Article NO. Content

Title:

Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities 

Amended Date: 2019.02.12 
Categories: Securities Exchange Market > Margin Transaction
Article 88     When conducting margin purchases and short sales of securities, a securities firm shall implement an internal control over the amount limit for margin purchase and short sale applicable to its customers and establish the operating procedures for management of amount limit for margin purchase and short sale applicable to its customers, which shall cover, to a minimum extent, the following:
  1. Method of assessment of a customer's maximum amount for margin purchase and short sale. The amount approved to the customer for other loan business should also be taken into consideration in the assessment. There should be requirements that establish the sum of funds or securities financed to a single customer in the overall loan business should not exceed a certain percentage of its net worth. If the amount of margin purchases or short sales conducted by a single customer exceeds NT$300 million or 1 percent of the securities firm's net worth, whichever is higher, a proposal shall be submitted to the board of directors for approval.
  2. Method of assessment of a customer's maximum amount for margin purchase and short sale of individual securities. The amount approved to the customer for other loan business should also be taken into consideration in the assessment.
  3. Method of identifying high risk securities or high risk customers. Establishment of special procedure for supervision and approval/determination of the amount limit for margin purchase and short sale applicable to high risk securities or high risk customers.
  4. Method to determine the amount limit for sources of securities available for a customer's short sales based on a fair and reasonable principle and to avoid circumstances where the same customer acquires most securities from the sources. Special care is required in the case of securities for which the TWSE or the TPEx allocates the amount limit.