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Taiwan Stock Exchange Corporation Specific Standards and Procedures for Determining Eligibility of Securities for Margin Purchase and Short Sale Transactions(2006.11.24) |
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These Standards and Procedures are prescribed pursuant to Article 2, paragraphs 5, 6, and 12 and Article 3, paragraph 2 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale.
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For the purposes of these Standards and Procedures, the following terms shall have the following meanings:
(1) Subject securities:
(i) Common shares that have been listed on an exchange for six months and have a net worth per share of not less than par value.
(ii) Taiwan depositary receipts that have been listed on an exchange for six months, and whose issuer has not posted an accumulated deficit in either the CPA-audited and certified consolidated financial report for the most recent fiscal year or the CPA-audited and certified half-year consolidated financial report (either report shall have been prepared in compliance with the laws and regulations of the issuer's home country).
(iii) Beneficial interest certificates that have been listed on an exchange for six months. However, the beneficial interest certificates of an exchange-traded fund ("ETF beneficial interest certificates") need not be subject to the six-month listing requirement.
(2) Review date: The review date is the date on which the exchange listing of a subject security reaches six full months. If it falls on a non-business day, it is moved back to the next business day.
(3) Net worth per share: Based on the published and filed financial report, available as of the review date, for the most recent fiscal year.
(4) Accumulated deficit: Based on the published and filed CPA-audited and certified consolidated financial report for the most recent fiscal year or half-year available as of the review date.
(5) Sampling period: The 90 business days preceding (and inclusive of) the review date constitute the sampling period, which is taken as the acquisition period for the data used in calculations.
(6) Sampled securities: Exchange-listed common shares, Taiwan depositary receipts, and beneficial interest certificates that have not been placed under an altered trading method are the sampled securities, which serve as the basis for comparison with subject securities.
(7) Degree of price fluctuation: Refers to the average daily degree of price fluctuation (absolute value) as calculated during the sampling period for the subject securities, sampled securities, or securities of industry peers.
(8) Spread ratio: Refers to the ratio between: (a) the spread between the highest and lowest prices for the subject securities, sampled securities, or securities of industry peers, as calculated during the sampling period; and (b) the respective average prices thereof.
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Where a review of subject securities on the review date reveals none of the following circumstances, the Taiwan Stock Exchange Corporation (TSEC) shall publicly announce the securities as eligible for margin purchase and short sale:
(1) Where either one of the following descriptions applies to subject securities, the share price is too volatile:
(i) The degree of price fluctuation for the securities is equal to the average value for degree of price fluctuation for the sampled securities plus two or more standard deviations, and exceeds 150% of the average value for degree of price fluctuation for the securities of industry peers.
(ii) The degree of price fluctuation for the securities is equal to the average value for degree of price fluctuation for the sampled securities plus two or more standard deviations, and exceeds 150% of the average value for degree of price fluctuation for the securities of industry peers.
(2) Where either one of the following descriptions applies to subject securities during the sampling period, trading volume is excessively abnormal.
(i) The turnover rate for the securities is 10 or more times the average turnover rate for the sampled securities.
(ii) The turnover rate for the securities is less than 10 percent of the average turnover rate for the sampled securities, and the total figure for trading volume is less than 3,000 round lots of shares or 3,000 trading units.
(3) Where either one of the following descriptions applies to subject securities, equity ownership or beneficial ownership is overly concentrated:
(i) Shares: Shareholders owning 1,000 to 50,000 shares are fewer than 500 in number. Taiwan depositary receipts: Holders of Taiwan depositary receipts owning 1,000 to 50,000 units are fewer than 500 in number. Beneficial interest certificates: Persons owning not more than 100,000 beneficial interest units are fewer than 1,000 in number.
(ii) Shares: The holdings of all directors, supervisors, managerial officers, and shareholders with a stake of greater than 10 percent, account for a combined total of 75 percent or more of the company's listed registered shares, and the company's paid-in capital is NT$500 million or less; or the aforementioned holdings are 80 percent or more and paid-in capital is greater than NT$500 million and less than NT$5 billion; or the aforementioned holdings are 85 percent or more and paid-in capital is greater than NT$5 billion. Taiwan depositary receipts: The holdings of persons owning greater than 5 percent of the company's total issued Taiwan depositary receipt units account in combination for greater than 80 percent of total issued units as recorded in the register of Taiwan depositary receipt holders. Beneficial interest certificates: The beneficial interest units recorded in the register of beneficial owners under the names of beneficial owners holding more than 5 percent of the total dollar amount of a
fund account in combination for greater than 80 percent of the total dollar amount of the fund.
(4) Other circumstances where it may be deemed that share price is too volatile, or trading volume is excessively abnormal, or equity ownership of beneficial ownership is overly concentrated.
The provisions of the preceding paragraph do not apply to ETF beneficial interest certificates.
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To review for the existence of circumstances constituting overly concentrated equity ownership or beneficial ownership as set out in paragraph 3 of the preceding article, prior to the review date the TSEC will first ask an exchange-listed company, foreign issuer, or securities investment trust enterprise to furnish equity ownership and beneficial ownership data for the exchange date, to serve as the basis for review.
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Where it is found upon review that equity ownership or beneficial ownership of subject securities is overly concentrated, the TSEC will wait for the exchange-listed company, foreign issuer, or securities investment trust enterprise to furnish the TSEC with records indicating that equity ownership or beneficial ownership is no longer overly concentrated, then conduct another review.
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Where it is found upon review that share price is too volatile, or trading volume is excessively abnormal, the TSEC will regularly conduct further reviews on the last business day of each month.
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Securities that are to be listed on an exchange shall, unless equity ownership is overly concentrated, be announced as eligible for margin purchase and short sale from the date of the exchange listing if they meet the descriptions given below (standards and procedures for making determinations regarding the subject matter of this paragraph shall be subject to the provisions of Point 3, paragraph 1, subparagraphs 3 and 4, as well as the provisions of Point 5):
(1) The securities to be listed on an exchange are OTC-listed shares, eligible for margin purchase and short sale, that the issuer is applying to switch to an exchange listing.
(2) The securities to be listed on an exchange are shares, eligible for margin purchase and short sale, issued by an exchange-listed or OTC-listed company that is to be converted in accordance with the Financial Holding Company Act into a financial holding company.
(3) The securities to be listed on an exchange are shares, eligible for margin purchase and short sale, issued by an exchange-listed or OTC-listed company that is to be converted into an investment holding company through a 100 percent share conversion in accordance with the Business Mergers and Acquisitions Act.
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These Standards and Procedures, and any subsequent amendments hereto, shall be implemented upon submission to and ratification by the competent authority.
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