Chapter IV Collateral value and remargining |
| Article 20 | Securities firms are required to obtain collaterals totaling no less than 110% of the market value of the lent securities (the initial maintenance ratio) when accepting customers' borrowing requests.
Customer is required to maintain a collateral maintenance ratio of no less than 105% for the borrowing period.
The collateral maintenance ratio is calculated as follows:
- Collateral maintenance ratio equals the collateral value divided by the indicative market value of the borrowed bonds, multiplied by 100%.
- Collateral value equals the indicative market value of bonds placed as collaterals plus cash collaterals.
The indicative market values mentioned above are determined using the daily quotations shown in TPEx's Electronic Bond Trading System.
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| Article 21 | If customer's account collateral maintenance ratio falls below 105%, the securities firm shall notify the customer to remargin the lending deals that have fallen short of the required margin level back to the initial maintenance ratio within 2 business days after the notice is served.
If the customer does not remargin to the required level within 2 business days after being notified, the securities firm shall proceed with the following:
- If the customer's account collateral maintenance ratio still falls short of the required maintenance ratio, the securities firm may proceed to dispose the customer's collaterals in accordance with Article 25, Paragraph 1 on the next business day.
- If the customer's account collateral maintenance ratio rises back above the required maintenance ratio, the disposal of collateral can be postponed temporarily. However, if the collateral maintenance ratio falls short again the next business day and the customer does not remargin by the end of the day, the securities firm may proceed to dispose the customer's collaterals in accordance with Article 25, Paragraph 1 on the next business day.
- If the customer remargins up to the level notified before collaterals are disposed, the securities firm shall purge all records of margins called for this instance.
- Customers whose account collateral maintenance ratios have risen back to the initial maintenance ratio or above shall be purged of all margin call records for this instance.
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| Article 22 | If the customer closes one of the lending deals, thereby causing the collateral maintenance ratio of remaining balances in this account to fall short of the required maintenance ratio, the securities firm may retain part or all of the customer's collaterals to the extent necessary to maintain the required maintenance ratio.
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| Article 23 | Customers need to ensure the integrity of the bonds they place as collaterals. Collaterals that contain defects or give rise to legal disputes shall be excluded from the calculation of collateral maintenance ratio described in Article 20. In the meantime, the customer must be notified to provide eligible collateral of equivalent value within 3 business days after the notice is served.
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| Article 24 | If the customer's account collateral maintenance ratio rises above initial maintenance ratio as a result of price variations, the customer may request, subject to the terms agreed between the two parties, to have bond collaterals in excess of the initial maintenance ratio collateral maintenance ratio returned or used to secure other deals. However, the account collateral maintenance ratio must not fall below initial maintenance ratio once the collateral is returned.
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