Chapter IV Margin Trading Applications and Settlements |
| Article 47 | A customer giving an order for a margin purchase or short sale shall fill out an order ticket marked "MARGIN PURCHASE" or "SHORT SALE"; after execution of the trade, the securities firm shall prepare a trading report marked with the same words and have it signed/sealed by the customer.
|
|
| Article 48 | For executed margin purchases and short sales, a securities firm shall calculate the balance of long and short positions in a customer's margin account after close of market each day. The customer shall settle with cash or spot securities any portion that is beyond the long position limit or short position limit.
After a customer places an order for a short sale, if a rise in the price causes the customer's short balance to exceed the short position limit, the securities firm may lend the security to the customer for short selling within the extent of the daily price limit on the given day, provided that if short sales of ETF beneficial certificates with foreign component securities, offshore ETF beneficial certificates, or futures ETF beneficial certificates are not subject to a price limit, the securities firm may accommodate short sale of the securities within the extent of the highest trade price on the given day.
When the market price per trading unit of a security sold short exceeds the short position limit, a customer may sell one trading unit short if the customer's margin account is clear of any short balance.
|
|
| Article 49 | Upon execution of a margin purchase or short sale, the securities firm shall, by 10 a.m. on the second business day after the trade date, collect from the customer a margin for the margin purchase, based on the balance of the trade price of the margin purchase less the dollar amount of the margin loan, or in the case of a short sale, a margin for the short sale, based on the trade price of the short sale multiplied by a required percentage (any amount less than NT$100 shall be calculated as NT$100).
|
|
| Article 50 | A securities firm providing a margin loan to a customer shall do so and perform settlement on behalf of the customer based on the amount of the margin loan as calculated by multiplying the trade price of the margin purchase by a required percentage (with any amount less than NT$1,000 excluded from calculation); all securities bought on margin shall serve as collateral.
A securities firm lending a security to a customer for short selling shall do so and perform settlement on behalf of the customer based on the type and quantity of the security sold short in that trade; the proceeds from the short sale conducted by the customer with securities provided by the securities firm acquired through margin purchase shall serve as collateral after deducting the securities transaction tax, the short sale handling fee, and the securities firm handling fee; proceeds from the short sale conducted by the customer with Borrowed Securities or Proprietary Securities shall serve as collateral after deducting the securities transaction tax and securities firm handling fee.
A securities firm borrowing securities from a securities firm or securities finance enterprise conducting money lending in connection with securities business shall deposit a performance bond with the TWSE in accordance with the Regulations Governing the Performance Bond for the Lending of Securities by Securities Firms and Securities Finance Enterprises.
|
|
| Article 51 | A securities firm shall, for a margin purchase, collect from the customer the interest on the margin loan at the stated interest rate, and, for a short sale, pay interest at the stated interest rate on the short sale margin and on the remainder of the proceeds from the short sale under paragraph 2 of the preceding article.
The interest under the preceding paragraph shall accrue for the number of days from the second business day after the day on which the margin purchase or short sale is executed to the day before the payment day.
|
Info |
| Article 52 | Where a securities firm charges a customer a short sale fee, expenses incurred from refinancing from a securities finance enterprise due to a shortfall in the security shall be borne by the securities firm.
Where a securities firm charges a customer a short sale handling fee, the various fees and expenses required for any competitive bid loan, negotiated transaction, or purchase by tender offer conducted by a securities finance enterprise shall be borne by the customer. The securities firm shall further calculate pursuant to the following principles for short sellers the fees and expenses for each share of the security sold short based on the short balance for that security for which a short sale handling fee is charged, on the date the shortfall in the security occurs, and then collect payment from each short seller in the short sales in an amount determined by the number of shares it sells short:
- If the margin balance is larger than or equal to the short balance of the security for which a short sale handling fee is charged, and the balance of Borrowed Securities and Proprietary Securities is smaller than the balance of securities lent through securities lending, securities lent to securities firms and securities finance enterprises conducting money lending in connection with securities business, and securities lent through the TWSE securities lending system ("Lending Balance") plus the short balance for which a short sale fee is charged, the short seller does not have to bear the fees.
- If the margin balance is smaller than the short balance for which a short sale handling fee is charged, and the balance of Borrowed Securities and Proprietary Securities is larger than or equal to the Lending Balance plus the short balance for which a short sale fee is charged, the short seller shall bear the fees in full.
- If the margin balance is smaller than the short balance for which a short sale handling fee is charged, and the balance of Borrowed Securities and Proprietary Securities is smaller than the Lending Balance plus the short balance for which a short sale fee is charged, the short seller shall bear a proportion of the fees as calculated pursuant to the following formula:
(short balance for which a short sale handling fee is charged - margin balance)/[(short balance for which a short sale handling fee is charged - margin balance) + (Lending Balance + short balance for which a short sale fee is charged) – (balance of Borrowed Securities and Proprietary Securities)]
The securities firm may collect the fees and expenses receivable under the preceding paragraph by deducting the amount from the short sale collateral funds in the customer's margin account.
During the suspension or halting of trading of the securities, if there is a difference in the number of the securities, the securities firm may borrow from the securities finance company. The securities finance company may purchase securities by tender offer according to Chapter 3 of the TWSE Rules Governing Purchase of Listed Securities by Reverse Auction or according to Chapter 3 of the TPEx Rules Governing Reverse Auction of TPEx Listed Securities in the event of inadequate sources of securities.
For shares of securities obtained and distributable as a result of a securities finance enterprises conducting a purchase by tender offer, the securities firm shall distribute the shares to those short sellers who have a short balance for which a short sale handling fee is charged in the security, on the date the security falls short, in a quantity decided on a pro rata basis in accordance with the principles of paragraph 2 and rounded to an integral trading unit, for them to buy in to cover their short positions; any quantity remaining after the distribution shall further be distributed to these short sellers in the order of the size of the decimal portion of their respective distributable quantity, and if for a decimal number there are multiple short sellers, to one or more of them determined by drawing lots.
Where two or more tender offer purchases are conducted [to cover securities shortfalls arising in the course of short sale operations], the dollar amounts of the purchases that are allocable to the short sellers shall be calculated by the weighted average method.
|
|
| Article 53 | A securities firm shall calculate, on a daily mark-to-market basis, the collateral maintenance ratio for each margin account as a whole and for each margin purchase and short sale in each margin account by the following formula:
collateral maintenance ratio = {market value of collateral securities for margin purchase(s) + initial collateral and short margin for short sale(s) + market value of securities deposited as collateral or other merchandise} ÷ {original margin purchase amount(s) + market value of underlying securities sold short} × 100 percent
The market value of securities and other merchandise under the preceding paragraph shall be calculated based on the paragraph below , provided that for the six business days prior to an ex-rights or ex-dividend date for a TWSE or TPEx listed security pledged as collateral for a margin purchase, with the exception of in cases of a cash capital increase, the market value of the collateral security and the market value of TWSE or TPEx listed securities pledged as collateral shall be calculated based on the respective current day's closing price, minus the value of the cash dividend, or minus the value of the stock dividend calculated based on the current day's closing price.
- TWSE or TPEx listed book-entry central government bonds, local government bonds, corporate bonds, financial bonds: par value.
- TWSE or TPEx listed securities: the closing price of Taiwan Stock Exchange or Taipei Exchange.
- Gold that is registered for trading over the counter: the average price at closing based on the highest buying price quote and the lowest selling price quote ("the average closing price").
- An open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate: the net asset value per beneficiary unit of the prior business day.
If the security the customer purchases on margin is subject to a 20 percent or more share dividend rate in gratuitous distribution of shares, or the issuer of the securities conducts a demerger and capital reduction, and after the capital reduction, the stock resumes trading and is TWSE or TPEx listed on the same day as the stock of the assignee company of the demerger, then unless the competent authority has otherwise imposed trading restrictions on the security, the newly issued rights shares or the stock of the assignee company of the demerger shall all be pledged as collateral, with the option of income tax deferral to be waived, and shall be transferred through book-entry by the central securities depository into the securities firm's segregated account for margin purchases and short sales, notwithstanding the provisions of Article 33 of the Regulations Governing Handling of Shareholder Services by Public Companies.
The securities firm may not use the newly issued rights shares or the stock of the assignee company of the demerger under the preceding paragraph as a source of securities for lending in its conduct of securities trading short sale operations or as collateral for refinancing.
The provisions of paragraph 2 shall not apply to newly issued rights shares or the stock of the assignee company of the demerger used as collateral. After the security is traded ex-rights, the market value of the newly issued rights shares shall be calculated as 70 percent of the closing price if they are TWSE or TPEx listed securities for margin purchase and short sale, or 50 percent of the closing price if they are not qualified according to Article 2 or 3 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale, or are suspended according to Article 4 or 5 of the same Standards. After such shares have been transferred into the securities firm's segregated account for margin purchases and short sales, their market value is no longer required to be discounted.
The number of new beneficial right units after a split of the ETF beneficial certificates and beneficial certificates of futures trust exchange-traded funds acquired by a securities firm through margin purchases shall be deposited into the securities firm's segregated account for margin purchases and short sales as margin balance. The number of new beneficial right units after a split of the ETF beneficial certificates and beneficial certificates of futures trust exchange-traded funds deposited as additional collateral by a securities firm in accordance with Article 57 shall be deposited into the securities firm's segregated account for margin purchases and short sales as securities to be deposited as additional collateral.
The market value of collateral securities for margin purchases and the original collateral and short margin for short sales, the market value of securities deposited as collateral or other merchandise referred to in paragraph 1 means the balance of the money, market value of securities and other merchandise in a customer margin account after deducting the short sale fee, competitive auction lending fee, negotiated lending fee, and fee for purchase of securities by tender offer [to meet a securities shortfall in short selling]; if there is any residual obligation after a settlement trade has been made or after the securities firm has disposed of the collateral, the residual obligation shall also be deducted.
|
Info |
| Article 54 | Where the overall collateral maintenance ratio of the customer margin account is lower than 130 percent, the securities firm shall issue a margin call to the customer demanding the deposit, within two business days from the day the margin call is received, of additional margin collateral for the margin purchase or short sale that falls below the collateral maintenance ratio, to cover the margin deficiency.
Margin deficiencies that a customer is required to cover under the preceding paragraph shall be calculated by the following formulas:
■ deficiency in margin for margin purchase = original margin purchase amount - (closing price on the day of calculation × number of shares purchased on margin × margin purchase leverage ratio) - (par value, closing price and average closing price of the day of calculation or net asset value per beneficiary unit of the prior business day × unit number of shares of the stock under paragraph 3 and securities deposited as collateral or other merchandise under Article 57 × margin purchase leverage ratio)
■ deficiency in margin for short sale = (closing price on the day of calculation × number of shares sold short × margin percentage required for short sale - initial margin for short sale) + (closing price on the day of calculation × number of shares sold short - original short sale proceeds) - (par value, closing price and average closing price of the day of calculation or net asset value per beneficiary unit of the prior business day × unit number of shares of the securities deposited as collateral under Article 57 or other merchandise).
In the formula for calculating the deficiency for margin purchase under the preceding paragraph, if the stock under paragraph 3 of the preceding article or the securities deposited as collateral or other merchandise under Article 57 are categorized as book-entry central government bonds, local government bonds, corporate bonds, financial bonds, gold that is registered for trading over the counter, an open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate, its financing ratio shall be calculated based on the maximum financing ratio of TWSE or TPEx listings announced by the competent authority; for others that are not eligible for margin purchase or short sale under Article 2 or 3 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale or are temporarily suspended under Article 4 or 5 of the same Standards, then the margin purchase leverage ratio shall be set at zero.
Where trading of securities has been suspended or halted, the collateral maintenance ratio in paragraph 1 of the preceding article and the margin deficiencies required to cover in paragraph 2 of this article shall be calculated based on the closing price of the business day immediately before suspension or halting of trading.
For purposes of calculation of the collateral maintenance ratio in the preceding article and the margin deficiencies that a customer is required to cover in paragraph 2 of this article, if a closing price is not available for the given day, it shall be calculated as the price determined by the following principles:
- When the highest buy price quoted as of market close on the given day is higher than the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the TPEx, the highest buy price quoted will be the price.
- When the lowest sell price quoted as of market close on the given day is lower than the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the TPEx, the lowest sell price quoted will be the price.
- When the above circumstances are not met, the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the TPEx will be the price.
The terms "the auction reference price at market opening" and "the basis price for the opening of trading" in the preceding paragraph shall have the meaning specified in Article 58-3, paragraph 4 of the TWSE Operating Rules, or Article 60-1 of the TPEx Trading Rules.
|
Info |
| Article 55 | If, after a securities firm has issued a margin call demanding additional deposit to cover a margin deficiency in accordance with paragraph 1 of the preceding article, the customer fails to make the additional deposit, or makes deposit covering only part of it, within two business days from receipt of the margin call, unless agreed by both parties otherwise, the securities firm shall take the following measures:
- If the overall collateral maintenance ratio of the customer's margin account still falls below the required level on the given day, the securities firm shall dispose of the collateral by the mutatis mutandis application of Article 81, paragraph 3, starting from the next business day.
- If the overall collateral maintenance ratio of the customer's margin account is restored to 130 percent or higher on the given day, the securities firm may refrain for the time being from disposing of the collateral; provided that if the ratio again falls below the required level on any subsequent business day, and if the customer fails to make additional deposit on its own initiative to cover the deficiency that same afternoon, it shall dispose of the collateral by the mutatis mutandis application of Article 81, paragraph 3, starting from the next business day.
- If prior to disposal of collateral pursuant to the provisions of the preceding subparagraph, the customer makes successive deposits sufficient to cover the deficiency stated in the margin call, the securities firm shall expunge the record of the margin call.
- If the overall collateral maintenance ratio of the customer's margin account is restored to 166 percent or higher, the securities firm shall expunge the record of the margin call.
The collateral disposed of under the preceding paragraph shall be the collateral for a given margin purchase or short sale in the customer's margin account for which a margin call has been issued demanding additional deposit of collateral to meet the collateral maintenance ratio. 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, 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.
When a securities firm disposes of the collateral for margin purchases and/or short sales in customer margin accounts where a margin call has been issued demanding additional deposit of collateral to meet the collateral maintenance ratio, and where the customers concerned have failed to make the additional deposit within the specified time limit, the securities firm may take the newly issued rights shares or the stock of the assignee company of the demerger of those customers that are in amounts of less than one trading unit and combine them into trading units for the purpose of disposal.
|
Info |
| Article 56 | If a deficiency occurs with respect to the overall collateral maintenance ratio of a customer's margin account as a result of settlement of any part of the transaction of margin purchase and short sale, the securities firm shall retain as collateral all or part of the funds and/or securities payable within the extent necessary to maintain the 130 percent collateral maintenance ratio.
|
|
| Article 57 | A customer may deposit the following securities or other merchandise as additional collateral for the short sale margin and any deficiency the customer is required to cover under Article 54:
- TWSE or TPEx listed book-entry central government bonds, local government bonds, corporate bonds, financial bonds.
- TWSE or TPEx listed securities whose trading method has not altered or other than those listed on the Taiwan Innovation Board, primary listed on the Taiwan Innovation Board or managed stocks for OTC trading, excluding ETF beneficial certificates being traded in foreign currency.
- Gold that is registered for trading over the counter.
- If an open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate, it must be denominated in NT dollars and of a domestically offered and domestically invested securities investment or a domestically offered and domestically invested futures trust fund which is offered to the general public, including those purchased in the name of a securities firm as the customer.
The aforesaid securities deposited or other merchandise eligible for margin purchase and short sale as additional collateral may not:
- be less than one trading unit if being TWSE or TPEx listed securities and gold;
- be less than one trading unit, if being an open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate.
- be any registered shares issued to and acquired by shareholders or capital contributors as a result of capital increase out of earnings, or capital increase through contribution by company employees out of their bonuses to the industry in which they are serving, or capital increase by a venture capital company out of undistributed earnings, as effected in accordance with Article 13 of the Statute (Act) for Encouragement of Investment or Article 16 or 17 of the Statute (Act) for Upgrading Industries, that have not been transferred and reported for tax purposes.
Where the securities firm accepts the deposit by the customer of securities or other merchandise that are not owned by the customer as in the first paragraph, as additional collateral to offset against the margin requirement, it shall additionally submit the household registration record and consent letter obtained from the owner.
If the securities deposited as collateral to offset against a margin requirement under paragraphs 1 and 3 are subject to a 20 percent or more share dividend rate in gratuitous distribution of shares, or the issuer of the securities conducts a demerger and capital reduction, and after the capital reduction, the stock resumes trading and is TWSE or TPEx listed on the same day as the stock of the assignee company of the demerger, the provisions of paragraphs 3, 4, and 5 of Article 53 shall apply to the newly issued rights shares or to the stock of the assignee company of the demerger for which the circumstances set forth in paragraph 2, subparagraph 3 do not exist, and the consent letter under the preceding paragraph shall specify the waiver of the option of income tax deferral.
A securities firm that accepts a customer using open-end type securities investment trust fund beneficiary certificates for margin purchase and short sale as additional collateral under the name of the securities firm, shall keep a registration log for management purposes and inform relevant information to the Taiwan Depository and Clearing Corporation ("TDCC"); book-entry operations for centrally deposited securities do not apply.
A securities firm that accepts a customer using book-entry central government bonds for margin purchase and short sale as additional collateral, shall open a collateral account at the Book-Entry Central Government Securities Clearing Bank for margin sale transfer.
|
Info |
| Article 58 | Where a customer applies by means other than in person to use securities, other merchandise, or securities investment trust fund beneficiary certificates purchased in the name of the securities firm in its central securities depository account established and maintained with a securities firm to deposit as additional collateral to offset against a short sale margin requirement or a deficiency it is required to cover under Article 54, the provisions of the preceding article shall still apply, and it is required that the customer sign a letter of consent for carrying out the operation of depositing securities or other merchandise as additional collateral by means other than in person and that the securities firm keep it on record after verification.
When a customer submits an offsetting application by telephone as described in the preceding paragraph, the securities firm shall verify the identity of the customer and synchronously record the telephone call. The telephone recording shall be kept at its place of business and preserved for at least one year, or in the event of any dispute, until the dispute has been resolved.
|
Info |
| Article 59 | The securities deposited or other merchandise to offset against margin requirements under the preceding article shall be valued as follows:
- book-entry central government bonds : valued at 90 percent of their par value.
- local government bonds, corporate bonds, financial bonds: valued at 70 percent of their par value.
- TWSE or TPEx listed securities eligible for margin purchase or short sale: valued at 70 percent of the auction reference price at market opening on the day or the basis price at the commencement of trading of that day when they are deposited.
- Securities not qualified according to Article 2 or 3 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale, or suspended according to Article 4 or 5 of the same Standards: valued at 50 percent of the auction reference price at market opening or the basis price at the commencement of trading on the day they are deposited.
- Gold that is registered for trading over the counter: valued at 70 percent of the average market price on the business day prior to the margin purchase and short sale day.
- An open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate: valued at 70 percent of the net asset value per beneficiary unit on the business day prior to the margin purchase and short sale day.
The provisions of Article 54, paragraph 5 apply to the terms "the auction reference price at market opening" and "the basis price for the opening of trading" in the preceding paragraph.
For the purpose of calculating the overall account collateral maintenance ratio for a customer's margin account, the securities firm is not required to discount the value of securities deposited or other merchandise to offset against margin requirements.
|
Info |
| Article 60 | If any of the following circumstances applies to any securities deposited or other merchandise by a customer to offset against its margin requirements, the securities firm shall deduct the value of such securities or other merchandise when calculating the collateral maintenance ratio under Article 53, and shall promptly notify the customer to replace such securities within three business days from receipt of the notice with cash of equivalent value or other securities eligible for use as additional collateral in offsetting against margin requirements:
- there is any defect in the rights or any other legal dispute.
- the provisions of Article 57 are not complied with.
If any of the following circumstances applies to any securities deposited or other merchandise by a customer to offset against its margin requirements, upon notice by the securities firm, a customer shall replace the securities with equivalent cash or other securities or merchandise eligible for margin requirements within the following period:
- TWSE or TPEx listed securities, book-entry central government bearer bonds, local government bonds, corporate bonds, financial bonds, gold that is registered for trading over the counter: Upon the approval and public announcement by TWSE or TPEx of the termination of listing on the TWSE or TPEx, a securities firm shall give notice to a customer requesting it to make replacement 10 business days prior to the termination of listing. However, the aforesaid does not apply if (1) the proviso of Article 35-2 applies to the listed securities and (2) an open-end type fund beneficiary certificate for trading over the counter.
- Book-entry central government bearer bonds, local government bonds, corporate bonds, financial bonds: 10 business days prior to the date of partial redemption payment.
- For merger of an open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate: 10 business days prior to the termination of the trust contract or the expiration date of the extension period. However, if the surviving open-end type securities investment trust fund after merger is qualified under Article 57 requirements, the aforesaid is not applicable.
In the event of suspension or halting of trading of any securities deposited by a customer to offset against its margin requirements, no replacement is required.
|
Info |
| Article 61 | If there is any change in price resulting in an increase in the amount of the collateral value minus the obligations in the customer's margin account, the securities firm may not for that reason only deliver to the customer any cash, securities or other merchandise equivalent in amount to such increase, or use the amount to offset against the margin purchase margin or short sale margin.
|
|
| Article 62 | A customer giving an order to sell stock to settle (repay) a margin purchase or to buy stock to settle (repay) a short sale shall fill out an order ticket marked RETURN OF MONEY or RETURN OF STOCK, as the case may be; the securities firm receiving the order shall first check and verify that the type and quantity of shares under the settlement trade correspond to those on record for the original margin purchase or short sale before accepting the sell or buy order.
Upon execution of the settlement trade under the preceding paragraph, the securities firm shall prepare a trade report marked RETURN OF MONEY or RETURN OF STOCK, as the case may be, and have it signed/sealed by the customer.
If the execution of the settlement trade specified in the customer's order under paragraph 1 fails to fully satisfy the customer's obligation, the securities firm shall notify the customer to settle the remaining obligation by the second business day after the trade date, or directly use the money in the customer's margin account to offset against the remaining obligation.
|
|
| Article 63 | A customer applying to settle a margin purchase with cash or a short sale with spot securities shall deliver the money or securities by 12 noon of the current day, and shall fill out an Application to Settle a Margin Purchase with Cash or Application to Settle a Short Sale with Spot Securities and submit the application to the securities firm. Upon verification of the accuracy of the content, the securities firm shall deliver the short sale proceeds and short sale margin to the customer by the second following business day, or in the case of securities bought on margin or securities deposited or other merchandise as collateral, or securities investment trust fund beneficiary certificates purchased not in the name of a securities firm, where the customer has maintained a depository account or a book-entry central government securities account, transfer the securities to the account by the second following business day, or in the case of withdrawal of spot securities by the customer, deliver the securities by the third following business day.
A customer applying to settle a short sale with spot securities which are borrowed from the same securities firm through securities lending business as the source of securities, the short sale collateral, short sale margin, or securities eligible to be deposited as collateral by securities firms for conducting securities lending business may, with the customer’s consent, be pledged as collateral of the securities concerned and not be subject to the requirement for transfer through book-entry in the preceding paragraph. Any balance after the pledge as collateral shall be returned pursuant to the preceding paragraph unless the securities firm and customer agree otherwise.
The matters mentioned in the preceding paragraph that are subject to the customer’s consent and agreement with the customer shall be recorded by the securities firm.
During the suspension or halting of trading of the underlying securities in margin purchase and short sale, the customer may apply to settle a short sale by cash payment or delivery of spot securities.
Except under any of the following circumstances, the customer may not apply to use third-party securities as spot securities to settle a short sale:
- during a period in which trading has been suspended or halted in the underlying securities of the short sale
- where an order for margin purchase has been placed to settle the short sale at the maximum price of the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the TPEx on the same day and cannot be executed before the start of the trading session of the sixth business day prior to the book closure date of the underlying securities.
Where the securities acquired by a customer through margin purchases are short of one trading unit as a result of a split, reverse split, or otherwise, settlement of margin purchases with cash shall be carried out in respect of fractions of said unit
|
|
| Article 64 | Where a customer applies to settle a margin purchase with cash or a short sale with spot securities by means other than in person, the provisions of the preceding article shall still apply, except that the customer's signature or seal is not required on the settlement application form if the customer has already submitted a signed Letter of Consent That Applications to Settle with Cash or Spot Securities Do Not Require a Signature/Seal, and if the securities firm has kept it on record after verification.
When a customer makes an application as described in the preceding paragraph by way of telephone, the securities firm shall verify the identity of the customer or its authorized agent and synchronously record the telephone call. When an application is made by way of telecommunication or through electronic means, the securities firm shall verify the customer's expression of intent and the identify of the customer or its authorized agent and keep the records. The telephone and telecommunication recording shall be kept at its place of business. In case of electronic recording, information stored on electronic media shall always be ready to be converted into written form. Records shall be preserved for at least 1 year, or in the event of any dispute, until the dispute has been resolved.
The authorized agent in the preceding paragraph shall be issued a letter of authorization by the customer, stating that the authorized agent may act for and on behalf the customer in handling matters relating to settlement with cash or spot securities.
Where a customer has submitted a signed Letter of Consent That Applications to Settle with Cash or Spot Securities Do Not Require a Signature/Seal under paragraph 1, except in the circumstance mentioned in paragraph 2 of the preceding article, the short sale collateral price and short sale margin returnable by the securities firm to the customer shall be deposited into the same bank deposit account used for book-entry settlement of the customer's trading orders, and the securities bought on margin and/or the securities deposited or other merchandise as collateral returnable by the securities firm to the customer shall be transferred into the customer's book-entry custody account or a book-entry central government securities account. Securities or other merchandise deposited as collateral that are not owned by the customer shall be returned through book-entry transfer.
Securities firms that accept a customer using securities investment fund beneficiary certificates purchased in the name of the securities firm to settle a margin sale, shall operate according to Article 57, paragraph 5. The return transfer in the preceding paragraph is not applicable.
|
Info |
| Article 65 | Securities firms shall process collections and payments from and to the customer such as use of cash or spot securities to settle a margin purchase or short sale and margin calls through securities delivery account.
|
|
| Article 66 | During the period when a securities finance enterprise is engaging in a competitive bid borrowing, negotiated borrowing, or purchase by tender offer to cover a security that falls short of short sale needs, a securities firm may temporarily suspend the short selling of that security, and may also refrain from processing cash settlement of any margin purchase of that security, except in the case of settling a margin purchase at maturity, or where a customer is applying to settle a margin purchase with cash and will use the receivable securities to settle a short sale.
Where a securities firm conducts securities margin purchase and short sale business, and the combined total balance of short sales of any given type of securities plus the balance of loans of that type of securities extended in securities lending business and the Lending Balance in Article 7, paragraph 2, subparagraphs 5 to 7 reaches the combined total balance of margin purchases and the sum of Borrowed Securities and Proprietary Securities, the securities firm, during the resulting period of cessation of provision of short sales, may not withdraw the Proprietary Securities that have been used as a source of securities for short sale business.
A securities firm that has provided Borrowed Securities or Proprietary Securities to a customer for short selling may not request the customer to repay the short sale upon the lender’s request for early repayment.
|
Info |
| Article 67 | A securities firm may seek refinancing from a securities finance enterprise of any funds and securities that it needs in conducting securities trading margin purchase and short sale business.
The securities firm is still required to fulfill its clearing and settlement obligations with the TWSE or the TPEx with respect to the funds or securities refinanced under the preceding paragraph.
The securities firm shall prepare daily statements according to the following categories, and carry out clearing and settlement operations in accordance with the provisions of the TWSE Operating Rules, the TPEx Trading Rules, the Rules Governing Payment and Settlement Operations for Securities Traded on the TPEx, and the operating rules of the central securities depository:
- For margin purchases and short sales executed on behalf of securities finance enterprises, the securities firm shall prepare a separate Table of Applications for Margin Purchases and Short Sales by Securities Finance Enterprises, and reconcile the information therein with the records of the securities finance enterprises.
- For margin purchases and short sales executed with its own funds, the securities firm shall prepare a separate Itemized Table of Margin Purchases and Short Sales by Securities Firm.
- For trades executed with the refinancing from securities finance enterprises, the securities firm shall prepare a separate Table of Applications by Securities Firm for Refinancing in Margin Purchases and Short Sales, and reconcile the information therein with the records of the securities finance enterprises.
Upon entering the information respectively under the subparagraphs of the preceding paragraph into the mainframe computer of the central securities depository by the specified time limit and upon entering the prepared summary statements into the mainframe computer of the TWSE or TPEx, the securities firm shall print out a Delivery List or Payment and Settlement List containing the information entered.
|
|
| Article 68 | A securities firm shall maintain accurate and detailed records of and receipt/payment vouchers for funds and securities received and paid in conducting the business of securities trading margin purchase and short sale and refinancing from securities finance enterprises, and shall prepare the following statements on a daily basis:
- Daily operations statement of margin purchases and short sales.
- Summary statement and itemized statement of increments, settlement, and balances of margin purchases and short sales.
- Itemized statement of receipts, deliveries, disposals, and uses of collateral for margin purchases and short sales.
- Statement of settlement with cash and spot securities.
- Summary statement of margin calls and deposits.
- Itemized statement of deposits of securities or other merchandise as collateral.
- Itemized statement of refinancing applications and settlements.
- Itemized statement of refinancing balance.
- Itemized statement of collateral for refinancing.
- Summary statement and itemized statement of increments, settlement, and balances of margin purchases and short sales.
- Itemized statement of performance bond.
|
|
| Article 69 | A securities firm shall on daily basis transmit information regarding the authorized limits on margin purchases and short sales, transaction details and balances for each customer to the TWSE or the TPEx, which shall compile such information and publish the balances of margin purchase and short sales before the next day's market opening.
|
|