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Article 1
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These Rules are adopted pursuant to Article 10 of the Regulations Governing Securities Firms, and Article 20 of the Regulations Governing Stock Exchanges.
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Article 2
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The management of the Clearing and Settlement Fund (the “Fund”) shall comply with the provisions set forth by the Financial Supervisory Commission (the “Competent Authority”), Executive Yuan, and in addition thereto shall be subject to the priority application of these Rules.
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Article 3
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A securities firm shall make deposits to the Fund as required by the Competent Authority.
In order to supervise and regulate the market, the TWSE shall allocate a special settlement fund of NT$1 billion to coordinate with the operations of the Fund. The management of the settlement fund shall comply with the provisions set forth by the Competent Authority and the provisions of these Rules.
Following the announcement and implementation of these Rules, the TWSE shall on a continuing basis allocate to the special settlement fund any portion in excess of NT$1 billion in the compensation reserve fund that has been set aside. This portion allocated on a continuing basis shall be subject to an upper limit of NT$2 billion.
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Article 4
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A Special Management Committee of the Joint Responsibility System Clearing and Settlement Fund (the “Committee”) is specially established to manage the Fund.
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Article 5
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The Committee shall have 11 members, to be chosen and appointed by the following institutions:
- The Taiwan Securities Association shall appoint eight representatives.
- The TWSE shall appoint three persons.
The Committee shall have one chairperson, to be elected by and from among the members, and have one executive secretary and several clerks, to be appointed by the chairperson.
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Article 6
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Duties of the Committee are as follows:
- Keep track of the custody and use of the Fund.
- Requisition and review data related to the finances and business of securities firms.
- Requisition, review, and audit data on securities firms' financial operations and related data obtained through the surveillance system, for which purposes, representatives from related TWSE departments and offices shall make themselves available as nonvoting participants at Committee meetings to answer questions and give explanations.
- As merited by the findings of the requisitioning and review under the preceding two subparagraphs, the Committee may take the following measures:
- Request that the TWSE dispatch personnel to audit the finances and business of a specific securities firm.
- Require a securities firm to make additional deposits to the Fund, for which the specific rules shall be separately submitted for the Competent Authority's approval.
- Adjust, pursuant to TWSE rules, the trading amounts or limits that a specific firm may quote, or restrict, halt, or resume trading by the securities firm.
- Review matters such as recovery and reimbursement of funds of the Fund.
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Article 7
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The Committee shall hold a meeting once a month, and may hold special meetings when necessary. All meetings are to be convened by the chairperson. If the chairperson is for any reason unable to exercise the powers of the chairperson, he or she may appoint another member to serve as his or her proxy, and if for any reason the chairperson is unable to make such an appointment, the members shall elect from among themselves one person to serve as the proxy.
A resolution of the Committee requires the approval of a majority of the members present at a meeting attended by two-thirds or more of the members.
Any resolution of the Committee regarding subparagraph 4, item 2 or 3 of the preceding Article requires the approval of two-thirds or more of the members present at a meeting attended by two-thirds or more of the members.
A member appointed by a securities firm may not participate in voting, or exercise voting rights on behalf of another member, on any agenda item that involves any interest of the securities firm under subparagraph 4 of the preceding Article.
The members and non-voting participants present at a meeting may not without due cause divulge any matter discussed during meeting proceedings.
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Article 8
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When the TWSE utilizes the Fund because of a securities firm's default of settlement obligations, it shall notify the chairperson of the Committee on the day when the Fund is utilized.
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Article 9
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For the price difference and all other fees arising from and in connection with the TWSE’s handling of any default of settlement obligations by a securities firm, the TWSE shall first make deductions from the portion of the Fund deposited by the defaulting securities firm and the interest thereupon. When that is insufficient, compensation on behalf of the securities firm shall be made from the following in the following order of priority:
- The special settlement fund allocated by the TWSE pursuant to Article 3, paragraph 3.
- The Clearing and Settlement Fund deposited by non-defaulting securities firms pursuant to Article 3, paragraph 1, and the special settlement fund allocated by the TWSE pursuant to Article 3, paragraph 2, shared pro-rata to the amounts of their allocations.
- Additional contributions to the Clearing and Settlement Fund by the non-defaulting securities firms pursuant to paragraph 3.
- The amount of any shortfall still remaining after the coverage under the preceding three subparagraphs will be covered from the TWSE compensation reserve fund.
After the utilization of amounts to be shared from the allocations under subparagraph 1 and 2 of the preceding paragraph, each securities firm and the TWSE shall replenish the allocations utilized, on the scale set by the Committee meeting.
The additional contributions to the Clearing and Settlement Fund under paragraph 1, subparagraph 3 shall be handled by the TWSE according to the following:
- If any securities firm or firms default during the cooling-off period, the additional contributions shall be capped at 100 percent of the required contributions to the Clearing and Settlement Fund from each non-defaulting securities firm in the most recent period.
- The required contributions to the Clearing and Settlement Fund in the preceding subparagraph means the Clearing and Settlement Fund that securities firms make deposits to as required by the Competent Authority under Article 3, paragraph 1.
The cooling-off period in these Rules means a period of 20 business days from the date when a securities firm’s default occurs.
Recoveries may be claimed from the defaulting securities firm of any amounts covered under paragraph 1, subparagraphs 1 to 4.
Any funds recovered from the defaulting securities firm shall be reimbursed pro-rata to the securities firms and the TWSE for any compensation that they made on behalf of the defaulting securities firm for the price difference and fees under paragraph 1.
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Article 10
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A non-defaulting securities firm may submit the following documents to the TWSE during the cooling-off period to apply for an exit:
- Explanatory documents including the letter of exit application and the board of directors meeting minutes.
- Supporting documents (as specified in the attached checklist) showing the payment of the capped additional contribution to the Clearing and Settlement Fund under paragraph 3 of the preceding article, the cessation of participation in market transactions, the completed performance of account transfers, settlement obligations with respect to funds and securities, and the full settlement of all accounts.
An application under the preceding paragraph shall be submitted before the five business days preceding and exclusive of the expiration date of the cooling-off period. The TWSE shall publicly announce the exit and report to the Competent Authority for recordation no later than the final day of the cooling-off period.
When a securities firm applies for an exit under paragraph 1, it shall simultaneously submit its application for termination of operations to the TWSE, which will forward it to the Competent Authority. If the Competent Authority issues a reply letter agreeing to the securities firm's termination of operations on the centralized exchange market, the securities firm, from the date of the TWSE's announcement of the exit, will no longer bear any obligation for any amount to be shared under paragraph 1, subparagraph 3 of the preceding article or for the replenishment of allocations under paragraph 2 of the preceding article.
"Exit" in this article means a scenario in which a non-defaulting securities firm, during the cooling-off period, has paid the capped additional contribution to the Clearing and Settlement Fund under paragraph 3 of the preceding article, ceased the participation in market transactions, completed operations including the performance of account transfers, settlement obligations with respect to funds and securities, and the full settlement of all accounts, and has submitted its application for termination of operations to the TWSE for forwarding to the Competent Authority.
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Article 11
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The Fund deposited by the securities firms and the special settlement fund allocated by the TWSE shall immediately be made up in the event of compulsory execution by a court.
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Article 12
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With respect to interest accrued from utilization by the TWSE of the Fund deposited by the securities firms, the TWSE shall settle accounts on a half-yearly basis and reimburse any remaining interest, after deducting applicable fees and taxes, to the securities firms by the end of January and July each year.
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Article 13
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When a securities firm is approved for dissolution or its business license is voided, it may apply for reimbursement of the balance of the Fund that it deposited.
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Article 14
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The management of the Fund and the special settlement fund shall comply with these Rules, and be conducted by the TWSE pursuant to applicable laws and regulations.
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Article 15
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These Rules shall take effect after having been submitted to and approved by the Competent Authority. Subsequent amendments thereto shall be effected in the same manner.
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