposal of the collateral for the margin purchase or short sale. If the disposal proceeds are insufficient to satisfy the obligation; or where either subparagraph 2 or subparagraph 3 applies to the customer, if brokerage trading orders for said collateral 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, after reverse auction is conducted in respect of the collateral in accordance with paragraph 4, the proceeds do not sufficiently cover the obligation, the securities firm shall use other funds in that customer's margin account to offset against the obligation. If there is still a deficiency remaining after such offsetting, the securities firm shall request the customer to make up the deficiency on the next business day. If the deficiency is not fully made up, the securities firm may, within the extent required to satisfy the obligation, dispose of the balance in the customer's margin account in accordance with the provisions of paragraph 3. If there is any surplus remaining after the obligation is satisfied by proceeds of the disposition, it shall be returned to the customer. If the proceeds of the disposal are insufficient to fully satisfy the obligation, or if, for said collateral for the margin purchase and/or short sale 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 securities firm shall request the customer to satisfy the remaining obligation within a specified time limit, and, if the obligation remains unsatisfied after the time limit, shall report the case to the TWSE or the TPEx as an event of default and cancel the customer's margin account accordingly. The TWSE or the TPEx shall promptly forward the message to securities finance enterprises and to all securities firms engaged in margin purchase and short sale business:
- Failure to settle a short sale in accordance with Article 76.
- Failure to settle a margin purchase or short sale at maturity.
- Failure to replace securities or other merchandise deposited as additional collateral against margin requirements as required under Article 60.
Where any circumstances under paragraphs 1 and 2 apply to a customer, the securities firm shall, starting the next business day and on the TWSE centralized exchange market or through the TPEx trade system or through tender offer or competitive auction, place an order with another securities broker to dispose of the customer's collateral and securities or other merchandise deposited through a Margin Trading Default Processing Account opened by it. If a customer uses book-entry central government bearer bonds, local government bonds, corporate bonds, financial bonds to settle a margin sale , a securities firm may negotiate the price and dispose the aforesaid with a bonds dealer; if a customer uses open-end fund beneficiary certificates to settle a margin sale, a securities firm may dispose the aforesaid by buying back from a securities investment trust enterprise.
If a customer fails to return the securities for satisfaction of the loan according to Article 76, the securities firm shall proceed with disposition from the next business day. The securities firm may conduct reverse auction in accordance with the preceding paragraph if the subject security cannot be disposed of on account of a suspension of trading.
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