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Standards Governing Margin Purchase and Short Sale of Securities(2002.08.02) |
| Date： |
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Article 1
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These Criteria are prescribed in accordance with Article 61 of the Securities and Exchange Law.
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Article 2
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Where any common stock has been listed for more than six (6) months and the net worth per share is not less than the par value, the stock exchange may publicly announce that margin purchase and short sale may be permitted for such stock and shall make a collective report to the Securities & Futures Commission, Ministry of Finance ("SFC") on monthly basis.
Where a common stock that is not OTC-managed, Category 2 stock, or emerging stock has been OTC-listed for six months, and its net worth is not less than the par value, upon fulfilling the following requirements, the OTC exchange may publicly announce that such stock may be traded on margin purchase and short sale, and report to the SFC at each month.
1.It has been incorporated and registered for at least five years;
2. Its paid in capital is NT$300 million or more;
3.There are no accumulated loss in the most recent fiscal year, and the ratios of business profits and pre-tax profit to year-end paid-in capital are no less than 3 percent.
If the stocks referred to in the preceding two paragraphs have any of the following conditions, it may not be approved for margin purchase and short sale:
1.Where the stock price fluctuation is too drastic;
2. Where the ownership of shares is over-centralized; or
3.Where the trading volume is excessively abnormal.
The concrete determination standards and operational procedures of the provisions referred to in the Items of the preceding three Paragraphs shall be prescribed by the stock exchange and OTC exchange and approved by the SFC.
After a company changes the OTC stocks eligible for trading on margin purchase and short sale to become listed, unless the shares are overly concentrated, they shall be eligible for trading on margin purchase and short sale, and the regulation in Paragraph 1 regarding the 6 month listing requirement and the regulations in Items 1 and 3 of Paragraph 3 are not applicable; the said procedure shall be prescribed by the stock exchange and reported to the SFC for approval.
The regulations in the preceding Paragraph shall also be applicable for shares that have already been changed to become listed before this amendment went into effect but for less than 6 months.
When a listed (or OTC-listed) company is converted into a financial holding company in accordance with the Financial Holding Company Law, if the shares of the financial institution anticipated to be converted into the financial holding company are eligible for trading on margin purchase and short sale, the shares of the financial holding company after conversion, if it is a listed company, shall be eligible for margin purchase and short sale, unless the shares are overly concentrated; the six-month listing provision of Paragraph 1 and the provisions of Paragraph 3, Subparagraphs 1 and 3 shall not apply. The procedures therefore shall be drafted by the Stock Exchange and reported to the SFC for ratification.
When a listed (or OTC-listed) company is converted into a financial holding company in accordance with the Financial Holding Company Law, if the shares of the financial institution anticipated to be converted into the financial holding company are eligible for trading on margin purchase and short sale, the shares of the financial holding company after conversion, if it is an OTC-listed company, shall be eligible for margin purchase and short sale, unless the shares are overly concentrated; the six-month listing provision, and Subparagraphs 1 and 3, of Paragraph 2, and the provisions of Subparagraphs 1 and 3 of Paragraph 3, shall not apply. The procedures therefore shall be drafted by the OTC Securities Exchange and reported to the SFC for ratification.
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Article 3
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Where any beneficiary certificate has been listed for more than six (6) months, the stock exchange may publicly announce that margin purchase and short sale are allowed for such beneficiary certificate and shall collectively report to the SFC on monthly basis.
The provisions in Paragraphs 3 and Paragraph 4 of the preceding Article shall apply mutatis mutandis to beneficiary certificates.
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Article 4
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If a stock allowed for margin purchase and short sale has any of the following conditions, the stock exchange and OTC exchange may publicly announce the suspension of the margin purchase and short sale transaction of such stock, or adjust the margin purchase ratio or percentage of margin for short sale within the scope prescribed by the SFC and report same to the SFC for recordation:
1. Change to same day settlement for listed stocks, or change to pre-paid settlement for OTC stocks;
2. Trading suspension for listed or OTC-listed stocks;
3. Termination of listing for listed or OTC-listed stocks;
4. The net worth per share of the listed or OTC-listed stock is less than the par value;
5. There has been a major settlement breach for listed or OTC-listed stocks and the ratio of margin purchase or short sale has reached a set ratio;
6. The stock price fluctuation is too drastic;
7. The ownership of shares is over-centralized;
8. The trading volume is excessively abnormal; or
9. There is any other situation for which continued margin purchase or short sale transaction is improper.
Where margin purchase or short sale transaction is suspended or margin purchase ratio or percentage of margin of short sale is adjusted in accordance with the provisions in the preceding Paragraph, if the reason for suspension or adjustment no longer exists, the stock exchange or OTC exchange shall make public announcement of the reinstatement and report to SFC for recordation.
The concrete determination standards and operational procedures of the provisions referred to in the Items of the preceding two Paragraphs shall be prescribed by the stock exchange and OTC exchange and approved by the SFC.
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Article 5
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Where any beneficiary certificate allowed for margin purchase and short sale transactions has any of the following conditions, the stock exchange may make public announcement of suspension of the margin purchase and short sale transactions of such beneficiary certificate, or adjust the margin purchase ratio or the percentage of margin for short sale within the scope prescribed by SFC and report same to SFC for recordation:
1.Where listing of the beneficiary certificate has been terminated;
2.Where the issuer has failed to punctually file and make public announcement of financial reports;
3.Where the securities investment trust enterprise managing the securities investment trust fund has any of the conditions under Article 33 of the Rules for Administration of Securities Investment Trust Enterprises;
4.Where the price fluctuation is too drastic;
5.Where the ownership of beneficiary interests is over-centralized;
6.Where the trading volume is excessively abnormal; or
7.Where there is any other event for which continued margin purchase or short sale transaction is improper.
Where margin purchase or short sale transaction is suspended or margin purchase ratio or percentage of margin of short sale is adjusted in accordance with the provisions in the preceding Paragraph, if the reason for suspension or adjustment no longer exists, the stock exchange shall make public announcement of the reinstatement and report to the SFC for recordation.
The concrete determination standards and operational procedures of the provisions referred to in the Items of the preceding two Paragraphs shall be prescribed by the stock exchange and approved by the SFC.
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Article 6
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When the balance of margin purchase or short sale for each type of stock allowed for margin purchase or short sale transaction reaches 25% of the listed or OTC-listed shares of such stock, the margin purchase or short sale shall be suspended. When the balance is below 18%, the margin purchase and short sale shall be reinstated.
Though the balance of short sale referred to in the preceding Paragraph does not reach 25% or is below 18% but if the balance thereof exceeds the balance of margin purchase, short sale shall be suspended. When the balance has equalized, the short sale shall be reinstated.
In executing the provisions referred to in Paragraph 1 above, the stock exchange and OTC exchange may conduct distribution and report to SFC. When a securities finance enterprise and a securities firm dealing with margin purchase and short sale of securities conducts margin purchases or short sale, the number of stock certificates distributed by the stock exchange and OTC exchange for margin purchase and short sale shall not be exceeded.
The provisions in the preceding three Paragraphs shall apply mutatis mutandis to beneficiary certificates.
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Article 7
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The securities financing enterprises and securities firm dealing with margin purchase and short sale of securities shall, on the afternoon of each day, submit the information of the balance of margin purchase and short sale of each type of securities of that day to the stock exchange and OTC exchange. The stock exchange and OTC exchange shall calculate and make public announcement prior to the opening time of the following business day and notify securities brokers to post the same at their places of business. When margin purchase and short sale transaction is suspended or reinstated by the stock exchange or OTC exchange pursuant to Article 6 herein, the suspension or reinstatement shall be executed on the day of public announcement placed according to the method referred to in the preceding Paragraph.
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Article 8
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These Criteria shall become effective on the date of promulgation.
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Article 9
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These Criteria shall become effective on the date of promulgation.
The amendment of Article 2 and Article 4 hereof shall become effective from October 21, 1997.
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