| Title： |
Operational Rules Governing Day Trades of Securities(2014.06.16) |
| Date： |
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Chapter I General Principles
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| Article 1 | For the purposes of these Rules, day trading of securities shall mean trading, by the normal settlement method, in which, by agreement of the principal and the securities firm, with respect to a TWSE (or GTSM) listed security designated by the competent authority, after a buy order or sell order for the security is executed on the cash (spot) market, an equal quantity of the security is offset through the same brokerage account on the same day, and the settlement of funds is conducted based on the price difference after the offsetting of the opposite trades.
If a TWSE (or GTSM) listed security that is eligible for day trading has been publicly announced by the TWSE or the GTSM under relevant bylaws or rules as being placed under an altered trading method or under dispositive measures, the security may not be an object of a day trade.
Day trades of securities are limited to day trades between trades executed in normal trading before market close, and to day trades between a buy or sell trade executed in normal trading before market close and an opposite offsetting trade executed in after-hours fixed-price trading.
These Rules do not apply to odd-lot trades, block trades, trades conducted under Article 74 of the TWSE Operating Rules, and trades conducted through over-the-counter price negotiation under Article 32-1, and trades under Article 39, of the GreTai Securities Market Rules Governing Securities Trading on the GTSM.
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| Article 2 | A principal applying to conduct day trades of securities shall have opened a brokerage account for three full months and shall have had at least 10 trading orders executed within the most recent one year, provided that these restrictions do not apply to those that have opened a margin account or to professional institutional investors.
A principal shall first sign a general authorization agreement with the securities broker, stipulating the matters specified in Article 1, paragraph 1, and, unless a professional institutional investor, shall sign a risk disclosure statement before the securities broker may accept the principal's orders for day trades.
If a principal has signed a general authorization agreement, and on the day of a trade does not wish to offset the trade in day trading, the principal shall, before market close, make a statement to the securities broker. The securities broker shall confirm the statement and keep a record.
The risk disclosure statement and general authorization agreement under the preceding paragraphs shall be publicly announced by the TWSE.
Professional institutional investors under paragraphs 1 and 2 shall mean domestic and foreign banks, insurance companies, bills finance companies, securities firms, fund management companies, government investment institutions, government funds, pension funds, mutual funds, unit trusts, securities investment trust enterprises, securities investment consulting enterprises, trust enterprises, futures commission merchants, futures service enterprises, and other institutions approved by the competent authority.
A securities broker shall input into the computer systems designated by the TWSE and the GTSM the list of names of principals that may conduct day trades. If there is any change, an adjustment shall be made immediately.
A principal may not use an omnibus trading account to engage in day trades of securities. Trades conducted after trade allocation of an omnibus trading account, and trades for which the account number is corrected after trade allocation, may not be offset as day trades.
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| Article 3 | The monetary amount of a principal's initial buy and sell orders executed in day trading shall be included in the calculation toward the single-day trading limit. However, the monetary amounts of the opposite offsetting orders executed in day trading shall not be included in the calculation toward the single-day trading limit. Trading limit amounts may not be credited back for revolving use on the same day after being offset in day trading.
If the securities broker, pursuant to relevant regulations, does not establish a single-day trading limit for the principal, and the principal engages in day trades, it shall separately establish a limit for day trades. The total sum of sell orders for day trades may not exceed the day trading limit. The monetary amount of buy orders and the monetary amount of canceled sell orders need not be included in the calculation toward the day trading limit. After a limit amount has been offset, it may not be credited back for revolving use on the same day.
The monetary amount of day-trading sell orders by a principal under the preceding paragraph during after-hours fixed-price trading shall be included in the calculation toward the day trading limit, but the monetary amount of unexecuted day-trading sell orders during normal trading hours is not included in the calculation toward the daily limit.
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Chapter II Risk Management by Securities Brokers
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| Article 4 | The securities broker may collect funds or securities in advance from the principal in full or in a certain percentage as the circumstances merit.
The Operational Directions for Advance Collection of Funds and Securities by Securities Brokers in Brokerage Trading shall apply mutatis mutandis to the operations for the advance collection of funds and securities under the preceding paragraph.
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| Article 5 | The securities broker shall, after the closing of the market each business day, assess whether to increase, or decrease, a principal's single-day trading limit or day trading limit, based on the principal's profit or loss following day trading.
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| Article 6 | If the principal's cumulative loss from day trading of the preceding month reaches half of the single-day trading limit or day trading limit, the securities broker shall suspend day trading by the principal. The securities broker shall reassess the principal's single-day trading limit or the day trading limit after the principal has submitted proof of adequate financial capability, unless the principal is a professional institutional investor.
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Chapter III Procedures for Covering Shortfalls in Securities Deliverable in Day Trading
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| Article 7 | When a securities broker accepts an order to sell shares on the spot market, the broker shall confirm whether the order quantity exceeds the aggregate sum of the balance of those securities deposited in the principal's depository account and the quantity of the principal's cash purchases of the securities executed the same day. If the order exceeds that sum, the securities broker also shall confirm that it has a sufficient quantity of the securities, for the broker to lend to the principal for settlement purposes in the event that the principal fails to complete an opposite purchase to close out the day trade.
The sources of securities for lending by a securities broker as referred to in the preceding paragraph shall be limited to securities borrowed from a customer of the securities broker, or securities borrowed from another securities broker that borrows the securities from its own customers and relends them to the securities broker.
A public company's directors, supervisors, managerial officers, and greater than 10 percent shareholders (including their spouses, minor children, and any other persons in whose names they hold shares) may not borrow or lend stock of that public company under paragraphs 1 and 2 herein. Stock of that public company placed in trust by those persons also may not be lent.
The rate charged for lending of securities to cover a shortfall in securities deliverable in day trading under paragraph 1 shall not exceed 7 percent of the closing price of the securities on the day of their sale by the principal.
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| Article 8 | If the securities broker is unable to lend securities to the principal under the preceding article, the securities broker will authorize a financial enterprise to bid or negotiate on its behalf for the borrowing of securities in accordance with the TWSE Securities Borrowing and Lending Rules or the GTSM Securities Borrowing and Lending Rules.
If the quantity of securities borrowed by the securities broker through the bidding or negotiation procedures under the preceding article is still insufficient, the TWSE or GTSM will arrange on its behalf for the borrowing of the remaining quantity of securities required for settlement in accordance with the TWSE Securities Borrowing and Lending Rules or the GTSM Securities Borrowing and Lending Rules.
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| Article 9 | When a principal has sold spot securities but fails to complete an opposite purchase, the securities broker shall, on the first business day after the trade date of the sale of the spot securities, make a forced repurchase through a "special account for handling shortfalls in securities deliverable in day trading" (securities trading account number: 889999-9) set up by the broker's headquarters, for purposes of returning the securities borrowed under Articles 7 and 8. If it is unable to make a forced repurchase of the full quantity on the first business day after the trade date of the sale of the spot securities, it shall, beginning from the second business day after the trade date of the sale of the spot securities, continuously repurchase the securities until the full quantity has been repurchased. Forcibly repurchased securities shall be used, in first priority, to return securities borrowed through bidding and negotiation procedures under Article 8.
If the securities broker is unable, on the first business day after the trade date of the sale of the spot securities, to make a forced repurchase of the full quantity of the securities borrowed under Article 7, it shall notify the customer or other securities broker that lent the securities and the principal that borrowed the securities to continue lending and borrowing the securities that have not yet been forcibly repurchased until the full quantity has been repurchased. The customer that lent the securities may not request the early return of the securities. The securities lending rate shall be as provided in Article 7, paragraph 4, and shall be calculated based on the closing price on the day of the continued lending. If there is no closing price for the securities on the current day, it shall be calculated based on the auction reference price at market opening of the current trading session.
If the securities broker is unable, on the first business day after the trade date of the sale of the spot securities, to make a forced repurchase of the full quantity of the securities borrowed through bidding or negotiation procedures under Article 8, it shall continue to authorize the financial enterprise to bid or negotiate on its behalf for the borrowing of the quantity of securities not yet forcibly repurchased.
Forced repurchases under this article may be made in ordinary trading, after-hours fixed-price trading, odd-lot trading, or block trading. However, the "special account for handling shortfalls in securities deliverable in day trading" referred to in paragraph 1 may be used only to make purchases in the spot market, and may not be used to make sales. Also, an omnibus account may not be used for forced repurchases, nor may an account number correction be reported.
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| Article 10 | The securities broker must first sign a Contract for Securities Lending to Cover Shortfalls in Securities Deliverable in Day Trading with the customer or the other securities broker that lends the securities and with the principal that borrows the securities, respectively. The securities broker also must open a Special Account for Handling Shortfalls in Securities Deliverable in Day Trading before the broker may handle business in connection with securities lending to cover shortfalls in securities deliverable in day trading under Article 7.
The contract of the preceding paragraph shall specify at least the following:
- Securities lending period: that the securities will be returned after the securities broker has forcibly repurchased the securities and settlement has been completed.
- Processing fee rate and securities lending fee rate.
- Entitlement compensation.
- Handling of customer information.
A template of the contract under the preceding paragraph shall be adopted by the Taiwan Securities Association and submitted to the TWSE for recordation.
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| Article 11 | A securities broker shall set up a separate account ledger for each customer and make itemized daily entries of shortfalls in securities deliverable in day trading, borrowing of securities through bidding or negotiation procedures, settlement-driven securities borrowing, return of securities, entitlement compensation, and related matters.
A securities broker shall, based on the account entry records under the preceding paragraph, prepare a reconciliation statement each month and deliver it to the customer, unless there is no record of borrowing for the given month and neither the lender nor the borrower has submitted a written request for a statement.
The securities broker shall obtain written statements of consent signed by securities borrowers and by lenders under Article 7 consenting for the securities broker to provide the signer's personal information related to securities borrowing to the TWSE, GTSM, and any institution designated by the competent authority, as required for collection, processing, or international transmission, and utilization, in accordance with relevant laws and regulations.
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| Article 12 | When there is book closure by an issuer of a security eligible for day trading, all sell-first buy-later day trading of that security, and all operations for lending of that security to cover shortfalls in day trading under Article 7, shall be suspended beginning from 5 business days before the book closure date. This restriction shall not apply, however, if the cause for the book closure by the issuer has no effect on the exercise of shareholder rights.
If a business day under the preceding paragraph is a trading day, but the commencement date of book closure of the issuing company is scheduled to fall on a date from (and inclusive of) the second settlement day after the last trading day before the Lunar New Year Holidays to (and inclusive of) the second trading day following the Lunar New Year Holidays, the following provisions shall apply:
- If the commencement date of book closure is scheduled to fall on the second settlement day after the last trading day before the Lunar New Year Holidays, then the first settlement day after the last trading day is included in the calculation of "business days."
- If the commencement date of book closure is scheduled to fall during the Lunar New Year Holidays or on the first trading day following the Lunar New Year Holidays, then the two settlement days after the last trading day are both included in the calculation of "business days."
- If the commencement date of book closure is scheduled to fall on a weekend or other regular holiday after the first trading day following, or on the second trading day following, the Lunar New Year Holidays, then the first settlement day after the last trading day is included in the calculation of "business days."
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| Article 13 | When a principal, after selling securities on the spot market, fails to complete an opposite purchase to close out the day trade, the principal shall be solely liable for all fees incurred in connection with any borrowing of securities, or bidding or price negotiation for the borrowing of securities, to cover any shortfall in securities deliverable in day trading, or with settlement-driven securities borrowing, and for any price difference and other fees incurred in connection with a forced repurchase.
By 5 p.m. on the first business day after a forced repurchase for the return of borrowed securities, the principal shall pay in full any price difference and fees incurred in connection with a forced repurchase under the preceding paragraph, and will be deemed in default if the payment is late.
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Chapter IV Timing of Reporting
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| Article 14 | The securities firm shall, by 6 p.m. on the trade date, input the types of securities and amounts traded in day trades through the brokerage account into the computer system designated by the TWSE or GTSM. If the securities firm fails to input the amount of a day trade, it shall be deemed not to be a day trade. The input data may not be adjusted after 10 a.m. on the second business day following the trade date.
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| Article 15 | When a principal, after selling securities on the spot market, fails to complete an opposite purchase to close out the day trade, the securities broker shall input an itemized report of the shortfall of securities in day trading into the computer system designated by the TWSE or GTSM by 6 p.m. on the trade date.
When a securities broker conducts securities lending to cover a shortfall in securities deliverable in day trading under Article 7, it shall by 6 p.m. on the day of the securities lending, input an itemized report of the lending and borrowing of the securities into the Platform for Reporting Shortfalls in Securities Deliverable in Day Trading, so that a notice can be forwarded to the Taiwan Depository & Clearing Corporation to carry out the securities transfer procedures. If the source of the securities lent by the securities broker is another securities broker, the other securities broker also shall simultaneously input an itemized report of the lending of the securities into the Platform for Reporting Shortfalls in Securities Deliverable in Day Trading.
When a securities broker authorizes a financial enterprise to bid or negotiate on its behalf for the borrowing of securities under Article 8, it shall, by 6 p.m. on the first business day after the execution of the sale of the securities in the spot market, input an itemized report of the borrowing of the securities into the Platform for Reporting Shortfalls in Securities Deliverable in Day Trading, so that a notice can be forwarded to the Taiwan Depository & Clearing Corporation to carry out the securities transfer procedures.
A securities broker shall, by 10 a.m. on the second business day after the trade date of the forced repurchase, input an itemized report of the repurchase into the computer system designated by the TWSE or the GTSM.
A securities broker shall, by 6 p.m. on the second business day after the trade date of the forced repurchase, input an itemized report of the return of securities borrowed to cover a shortfall in securities deliverable in day trading under Article 7 into the Platform for Reporting Shortfalls in Securities Deliverable in Day Trading, so that a notice can be forwarded to the Taiwan Depository & Clearing Corporation to carry out the securities transfer procedures.
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Chapter V Supplementary Provisions |
| Article 16 | Matters not provided for herein shall be governed mutatis mutandis by the relevant regulations of the TWSE and GTSM.
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| Article 17 | These Rules and any amendments hereto are drafted by the TWSE in consultation with the GTSM, and shall be announced and implemented after submission to and approval by the competent authority.
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