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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(2011.12.09) |
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When any of the conditions of Article 4, paragraph 1, subparagraphs 1 through 7 and subparagraph 11, or Article 5, paragraph 1, subparagraphs 1 through 3 and subparagraph 7 of the Margin Purchase and Short Sale Eligibility Standards exists with respect to TWSE listed securities eligible for margin purchase and short sale transactions, then from the second business day following public announcement, the Taiwan Stock Exchange Corporation (TWSE) will suspend margin purchase and short sale transactions in accordance with the following principles (unless a TWSE 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 following receipt from the competent authority of a notice of receivership, or unless such transactions are suspended by a resolution of the TWSE Surveillance Operations Oversight Committee in accordance with the principle set out in subparagraph 7 below):
(I) When the trading method for TWSE listed shares or Taiwan depositary receipts has been changed to require full delivery, or their trading has been suspended, or the shares 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 suspension of margin purchase and short sale transactions in those securities shall be simultaneously announced, provided that this requirement does not apply to delistings due to merger.
(II) When a securities investment trust enterprise has failed to punctually file and publish a securities trust investment fund's financial report, or the circumstances under Article 96, paragraph 1 of the Securities Investment Trust and Consulting Act exist 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.
(III) When net worth per share for a TWSE listed stock is below par value, provided that for shares issued by a TWSE primary listed company with no par value or a par value other than NT$10 per share, it is when an accumulated deficit has been posted in the financial report:
1. On the final business day of the fifth month following the close of each business year, the TWSE shall review the company's publicly disclosed and filed annual financial report for the most recent period, audited and attested by a CPA, and its publicly disclosed and filed, CPA reviewed Q1 financial report for the most recent period (the Q1 financial report of a TWSE primary listed company need not be reviewed by a CPA), and, if net worth per share is below par value, it shall publicly announce suspension of margin purchase and short sale transactions in that company's shares. However, with respect to the shares issued by a TWSE primary listed company with no par value or a par value other than NT$10 per share, suspension of margin purchase and short sale transactions shall be announced if an accumulated deficit has been posted both in the annual financial report and the Q1 financial report.
2. On the final business day of the third month following the close of each half business year, the TWSE shall review the company's publicly disclosed and filed, CPA audited and attested semi-annual financial report for the most recent period (the semi-annual financial report of a TWSE primary listed company may be CPA reviewed, and need not be audited and attested), 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. However, with respect to the shares issued by a TWSE primary listed company with no par value or a par value other than NT$10 per share, suspension of margin purchase and short sale transactions shall be announced if an accumulated deficit has been posted in the semi-annual financial report.
(IV) 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 semi-annual 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.
(V) Taiwan depositary receipts number less than 60 million TWSE listed units following redemption.
(VI) Where there has been a major default on TWSE 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.
(VII) Where there are other circumstance that make it unadvisable to continue margin purchase and short sale transactions: as determined by a resolution of the TWSE Surveillance Operations Oversight Committee, or in the event of another circumstance that makes such transactions unadvisable, the TWSE shall publicly announce suspension of margin purchase and short sale transactions in those securities.
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When margin purchase and short sale transactions in TWSE listed securities eligible for margin purchase and short sale transactions have been suspended pursuant to the provisions of the preceding article, then in addition to those for which the period of the disposition of suspension of margin purchase and short sale transactions by a resolution of the TWSE Surveillance Operations Oversight Committee has concluded, such transactions may be reinstated from the second business day following public announcement if the following conditions are met:
(I) When the circumstances under subparagraph 1, 2, or 7 of the preceding point exist: When the reason for suspension is extinguished, the TWSE will publicly announce reinstatement of margin purchase and short sale transactions in those securities.
(II) Given the circumstances of subparagraph 3 of the preceding point, if the company's financial report shows that net worth per share has returned to par value or higher, the TWSE shall publicly announce reinstatement of margin purchase and short sale transactions in those shares. However, with respect to the shares issued by a TWSE primary listed company at no par value or at par value of other than NT$10 per share, announcement of reinstatement shall be made when no accumulated deficit has been posted in the financial report:
1. On the final business day of the fifth month following the close of each business year, the TWSE shall review the company's publicly disclosed and filed annual financial report audited and attested by the CPA for the most recent period, and the publicly disclosed and filed Q1 financial report reviewed by the CPA for the most recent period (the Q1 financial report of a TWSE primary listed company need not be reviewed by a CPA), and if the net worth per share, recognized on the basis of the higher of the two shown in the annual and Q1 financial reports, has returned to par value it shall publicly announce reinstatement of margin purchase and short sale transactions in those securities. However, with respect to the shares issued by a TWSE primary listed company with no par value or a par value other than NT$10 per share, announcement of reinstatement shall be made when no accumulated deficit has been posted in either the financial report or the Q1 financial report.
2. On the final business day of the third month following the close of each half business year, the TWSE shall review the publicly disclosed and filed semi-annual financial report audited and attested by the CPA for the most recent period (the semi-annual financial report of a TWSE primary listed company may be reviewed by a CPA, and need not be audited and attested).
3. 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.
(III) Where the conditions 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 semi-annual 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.
(IV) Where the conditions under subparagraph 5 of the preceding point exist: The number of Taiwan depositary receipts has returned to 60 million or more TWSE listed units.
(V) Where the conditions 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 6 business days and the figures for both long margin positions and open interest on the last of those 6 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 TWSE 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 publicly disclosed and filed annual or semi-annual financial report audited and attested by the CPA, or the publicly disclosed 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 (MIS) website and conduct a review 5 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 following public announcement. However, a TWSE primary listed company may apply for reinstatement of margin purchase and short sale transactions by submitting the publicly disclosed and filed annual or semi-annual financial report audited and attested by the CPA (the semi-annual financial report may be reviewed, other than audited and attested, by the CPA), or the publicly disclosed and filed quarterly financial report audited and attested by the CPA for the most recent period; when the shares are issued with no par value or a par value other than NT$10 per share, announcement of reinstatement shall be made when the TWSE finds upon review that no accumulated deficit has been posted.
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 semi-annual 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 5 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 following public announcement.
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For the purposes of this point, the following terms shall have the following meanings:
(I) Subject securities: TWSE 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.
(II) 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.
(III) Sampled securities: TWSE 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.
(IV) 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.
(V) 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 5 consecutive business days or for any 6 business days during the most recent 10 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 a TWSE 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.
(I) Where either both of the following descriptions in items 1 and 2, or the following descriptions in item 3, apply to subject securities, the share price is too volatile:
1. 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. 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.
3. When the percentage of premium or discount calculated from the closing price of Taiwan depositary receipts and the closing price of the shares they represent on the exchange market of their home country meets any of the following conditions during the sampling period:
(1) When on the current day, the percentage of premium on a Taiwan depositary receipt announced through the Market Observation Post System (MOPS) for the previous business day is in excess of 50 percent, while the current day closing price is also the highest of the most recent 6 business days (inclusive of the current day), provided that if there is no closing price for the most recent 5 business days (excluding the current day), then the current day closing price must also be higher than the opening reference price.
(2) When on the current day, the percentage of discount on a Taiwan depositary receipt announced through the MOPS for the previous business day is in excess of 50 percent, while the current day closing price is also the lowest of the most recent 6 business days (inclusive of the current day), provided that if there is no closing price for the most recent 5 business days (excluding the current day), then the current day closing price must also be lower than the opening reference price.
Exceptions:
1. During the period for calculating the standards for subject securities prescribed in item 1 or 2 of this subparagraph, or when making for the subject securities the comparison based on the closing prices for the most recent 6 business days (inclusive of the current day) by the standards prescribed in item 3 of this subparagraph, if price fluctuation occurs due to non trade-related factors (such as ex-rights or ex-dividend factors), those factors in the fluctuation shall be excluded from the calculation.
2. During the period of making the comparison between the subject securities and securities of industry peers pursuant to item 1 or 2 of this subparagraph, if there are no other TWSE listed securities of industry peers, comparison may be made with GTSM listed securities of industry peers; if there are no other GTSM listed securities of industry peers, the requirement for comparison with securities of industry peers shall not apply.
(II) Where either one of the following descriptions applies to subject securities during the sampling period, trading volume is excessively abnormal:
1. The turnover rate for the securities is 10 or more times the average turnover rate for the sampled securities.
2. 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.
(III) Where any one of the following descriptions applies to subject securities, equity ownership or beneficial ownership is overly concentrated:
1. 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.
2. Shares: The holdings of registered shares by 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 shares when the company's paid-in capital is NT$500 million or less; or the aforementioned holdings account for at least 80 percent when the paid-in capital is greater than NT$500 million and less than NT$5 billion; or the aforementioned holdings account for at least 85 percent when the 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. However, for shares issued by a TWSE primary listed company with no par value or a par value other than NT$10 per share, overconcentration is when holdings of registered shares by 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 shares when the company's total number of issued shares is 50 million or less; or when the aforementioned holdings account for 80 percent or more when the total number of issued shares is greater than 50 million and less than 500 million; or the when aforementioned holdings account for 85 percent or more when the total number of issued shares is greater than 500 million.
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.
If the subject securities comply with Article 6, paragraph 3of the TWSE Directions for Announcement or Notice of Attention to Trading Information and Dispositions, the TWSE may, during the period of a disposition, lower the margin purchase leverage limit by 10 percent and raise the short sale margin requirement by 10 percent. The same shall apply to any adjustment that has already been made pursuant to these Standards and Procedures, and vice versa.
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