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Title:

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

Amended Date: 2023.12.28 (Articles 8, 13, 20, 57, 78 amended,English version coming soon)
Current English version amended on 2023.08.17 
Categories: Securities Exchange Market > Margin Transaction
   Chapter II Management of Margin Accounts for Margin Purchases and Short Sales
      Section 1 Securities eligible for margin purchases and short sales
Article 8    TWSE-listed ordinary shares other than those listed on the Taiwan Innovation Board, primary listed on the Taiwan Innovation Board will be announced by the TWSE as eligible for margin purchases and short sales if satisfying the criteria below:
  1. The shares have been listed for at least six months.
  2. The net asset value per share at least reaches the par value, as specified in the latest financial report as at the date of review. Where the shares are of a primary TWSE-listed company with no par value or the net asset value per share is not NT$10, the financial reports published and filed in the last fiscal year show no accumulated losses.
  3. None of the following applies:
    1. Excessively intense share price volatility.
    2. Excessively concentrated equity ownership.
    3. Excessively irregular trade volume.
    With the exception of TPEx-listed managed stocks and stocks registered on the Emerging Stock Board, all TPEx listed common stock shares satisfying the criteria below will be announced by the TPEx as eligible for margin purchase and short sale.
  1. The shares have been listed on the TPEx for at least six months.
  2. The net asset value per share at least reaches the par value, as specified in the latest financial report as at the date of review. Where the shares are of a primary TWSE-listed company with no par value or the net asset value per share is not NT$10, the financial reports published and filed in the last fiscal year show no accumulated losses.
  3. The company has been incorporated and registered for at least three years. If the issuer is a transferee company of a demerger from a TWSE or TPEx listed company, the time of incorporation may be calculated from the time of establishment of the demerged division as shown in the financial data of the demerged parent company. If the issuer is an investment holding company or financial holding company, the time of incorporation may be calculated from the time of incorporation of its operating entity.
  4. The company has a paid-up capital of NT$300 million or more, or a net worth of NT$600 million or more if it is a primary TPEx listed company whose shares have no par value or a par value other than NT$10 per share.
  5. Profitability of the company:
    1. Having had no accumulated losses, and had net operating income and profit before tax totaling 3% or more of paid-up capital on a standalone or consolidated basis, in the latest financial year, provided the above provision on net operating income and profit before tax may be waived if the paid-in capital reaches NT$600 million or more.
    2. It is a primary TPEx listed company whose shares have no par value or a par value other than NT$10 per share, had net operating income and profit before tax totaling 3% or more of shareholders' equity on a standalone or consolidated basis.
  6. None of the circumstances described in subparagraph 3 of the preceding paragraph applies.
    For purposes of these Rules, the term "net worth" means equity attributable to owners of the parent as stated in the balance sheet.
    The financial data mentioned in paragraph 2 are as specified in the latest published financial reports as having been audited and certified, or reviewed, by the CPA.
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Article 9    Taiwan depository receipts satisfying the criteria below will be announced by the TWSE as eligible for margin purchase and short sale:
  1. The receipts have been listed for at least six months.
  2. The latest annual consolidated financial reports which have been audited and certified by the CPA or biannual consolidate financial reports which have been reviewed by the CPA, as prepared according to the laws and regulations of the country concerned and available on the date of review, show no accumulated losses.
  3. The beneficial ownership is not excessively concentrated, or the circumstance in paragraph 1, subparagraph 3, item 1 or 3 of the preceding article does not apply.
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Article 10    Beneficial certificates satisfying the following criteria will be announced by the TWSE as eligible for margin purchase and short sale: having been listed for at least six months, not being traded in foreign currency, the beneficial ownership not being excessively concentrated, and the circumstance in Article 8, paragraph 1, subparagraph 3, item 1 or 3 not being applicable.
    Beneficial certificates of securities investment trust exchange-traded funds ("ETF Beneficial Certificates") and beneficial certificates of futures trust exchange-traded funds will be announced by the TWSE or TPEx as eligible for margin purchase and short sale from the day their trading commences on the TWSE or TPEx. Offshore ETF Beneficial Certificates will be announced by the TWSE as eligible for margin purchase and short sale from the day their trading commences on the TWSE.
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Article 11    The date of review mentioned in Articles 8, 9, 12 and 19 denotes the last day of a six-month TWSE or TPEx listing period, or the following business day if falling on a non-business day.
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Article 12    The sampling period of excessively intense share price volatility or excessively irregular trade volume as mentioned in Article 8, paragraph 1, subparagraph 3, item 1 or 3 is 90 business days prior to the date of review (inclusive) for purposes of data gathering.
    The business days mentioned in the preceding paragraph are the trading days of the particular security.
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Article 13    As samples for review purposes of TWSE listed securities to which excessively intense share price volatility or excessively irregular trade volume as mentioned in Article 8, paragraph 1, subparagraph 3, item 1 or 3 occurs, listed common shares, Taiwan depository receipts, and beneficial certificates other than those whose trading method has altered or those of a Taiwan Innovation Board listed company or Taiwan Innovation Board primary listed company are taken for comparison. As samples for review purposes of TPEx listed securities, TPEx listed common stock shares other than TPEx listed managed stocks and stocks registered on the Emerging Stock Board, and ETF Beneficial Certificates and beneficial certificates of futures trust exchange-traded funds are taken for comparison.
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Article 14    The share price volatility of TWSE or TPEx listed securities is deemed excessively intense as in Article 8, paragraph 1, subparagraph 3, item 1 under any of the following circumstances:
  1. The average of the daily price limit (absolute value) of the securities during the sampling period prescribed in Article 12 reaches at least the average of the daily price limit (absolute value) of the samples specified in the preceding article for the same period plus two standard deviations and exceeds 150% of the average of the daily price limit (absolute value) of the securities of the same industry in the same market.
  2. The ratio of the difference between the highest and lowest prices to the average price during the sampling period prescribed in Article 12 reaches at least the average of the ratio of the difference between the highest and lowest prices to the average price of the samples specified in the preceding article for the same period plus two standard deviations and exceeds 150% of the ratio of the difference between the highest and lowest prices to the average price of the securities of the same industry in the same market.
  3. Any of the following occurs in respect of the percentage premium or discount during the sampling period prescribed in Article 12 as calculated by the closing price of Taiwan depositary receipts and that of the exchange market of the country of the shares represented by such receipts:
    1. The percentage premium of Taiwan depositary receipts on the business day immediately preceding the date of public notice of the Market Observation Post System exceeds 50%, and the closing price of Taiwan depositary receipts of the same day must be the highest of the closing prices for the last six business days (inclusive of the sixth business day), or higher than the opening reference price in the absence of a closing price for the last five business days (excluding the fifth business day).
    2. The percentage premium of Taiwan depositary receipts on the business day immediately preceding the date of public notice of the Market Observation Post System exceeds 50%, and the closing price of Taiwan depositary receipts of the same day must be the lowest of the closing prices for the last six business days (inclusive of the sixth business day), or lower than the opening reference price in the absence of a closing price for the last five business days (excluding the fifth business day).
  4. If the proviso of item (1), subparagraph 5, paragraph 2, Article 8 applies to the TPEx-listed securities, where the TPEx has announced disposition measures in respect of the securities in accordance with Article 6 of the TPEx Operation Directions for Announcement or Notice of Attention to Trading Information and Dispositions in the past six months.
  5. Other circumstances where the share price volatility may be deemed excessively intense.
    Any price change that is not attributed to a trade (such as ex-right, ex-dividend etc.) is disregarded during the period the standard in subparagraphs 1 and 3 of the preceding paragraph is being calculated or when the closing price standard is being compared over the last six business days (including the sixth business day) as mentioned in subparagraph 3 of the preceding paragraph, in respect of TWSE or TPEx listed securities.
    For the comparison in subparagraphs 1 and 2 of paragraph 1 of this article, securities of the same industry in a different market (listed or OTC) may be compared if there are no securities of the same industry in the same market. The comparison requirement does not apply if there are no securities of the same industry in a different market or the TWSE or TPEx listed securities do not fall in any industry.
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Article 15    The trade volume of TWSE or TPEx listed securities is deemed excessively irregular as in Article 8, paragraph 1, subparagraph 3, item 3 under any of the following circumstances:
  1. The turnover of the securities in the sampling period specified in Article 12 is at least 10 times the average turnover of the samples for the same period as mentioned in Article 13.
  2. The turnover rate of the securities in the sampling period specified in Article 12 is lower than 10% of the average turnover rate of the samples for the same period as mentioned in Article 13, and the trading volume in said period is less than 3,000 share certificates or 3,000 units.
  3. If the proviso of item (1), subparagraph 5, paragraph 2, Article 8 applies to the TPEx-listed securities, their turnover rate in the sampling period specified in Article 12 reaches twice or more of the average turnover rate of securities of the same industry in the TPEx market in the same period; paragraph 3 of the preceding article will apply mutatis mutandis if there are no securities of the same industry in the TPEx market.
  4. Other circumstances where the trade volume may be deemed excessively irregular.
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Article 16    The equity ownership of TWSE or TPEx listed shares is deemed excessively concentrated as in Article 8, paragraph 1, subparagraph 3, item 2 under any of the following circumstances:
  1. The number of shareholders holding between 1,000 and 50,000 shares is less than 500.
  2. The number of registered shares held by all the directors, supervisors, officers, and shareholders with more than 10% shares accounts for at least 75% of the company's TWSE or TPEx listed shares when the total number of issued shares of the company is not more than 50 million, at least 80% of the company's TWSE or TPEx listed shares when the total number of issued shares of the company is over 50 million and not more than 500 million, and 85% of the company's TWSE or TPEx listed shares when the total number of issued shares of the company is over 500 million.
  3. The number of registered shareholders of TPEx listed shares is less than 1,000.
  4. Other circumstances where the equity ownership may be deemed excessively concentrated.
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Article 17    The beneficial ownership of Taiwan depository receipts is deemed excessively concentrated as in Article 9, subparagraph 3 under any of the following circumstances:
  1. The number of holders of Taiwan depository receipts holding between 1,000 and 50,000 units is less than 500.
  2. The sum total, as entered in the Taiwan depository receipts holder register, of units of Taiwan depository receipts held by those whose Taiwan depository receipts holding exceeds 5% of the total number of issued units exceeds 80% of the total issue amount.
  3. Other circumstances where the beneficial ownership may be deemed excessively concentrated.
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Article 18    The beneficial ownership of beneficial certificates is deemed excessively concentrated as in Article 10, paragraph 1 under any of the following circumstances:
  1. The number of beneficiaries holding not more than 100,000 beneficial units is less than 1,000.
  2. The number, as entered in the beneficiary register, of units of beneficial rights held by beneficiaries whose beneficial rights holding exceeds 5% of the total amount of the fund exceeds 80% of the total amount of the fund.
  3. Other circumstances where the beneficial ownership may be deemed excessively concentrated.
    The preceding paragraph does not apply to ETF beneficial certificates, offshore ETF beneficial certificates, and futures ETF beneficial certificates.
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Article 19    For its review of the excessive concentration of equity or beneficial ownership mentioned in Articles 16 to 18, the TWSE or TPEx may request the TWSE or TPEx listed company, foreign issuer or securities investment trust enterprise ("SITE") to furnish information relevant to its equity or beneficial ownership of the review date.
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Article 20    The TWSE or TPEx will publicly announce TWSE or TPEx listed securities that conform to the following as eligible for margin purchases and short sales on the TWSE or TPEx listing date, unless the equity ownership of such securities is excessively concentrated. The relevant operating procedures are governed by Article 21, paragraph 2:
  1. The issuer of the TPEx listed shares that are eligible for margin purchases and short sales has applied for TWSE listing.
  2. The TWSE or TPEx listed company eligible to undertake margin purchases and short sales becomes a TWSE or TPEx listed financial holding company according to The Financial Holding Company Act.
  3. The TWSE or TPEx listed company eligible to undertake margin purchases and short sales becomes a TWSE or TPEx listed investment holding company through a 100% share exchange in accordance with the Business Mergers And Acquisitions Act.
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Article 21    The TWSE or TPEx will conduct another review on the last business day of each month in respect of securities where upon initial review the price fluctuation is found to be excessively volatile or the trade volume excessively irregular as in this section.
    Where it is found upon initial review that the equity or beneficial ownership of securities is excessively concentrated as mentioned in this section, the TWSE or TPEx will not conduct another review until after the TWSE or TPEx listed company, foreign issuer or SITE furnishes information showing that the equity or beneficial ownership of securities is no longer excessively concentrated.
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