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Taiwan Stock Exchange Corporation Specific Standards and Procedures for Suspending and Reinstating Margin Purchase and Short Sale of Securities, and for Adjusting Margin Purchase Leverage Limits and Short Sale Margin Requirements(2009.08.10) |
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1. These Standards and Procedures are prescribed pursuant to Article 4 and Article 5 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale ("Margin Purchase and Short Sale Eligibility Standards").
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2. Where any of the conditions set out in Article 4, paragraph 1, subparagraphs 1 through 7, or subparagraph 11, or Article 5, paragraph 1, subparagraphs 1 through 3, or subparagraph 7 of the Margin Purchase and Short Sale Eligibility Standards obtains with respect to exchange-listed securities eligible for margin purchase and short sale transactions, this corporation (TWSE) shall, from the second business day next following public announcement, suspend margin purchase and short sale transactions in accordance with the following principles (unless an exchange-listed financial institution has been duly appointed as receiver by the competent authority in charge of the relevant industry, in which case margin purchase and short sale transactions shall be suspended from the day next following receipt from the competent authority of a notice of receivership):
(1) Where the trading method for exchange-listed shares or Taiwan depositary receipts has been changed to require full delivery, trading has been suspended, or the securities have been delisted, or beneficial certificates have been delisted: When it is announced that the trading method for shares or Taiwan depositary receipts has been changed by the TWSE to require full delivery, or that trading has been suspended, or the securities delisted, then margin purchase and short sale transactions in those securities shall be simultaneously announced; provided, this requirement does not apply to delistings due to merger.
(2) Where a securities investment trust enterprise has failed to punctually file and publish a securities trust investment fund's financial report, or a situation contemplated under Article 96, paragraph 1 of the Securities Investment Trust and Consulting Act obtains with respect to the securities investment trust enterprise that manages a securities investment trust fund: The TWSE shall publicly announce suspension of margin purchase and short sale transactions in the fund's beneficial certificates.
(3) Where net worth per share for exchange-listed shares is below par value:
(i) On the final business day of the fifth month following the close of each business year, the TWSE shall review the company's published and filed annual report audited and attested by the CPA for the most recent period, and published and filed Q1 financial report reviewed by the CPA for the most recent period, and, if net worth per share is below par value, shall publicly announce suspension of margin purchase and short sale transactions in that company's shares.
(ii) On the final business day of the third month following the close of each half business year, the TWSE shall review the company's published and filed half-year financial report reviewed and attested by the CPA for the most recent period, and, if net worth per share is below par value, shall publicly announce suspension of margin purchase and short sale transactions in that company's shares.
(4) Where the issuer of foreign securities evidenced by Taiwan depositary receipts has posted an accumulated deficit: If the issuer has posted an accumulated deficit in either the CPA-audited and attested consolidated annual financial report for the most recent period or the CPA-audited and attested half-year consolidated financial report for the most recent period, the TWSE shall announce suspension of margin purchase and short sale transactions in those depositary receipts on the final business day of the third month following the deadline for public announcement and reporting to the competent authority, securities exchange, or securities market as required by the laws and regulations of the foreign issuer's home country or the jurisdiction where it is listed.
(5) Taiwan depositary receipts number less than 60 million exchange-listed units following redemption.
(6) Where there has been a major default on exchange-listed shares or Taiwan depositary receipts, and the balance of long margin positions or short interest meets or exceeds a prescribed ratio: When the aggregate dollar amount of transaction failures reported in a single day is NT$200 million or more and the balance of long margin positions or short interest on that day meets or exceeds 15 percent of listed shares or units, the TWSE shall publicly announce suspension of margin purchase and short sale transactions in those shares or Taiwan depositary receipts.
(7) Where there is another situation that makes it unadvisable to continue margin purchase and short sale transactions, the TWSE shall publicly announce suspension of margin purchase and short sale transactions in those securities.
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3. Where margin purchase and short sale transactions in exchange-listed securities eligible for margin purchase and short sale transactions have been suspended pursuant to the provisions of the preceding paragraph, such transactions may be reinstated from the second business day next following public announcement if the following conditions are met:
(1) Where the circumstances contemplated under subparagraph 1, 2, or 7 of the preceding point exist: When the reason for suspension is extinguished, the TWSE shall publicly announce reinstatement of margin purchase and short sale transactions in those securities.
(2) Where the conditions contemplated under subparagraph 3 of the preceding point exist:
(i) On the final business day of the fifth month following the close of each business year, the TWSE shall review the company's published and filed annual report audited and attested by the CPA for the most recent period, and the published and filed Q1 financial report reviewed by the CPA for the most recent period, and if net worth per share has returned to par value it shall publicly announce reinstatement of margin purchase and short sale transactions in those securities.
(ii) On the final business day of the third month following the close of each half business year, the TWSE shall review the published and filed half-year financial report audited and attested by the CPA for the most recent period.
(iii) If any law or regulation prescribes otherwise regarding the filing period for the financial reports referred to in the preceding two items, the TWSE shall review the financial reports on the fifth business day following the expiration of each given filing period.
(3) Where the conditions contemplated under subparagraph 4 of the preceding point exist: If the issuer has not posted an accumulated deficit in either the CPA-audited and attested consolidated annual financial report for the most recent period or the CPA-audited and attested half-year consolidated financial report for the most recent period, the TWSE shall announce reinstatement of margin purchase and short sale transactions in those depositary receipts on the final business day of the third month following the deadline for public announcement and reporting to the competent authority, securities exchange, or securities market as required by the laws and regulations of the foreign issuer's home country or the jurisdiction where it is listed.
(4) Where the conditions contemplated under subparagraph 5 of the preceding point exist: The number of Taiwan depositary receipts has returned to 60 million or more exchange-listed units.
(5) Where the conditions contemplated under subparagraph 6 of the preceding point exist: When the aggregate dollar amount of transaction failures reported in a single day has been less than NT$10 million for each of the previous six business days and the figures for both long margin positions and open interest on the last of those six business days are below 15 percent of listed shares or units, the TWSE shall publicly announce reinstatement of margin purchase and short sale transactions in those securities.
Where margin purchase and short sale transactions in exchange-listed securities eligible for margin purchase and short sale transactions have been suspended pursuant to the provisions of subparagraph 3 under the preceding point, the issuer may apply for reinstatement of margin purchase and short sale transactions by submitting the published and filed annual or half-year financial report audited and attested by the CPA, or the published and filed quarterly financial report reviewed by the CPA for the most recent period. The TWSE shall then make disclosure on the Market Information System website and conduct a review five days afterward. Where it is found upon review that net worth per share has returned to par value or higher, margin purchase and short sale transactions in those securities shall be reinstated on the fifth business day next following public announcement.
Where margin purchase and short sale transactions in Taiwan depositary receipts eligible for margin purchase and short sale transactions have been suspended pursuant to the provisions of subparagraph 4 of the preceding point, the issuer may apply for reinstatement of margin purchase and short sale transactions by submitting the CPA-audited and attested consolidated annual financial report for the most recent period or the CPA-audited and attested half-year consolidated financial report for the most recent period. The TWSE shall then make disclosure on the Market Information System (MIS) website and conduct a review five days afterward. Where it is found upon review that there is no accumulated deficit, margin purchase and short sale transactions in those securities shall be reinstated on the fifth business day next following public announcement.
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4. For the purposes of this point, the following terms shall have the following meanings:
(1) Subject securities: Means exchange-listed securities that are eligible for margin purchase and short sale transactions, with the TWSE deciding whether to adjust margin purchase leverage limits and short sale margin requirements; provided, that this does not apply to beneficial certificates of an exchange traded fund (ETF) nor to beneficial certificates of an offshore ETF.
(2) Sampling period: Prices and trading volume are reviewed daily. The 30 business days preceding the review date (inclusive) constitute the sampling period, which is taken as the acquisition period for the data used in calculations.
(3) Sampled securities: Exchange-listed common shares, Taiwan depositary receipts, and beneficial 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.
(4) 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.
(5) 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 for the sampling period; and (b) the respective average prices thereof.
Where, for five consecutive business days or for any six business days during the most recent ten business days, the share price of subject securities is too volatile or the trading volume is excessively abnormal in the manner described below, or if it is determined on the basis of records on equity ownership or beneficial ownership prepared in connection with either: (a) a regular shareholders meeting convened by an exchange-listed company or foreign issuer; or (b) a general meeting of beneficial owners of a securities investment trust fund; that equity ownership or beneficial ownership is overly concentrated, the TWSE shall on the next business day lower the margin purchase leverage limit by 10 percent and raise the short sale margin requirement by 10 percent. Where the aforementioned circumstances occur simultaneously or in close succession, the margin purchase leverage limit shall be lowered by 10 percent and the short sale margin requirement raised by 10 percent one time only.
(1) Where both of the following descriptions apply 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 differential for the securities is equal to the average value for degree of price differential for the sampled securities plus two or more standard deviations, and exceeds 150% of the average value for degree of price differential 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 1,000 round lots of shares or 1,000 trading units.
(3) Where any 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 certificates: Persons owning not more than 100,000 beneficial 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 at least 75 percent 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 at least 80 percent and paid-in capital is greater than NT$500 million and less than NT$5 billion; or the aforementioned holdings are at least 85 percent 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 roster of Taiwan depositary receipt holders. Beneficial certificates: The beneficial 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.
3. Where records on equity ownership or beneficial ownership are not delivered to the TWSE within 20 days after a regular shareholders meeting or a general meeting of beneficial owners of a fund, equity ownership or beneficial ownership shall be deemed overly concentrated.
Where there is an irregularity in the redemption of Taiwan depositary receipts, the TWSE may on the next business day lower the margin purchase leverage limit by 20 percent and raise the short sale margin requirement by 20 percent, and under serious circumstances may lower the margin purchase leverage limit and raise the short sale margin requirement multiple times in succession.
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5. For exchange-listed securities eligible for margin purchase and short sale transactions, where the margin purchase leverage limit has been lowered by 10 percent or the short sale margin requirement raised by 10 percent pursuant to the provisions of the preceding point, the TWSE shall reinstate the original margin purchase leverage limit and short sale margin requirement for those securities on the next business day after the reinstatement conditions set out below are met; note, however, that where the adjustment was made because excessive volatility of share prices, excessive abnormality of trading volume, and overconcentration of equity ownership or beneficial ownership have occurred simultaneously or in close succession, reinstatement may not be effected until each of the following reinstatement conditions have been met:
(1) Excessively volatile share price: The reason for readjustment has been extinguished for six consecutive business days.
(2) Excessively abnormal trading volume: The reason for readjustment has been extinguished for six consecutive business days.
(3) Overconcentration of equity ownership or beneficial ownership: The exchange-listed company, foreign issuer, or securities investment trust enterprise has furnished records to the TWSE which, upon review, indicate that overconcentration of equity ownership or beneficial ownership no longer exists.
Where the circumstances contemplated in paragraph 3 of the preceding point arise, once the reason for adjustment is extinguished, the TWSE shall on the next business day reinstate the original margin purchase leverage limit and the original short sale margin requirement for those securities.
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6. Where margin purchase and short sale transactions in exchange-listed securities eligible for margin purchase and short sale transactions are suspended or reinstated, or the margin purchase leverage limit and short sale margin requirement are adjusted, the TWSE shall publicly announce such information on the Market Information System website. Whenever margin purchase and short sale transactions are suspended, price volatility is excessive, trading volume is excessively abnormal, equity ownership or beneficial ownership is overly concentrated, or there has been a 10-percent cut in a margin purchase leverage limit accompanied by a 10-percent raise of a short sale margin requirement, the TWSE shall note this fact in the Summary Statement of Balances for Long Margin Positions and Short Interest.
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7. 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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