Taiwan Stock Exchange - Rules & Regulations Directory

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Taiwan Stock Exchange Corporation Operation Directions for the Allocation of Limits for Margin Purchases and Short Sales and for Sales of Borrowed Securities Permitted for Securities Trading 

Amended Date: 2016.03.15 
Categories: Securities Exchange Market > Margin Transaction

1
    Stipulated by competent authority according to Article 6 of "Standards Governing Eligibility of Securities for Margin Purchase and Short Sale", paragraph 2 of Article 10 of "Regulations Governing Borrowing or Lending Money in Connection with Securities Business by Securities Firms", per 3 December, 2013 Order No. Financial-Supervisory-Securities-Trading-1020049612, per 7 January , 2015 Order No. Financial-Supervisory-Securities-Investment -1030052647, and paragraph 2 of Article 32 of Operating Rules for Securities Firms Handling Non-Restricted Purpose Loan.

2
    In the event that the daily balance of margin purchases, securities business related money lending or borrowing, and non-restricted purpose loan business, as conducted by securities firms, and settlement money performed by securities finance companies, reach eighty percent of the ratio for suspending margin purchase set forth in Article 6 of the preceding standards (hereinafter referred to as the "allocation limit"), the Taiwan Stock Exchange Corporation (TWSE) will proceed to conduct the allocation on the next business day; when the daily balance of margin purchases and short sales for securities trading reaches eighty percent of the ratio set forth in the foregoing order (hereinafter referred to as the " allocation limit ") the TWSE will proceed to conduct the allocation on the next business day. The calculation methods for the allocations in the preceding paragraph are as follows:
  1. Margin purchases, money lent or borrowed relating to securities business and non-restricted purpose loans, and settlement money financing:
    1. Allocation for margin purchases
    2.  
      The total daily balance of the numbers of lots of each 
      security for margin purchase from securities firms and 
      securities finance companies 
      ─────────────────────  ×(allocation limit - daily balance)
      The daily balance of the number of lots of each  securities
      for margin purchase from securities firms and securities
      finance companies and the total amount of daily balance
      of the number of lots of collateral for money lent or borrowed
      relating to securities business of each security from the
      securities firm conducting money lending relating to securities
      business and the total amount of daily balance
      of the number of lots of collateral for money lent or borrowed
      relating to non-restricted purpose loan business of each 
      security from the securities firm conducting non-restricted 
      purpose loan business; and the daily balance of the number of 
      lots of collateral for each security of settlement money 
      financing from securities finance companies.
      
    3. The number of lots for margin purchases allocable to each credit institute :
      1. Where the allocation for margin purchases is sufficient to allocate one lot to each credit institute ( excluding the securities firm commencing to conduct business of margin purchases and short sales on the next business day ), allocate firstly one lot to each credit institute and the remaining number of lots :
      2.  
        The daily balance of the number of lots of each 
        securities for margin purchase from each securities 
        firm and securities finance company
         ───────────────────×  (allocation for margin purchase - the number of credit institutes) 
        The total daily balance of the numbers of lots of 
        each security for margin purchase conducted by each 
        of  securities firms and securities finance companies
        
      3. Where the allocation for margin purchases is insufficient to allocate one lot to each credit institute( excluding the securities firm commencing to conduct business of margin purchases and short sales on the next business day ):
      4.  
        The daily balance of the number of lots of each 
        securities for margin purchase from each securities 
        firm and securities finance company
        ───────────────────×  allocation for margin purchase
        The total daily balance of the numbers of lots of 
        each security for margin purchase from each of 
        securities firms and securities finance companies
        
    4. Total allocation for money lent or borrowed relating to securities business and non-restricted purpose loan business:
    5.  
      The sum of the total daily balance of numbers of lots of 
      collateral for money lent or borrowed relating to securities 
      business of each security from the securities firm conducting
      money lending relating to securities business and the total 
      daily balance of the number of lots of collateral for money lent
      or borrowed relating to non-restricted purpose loan business of 
      each security from the securities firm conducting non-restricted
      purpose loan business
      ─────────────────────× (allocation limit - daily balance)
      The daily balance of the number of lots of each securities
      for margin purchase from securities firms and securities
      finance companies; and  the total amount of daily balance
      of the number of lots of collateral for money lent or
      borrowed relating to securities business of each security
      from the securities firm conducting  money lending  relating
      to securities business and the total amount of daily balance
      of the number of lots of collateral for money lent or borrowed
      relating to non-restricted purpose loan business of each 
      security from the securities firm conducting non-restricted 
      purpose loan business; and the daily balance of the number
      of lots of collateral for each security of settlement money
      financing from securities finance companies.
      
    6. The total number of lots of collateral for money lent or borrowed relating to securities business and non-restricted purpose loan business allocable to each credit institute :
    7. The daily balance of the numbers of lots of collateral
      for money lent or borrowed relating to securities business
      of each security from the securities firm conducting
      money lending  relating to securities business and the total 
      amount of daily balance of the number of lots of collateral for 
      money lent or borrowed relating to non-restricted purpose loan 
      business of each security from thesecurities firm conducting 
      non-restricted purpose loan business
      ──────────────────────× total allocation for money lent or borrowed relating to securities business and non-restricted purpose loan business 
      The sum of the total daily balance of the numbers of lots of
      collateral for money lent or borrowed relating to
      securities business of each security from securities firms
      conducting  money lending relating to securities business and 
      total daily balance of the number of lots of collateral for 
      money lent or borrowed relating to non-restricted purpose loan 
      business of each security from the securities firm conducting 
      non-restricted purpose loan business
      
    8. Allocation for margin purchase settlement financing:
    9.  
      The total daily balance of the number of lots of 
      collateral for each security of settlement money 
      financing from each of securities finance companies.
       ─────────────────────×(allocation limit - daily balance)     
      The daily balance of the number of lots of each
      securities for margin purchase from securities firms
      and securities finance companies and  the total amount
      of daily balance of the number of lots of collateral for
      money lent or borrowed relating to securities business
      of each security from the securities firm conducting
      money lending  relating to securities business and the total 
      amount of daily balance of the number of lots of collateral for 
      money lent or borrowed relating to non-restricted purpose loan 
      business of each security from the securities firm conducting 
      non-restricted purpose loan business; and the daily balance of 
      the number of lots of collateral for each security of settlement
      money financing from securities finance companies.
      
    10. The number of lots of collateral for margin purchase settlement financing allocable to each credit institute :
    11.      
      The daily balance of the number of lots of collateral
      for each security settlement financing from
      each of the securities finance company.
      ─────────────────────× Allocation for margin purchase settlement financing 
      The total daily balance of the number of lots of collateral 
      for each security settlement financing from 
      each of securities finance companies.
      
  2. short sales and securities lending:
    1. Allocation for securities lending
    2.     
      The daily balance of sales of borrowed 
      securities
      ──────────────── ×(allocation limit - daily balance)
      The total daily balance of short sales and 
      sales of borrowed securities
      
      For the amount of allocation less than 1.5% of the listed stock, use 1.5% for calculation.
    3. Allocation of short sales
    4.  
      Daily balance of short sales
      ──────────────  × (allocation limit - daily balance)
      The total daily balance of short sales 
      and sales of borrowed securities
      
    5. The number of lots of short sales allocable to each credit institute :
      1. Where the allocation for margin purchases is sufficient to allocate one lot to each credit institute ( excluding the securities firm commencing to conduct business of margin purchases and short sales on the next business day ), allocate firstly one lot to each credit institute and the remaining number of lots :
      2.  
        The daily balance of the number of lots of each
        security for margin purchase from each securities 
        firm and securities finance company
         ─────────────────────× (allocation for margin purchase - the number of credit institutes) 
        The total daily balance of the numbers of lots of each 
        security for margin purchase from securities firms and 
        securities finance companies 
        
      3. Where the allocation for margin purchases is insufficient to allocate one lot to each credit institute( excluding the securities firm commencing to conduct business of margin purchases and short sales on the next business day ):
      4. The daily balance of the number of lots of each 
        security for margin purchase from each securities 
        firm and securities finance company
        ─────────────────────× (allocation for margin purchase )
        The total daily balance of the numbers of lots of each 
        security for margin purchase from securities firms 
        and securities finance companies 
        
  3. The allocation limit shall be calculated according to the following calculation method on the first day when securities firm commencing to conduct business of margin purchases and short sales and deducted from the account of the securities finance company:
  4. The daily allocation limit for the securities finance company
    ──────────────────────────
    The number of agent securities firms on the day before the first day securities firm commencing to conduct business of  margin purchases and short sales 
    
  5. Anything less than one trading unit after calculating the allocation limit in accordance with the preceding calculation method for allocation of margin purchase, short sales and securities lending shall not be counted and allocated.
  6. Securities firms conducting securities trading of margin purchase and short sale or securities finance companies under the circumstances of exceeding allocation limit set forth in point 4 which results in deduction, the deductible portion shall be included in the calculation and be reallocated to other securities finance companies and the securities firms.

3
    Securities firms conducting securities trading of margin purchase and short sale shall handle consignment trading within the allocation limit, in the event of exceeding the allocation limit and failing to fill out the consent form for settlement by cash and securities by the client, the exceeding part shall be reported as accounting errors.
    Under the circumstances set forth in the preceding Paragraph, the securities firm may, in addition to handle in accordance with "Directions for Reporting and Handling of Out-Trades and Account Number Corrections by Securities Brokers" or "Directions for Securities Firms Handling Changes to Trading Category", notify the securities firms to correct and improve within the time limit; and may report to the competent authorities where the violations are of a serious nature.

4
    In the event that securities firms conducting securities trading of margin purchase and short sale or securities finance companies exceed the limit of allocation set forth in the Point 2, the TWSE would deduct the exceeding number of securities from the allocation of the securities on the second business day of the violation day. In case of insufficiency for deduction, TWSE shall deduct from the allocation limit of other securities, and give priority to the securities with lesser amount of allocation. In the event that the total amount of allocation for all the securities of the day is still insufficient for deduction, TWSE shall continue the deduction on the next business day and report to the competent authorities to deal with it.

5
    These Operation Directions shall take effect after having been submitted to and approved by the competent authority. Subsequent amendments thereto shall be effected in the same manner.

Data Source:Taiwan Stock Exchange - Rules & Regulations Directory
twse-regulation.twse.com.tw