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Article 23
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A securities firm shall calculate, on a daily mark-to-market basis, and based upon the closing price announced by the TWSE or the GTSM ("closing price"), or the par value of government bonds, as the case may be, the collateral maintenance ratio for each margin account as a whole and for each margin purchase and short sale in each margin account by the following formula:
collateral maintenance ratio = {market value of collateral securities for margin purchase(s) + initial collateral and short margin for short sale(s)} ÷ {original margin purchase amount(s) + market value of underlying securities sold short} × 100 percent
The market value of securities under the preceding paragraph shall be calculated based on the closing price, provided that for the six business days prior to an ex-rights or ex-dividend date for a security pledged as collateral for a margin purchase, with the exception of in cases of a cash capital increase, the market value of the collateral security shall be calculated based on the respective current day's closing price, minus the value of the cash dividend, or minus the value of the stock dividend calculated based on the current day's closing price.
If the security the customer purchases on margin is subject to a 20 percent or more share dividend rate in gratuitous distribution of shares, or the issuer of the securities conducts a demerger and capital reduction, and after the capital reduction, the stock resumes trading and is TWSE or GTSM listed on the same day as the stock of the assignee company of the demerger, then unless the competent authority has otherwise imposed trading restrictions on the security, the newly issued rights shares or the stock of the assignee company of the demerger shall all be pledged as collateral, with the option of income tax deferral to be waived, and shall be transferred through book-entry by the central securities depository into the securities firm's segregated account for margin purchases and short sales, notwithstanding the provisions of Article 33 of the Regulations Governing Handling of Shareholder Services by Public Companies.
The securities firm may not use the newly issued rights shares or the stock of the assignee company of the demerger under the preceding paragraph as a source of securities for lending in its conduct of securities trading short sale operations or as collateral for refinancing.
The provisions of paragraph 2 shall not apply to newly issued rights shares or the stock of the assignee company of the demerger used as collateral. After the security is traded ex-rights, the market value of the newly issued rights shares shall be calculated as 70 percent of the closing price if they are TWSE listed securities, or 60 percent of the closing price if they are GTSM listed securities. After such shares have been transferred into the securities firm's segregated account for margin purchases and short sales, their market value is no longer required to be discounted.
The market value of collateral securities for margin purchases and the original collateral and short margin for short sales referred to in paragraph 1 means the balance of the money and market value of securities in a customer margin account after deducting the securities lending fee and/or the fee for purchase of securities by tender offer [to meet a securities shortfall in short selling]; if there is any residual obligation after a settlement trade has been made or after the securities firm has disposed of the collateral, the residual obligation shall also be deducted.
Where the overall collateral maintenance ratio of the customer margin account is lower than 120 percent, the securities firm shall issue a margin call to the customer demanding the deposit, within two business days from the day the margin call is received, of additional margin collateral for the margin purchase or short sale that falls below the collateral maintenance ratio, to cover the margin deficiency.
Margin deficiencies that a customer is required to cover under the preceding paragraph shall be calculated by the following formulas:
? deficiency in margin for margin purchase = original margin purchase amount - (closing price on the day of calculation × number of shares purchased on margin × margin purchase leverage ratio) - (closing price on the day of calculation × number of shares of the stock under paragraph 3 and of the securities deposited as collateral under Article 26 × margin purchase leverage ratio)
? deficiency in margin for short sale = (closing price on the day of calculation × number of shares sold short × margin percentage required for short sale - initial margin for short sale) + (closing price on the day of calculation × number of shares sold short - original short sale proceeds) - (closing price on the day of calculation × number of shares of the securities deposited as collateral under Article 26).
If the stock under paragraph 3 or the securities deposited as collateral under Article 26, as included in the formula for calculating the deficiency in margin for margin purchase under the preceding paragraph, are not eligible for margin purchases or short sales under Article 2 or 3 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale, or is temporarily suspended from margin purchases or short sales under Article 4 or 5 of the same Standards, then the margin purchase leverage ratio shall be set at zero.
For purposes of this Article, if a closing price is not available for the given day, it shall be calculated as the price determined by the following principles:
1. When the highest buy price quoted as of market close on the given day is higher than the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the GTSM, the highest buy price quoted will be the price.
2. When the lowest sell price quoted as of market close on the given day is lower than the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the GTSM, the lowest sell price quoted will be the price.
3. When the above circumstances are not met, the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the GTSM will be the price.
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Article 31
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A customer applying to settle a margin purchase with cash or a short sale with spot securities shall deliver the money or securities by 12 noon of the current day, and shall fill out an Application to Settle a Margin Purchase with Cash or Application to Settle a Short Sale with Spot Securities and submit the application to the securities firm. Upon verification of the accuracy of the content, the securities firm shall deliver the short sale proceeds and short sale margin to the customer by the second following business day, or in the case of securities bought on margin or securities deposited as collateral, where the customer has maintained a depository account, transfer the securities to the account by the second following business day, or in the case of withdrawal of spot securities by the customer, deliver the securities by the third following business day.
Except under any of the following circumstances, the customer may not apply to use third-party securities as spot securities to settle a short sale:
1. during a period in which trading has been suspended in the underlying securities of the short sale.
2. where an order for margin purchase has been placed to cover the short sale at a price of seven percent above the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the GTSM on the same day and cannot be executed before the start of the trading session of the sixth business day prior to the book closure date of the underlying securities.
During a period when the central securities depository postpones processing of participants' withdrawal of securities, a securities firm may postpone delivering to a customer any securities deliverable as a result of the customer's application to settle a margin purchase with cash.
Where a customer withdraws spot securities, the securities firm shall additionally stamp the words "SETTLEMENT OF MARGIN PURCHASE WITH CASH" or "RETURN OF SECURITIES DEPOSITED AS COLLATERAL," as the case may be, on the Share Transfer Application Form and the trade report of the original margin purchase.
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