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Article 8
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TWSE-listed ordinary shares will be announced by the TWSE as eligible for margin purchases and short salesif satisfying the criteria below:
- The shares have been listed for at least six months.
- The net asset value per share at least reaches the par value, as specified in the latest financial report as at the date of review. Where the shares are of a primary TWSE-listed company with no par value or the net asset value per share is not NT$10, the financial reports published and filed in the last fiscal year show no accumulated losses.
- None of the following applies:
- Excessively intense share price volatility.
- Excessively concentrated equity ownership.
- Excessively irregular trade volume.
With the exception of TPEx-listed managed stocks and stocks registered on the Emerging Stock Board, all TPEx listed common stock shares satisfying the criteria below will be announced by the TPEx as eligible for margin purchase and short sale.
- The shares have been listed on the TPEx for at least six months.
- The net asset value per share at least reaches the par value, as specified in the latest financial report as at the date of review. Where the shares are of a primary TWSE-listed company with no par value or the net asset value per share is not NT$10, the financial reports published and filed in the last fiscal year show no accumulated losses.
- The company has been incorporated and registered for at least three years. If the issuer is a transferee company of a demerger from a TWSE or TPEx listed company, the time of incorporation may be calculated from the time of establishment of the demerged division as shown in the financial data of the demerged parent company. If the issuer is an investment holding company or financial holding company, the time of incorporation may be calculated from the time of incorporation of its operating entity.
- The company has a paid-up capital of NT$300 million or more, or a net worth of NT$600 million or more if it is a primary TPEx listed company whose shares have no par value or a par value other than NT$10 per share.
- Profitability of the company:
- Having had no accumulated losses, and had net operating income and profit before tax totaling 3% or more of paid-up capital on a standalone or consolidated basis, in the latest financial year, provided the above provision on net operating income and profit before tax may be waived if the paid-in capital reaches NT$600 million or more.
- It is a primary TPEx listed company whose shares have no par value or a par value other than NT$10 per share, had net operating income and profit before tax totaling 3% or more of shareholders' equity on a standalone or consolidated basis.
- None of the circumstances described in subparagraph 3 of the preceding paragraph applies.
For purposes of these Rules, the term "net worth" means equity attributable to owners of the parent as stated in the balance sheet.
The financial data mentioned in paragraph 2 are as specified in the latest published financial reports as having been audited and certified, or reviewed, by the CPA.
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Article 13
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As samples for review purposes of TWSE listed securities to which excessively intense share price volatility or excessively irregular trade volume as mentioned in Article 8, paragraph 1, subparagraph 3, item 1 or 3 occurs, listed common shares, Taiwan depository receipts, and beneficial certificates other than those whose trading method has alteredare taken for comparison. As samples for review purposes of TPEx listed securities, TPEx listed common stock shares other than TPExlisted managed stocks and stocks registered on the Emerging Stock Board, and ETF Beneficial Certificates and beneficial certificates of futures trust exchange-traded fundsare taken for comparison.
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Article 20
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The TWSE or TPEx will publicly announce TWSE or TPEx listed securities that conform to the following as eligible for margin purchases and short sales on the TWSE or TPEx listing date, unless the equity ownership of such securities is excessively concentrated. The relevant operating procedures are governed by Article 21, paragraph 2:
- The issuer of the TPEx listed shares that are eligible for margin purchases and short sales has applied for TWSE listing.
- The TWSE or TPEx listed company eligible to undertake margin purchases and short sales becomes a TWSE or TPEx listed financial holding company according to The Financial Holding Company Act.
- The TWSE or TPEx listed company eligible to undertake margin purchases and short sales becomes a TWSE or TPEx listed investment holding company through a 100% share exchange in accordance with the Business Mergers and Acquisitions Act.
- The issuer of shares listed on the Taiwan Innovation Board that are eligible for margin purchases and short sales has applied for conversion of such shares as TWSE listed securities.
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Article 57
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A customer may deposit the following securities or other merchandise as additional collateral for the short sale margin and any deficiency the customer is required to cover under
- TWSE or TPEx listed book-entry central government bonds, local government bonds, corporate bonds, financial bonds.
- TWSE or TPExlisted securitieswhosetrading methodhas not altered or other than those TPEx-listedmanaged stocks, excluding ETF beneficial certificatesbeing traded in foreign currency.
- Gold that is registered for trading over the counter.
- If an open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate, it must be denominated in NT dollars andof a domestically offered and domestically invested securities investment ora domestically offered and domestically invested futures trust fund which is offered tothe general public, including those purchased in the name of a securities firm as the customer.
The aforesaid securities deposited or other merchandise eligible for margin purchase and short sale as additional collateral may not:
be less than one trading unit if being TWSE or TPEx listed securities and gold;
be less than one trading unit, if being an open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate.
be any registered shares issued to and acquired by shareholders or capital contributors as a result of capital increase out of earnings, or capital increase through contribution by company employees out of their bonuses to the industry in which they are serving, or capital increase by a venture capital company out of undistributed earnings, as effected in accordance with Article 13 of the Statute (Act) for Encouragement of Investment or Article 16 or 17 of the Statute (Act) for Upgrading Industries, that have not been transferred and reported for tax purposes.
Where the securities firm accepts the deposit by the customer of securities or other merchandise that are not owned by the customer as in the first paragraph, as additional collateral to offset against the margin requirement, it shall additionally submit the household registration record and consent letter obtained from the owner.
If the securities deposited as collateral to offset against a margin requirement under paragraphs 1 and 3 are 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 TPEx listed on the same day as the stock of the assignee company of the demerger, the provisions of paragraphs 3, 4, and 5 of Article 53 shall apply to the newly issued rights shares or to the stock of the assignee company of the demerger for which the circumstances set forth in paragraph 2, subparagraph 3 do not exist, and the consent letter under the preceding paragraph shall specify the waiver of the option of income tax deferral.
A securities firm that accepts a customer using open-end type securities investment trust fund beneficiary certificates for margin purchase and short sale as additional collateral under the name of the securities firm, shall keep a registration log for management purposes and inform relevant information to the Taiwan Depository and Clearing Corporation ("TDCC"); book-entry operations for centrally deposited securitiesdo not apply.
A securities firm that accepts a customer using book-entry central government bonds for margin purchase and short sale as additional collateral, shall open a collateral account at theBook-Entry Central Government Securities Clearing Bank for margin sale transfer.
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Article 78
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When the TWSE or TPEx has ratified and publicly announced the delisting from the stock exchange or termination of TPEx trading of a collateral eligible for margin purchase and short sale transactions, a securities firm shall request customers to cover and close out any margin purchases or short sales of such collateral by repaying the margin loans or returning the borrowed securities by the tenth business day before the delisting or the termination of TPEx trading. However, these provisions shall not apply under any of the following circumstances:
- The issuing company has applied for conversion of its TPEx listed securities to TWSE listed securities.
- The securities of a TWSE orTPEx listed company are delisted due to the company's merger, and the surviving company uses the securities which are eligible for margin purchase and short sale transactions for payment of all or part of the consideration to shareholders of the non-surviving company.
- The securities of a TWSE or TPEx listed company are delisted due to a share conversion, and the shares after conversion are still eligible for margin purchase and short sale transactions.
If a customer fails to cover and close out any margin purchase or short sale by repaying the margin loan or returning the borrowed security within the deadline, unless agreed by both parties otherwise, the securities firm shall dispose of said collateral on the following business day. Any surplus amount after the disposal shall be returned. If the disposal proceeds are insufficient to satisfy the obligation; or if, for said collateral for margin purchases and/or short sales that is disposed of, brokerage trading orders have been placed at auction reference price at market opening of the current trading session or at basis price for the opening of trading, ± 10 percent, before market opening for six consecutive days (brokerage trading orders may be placed at market price instead during intraday trading hours other than a given period before market opening and after close of market), and the trades thus cannot be fully executed; or if the collateral cannot be disposed of on account of a suspension of trading; or if, after reverse auction is conducted in respect of the collateral in accordance with Article 81, paragraph 5, the proceeds do not sufficiently cover the obligation, then the deficiency shall be offset by other funds in the margin account. If there is still a deficiency remaining after such offsetting, the securities firm shall request the customer to make up the remaining deficiency on the next business day.
After an application by the issuer of shares listed on the Taiwan Innovation Board that are eligible for margin purchases and short sales for conversion of such shares as TWSE listed securities or after termination of the contract for trading of Over-the-Counter (OTC) securities eligible for margin purchase and short sale to be converted as TWSE listed securities, the customer shall proceed to settlement of the balance of its existing margin purchases and short sales within the time limits for margin purchase and short sale. If prior to listing of these securities to be eligible for margin purchase and short sale, the customer acquired these securities through margin purchase or short sale, redemption shall be made by cash or by delivery of spot securities, respectively.
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