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Relevant Laws

Title:Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities (2020.12.08)
Article 37     A customer shall meet the following qualifications to be able to submit a margin account opening application:
  1. The customer is a citizen of the Republic of China who is 20 years of age or older and who is not incapacitated, or a juristic person incorporated and registered under the law of the Republic of China.
  2. The customer has opened a consignment trading account for at least three months.
  3. The customer has settled 10 or more transactions of consignment trading during the most recent year with an accumulated transaction value of 50% of the amount limit for margin purchase applied for. This also applies to a consignment trading account opened for less than one year.
  4. The sum of the customer's income received and various other properties during the most recent year is at 30% of the amount limit for margin purchase applied for, except where the amount limit for margin purchase applied for is less than NT$500,000.
    Where a customer applying for opening of a margin account has one of the following circumstances, the amount limit for margin purchase approved for a margin account that has been opened shall be taken into account in the calculation of the amount limit for margin purchase applied for described in subparagraphs 3 and 4 of the preceding paragraph:
  1. The customer has opened more than five margin accounts.
  2. The customer has opened more than two margin accounts and the amount limit for margin purchase applied for plus the amount limit for margin purchase approved for margin accounts that have been approved has exceeded NT$300 million.
    When a customer is applying for a margin account, calculation of the amount limit for margin purchase applied for in according with paragraph 1, subparagraph 4 needs to include such amount limits for its other loan business with the same securities firm.
    If the customer applies for changes to amount limit during the term of a margin purchase and short sale contract or proceeds to renew the contract upon expiry of the term, the requirements under subparagraph 4 of paragraph 1, paragraph 2 and the preceding paragraph shall be complied with.
    Where necessary, the securities firm may raise the percentage set forth in paragraph 1, subparagraphs 3 and 4.
    In case of application for changes to amount limit or renewal of contract upon expiry, the securities firm may accept the request by way of communication or electronic means that would verify the identification of the applicant and its expression of intent.
Article 81     Where any of the following circumstances applies to a customer, the securities firm may, within the extent required to satisfy the obligation, dispose of the balance in the customer's margin account in accordance with the provisions of paragraph 3, unless agreed otherwise by both parties. If there is any surplus remaining after the obligation is satisfied by proceeds of the disposition, it shall be returned to the customer. If the proceeds of the disposal are insufficient to fully satisfy the obligation, or if, for the balance in the margin account being 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, the securities firm shall request the customer to satisfy the remaining obligation within a specified time limit and, if the customer fails to the remaining obligation within such specified time limit, the securities firms shall report the case to the TWSE or the TPEx as an event of default and cancel the customer's margin account accordingly. The TWSE or the TPEx shall promptly forward the message to securities finance enterprises and to all securities firms engaged in margin purchase and short sale business:
  1. Failure to make up a deficiency in accordance with Article 55, paragraph 2.
  2. Failure to settle an obligation in accordance with Article 62, paragraph 3.
  3. Failure to make up a deficiency in accordance with Article 78, paragraph 1.
    Where any of the following circumstances applies to a customer on a margin purchase or short sale, unless agreed otherwise by both parties according to subparagraphs 2 and 3, the securities firm shall return any surplus amount after the disposal of the collateral for the margin purchase or short sale. If the disposal proceeds are insufficient to satisfy the obligation; or where either subparagraph 2 or subparagraph 3 applies to the customer, if brokerage trading orders for said collateral 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, after reverse auction is conducted in respect of the collateral in accordance with paragraph 4, the proceeds do not sufficiently cover the obligation, the securities firm shall use other funds in that customer's margin account to offset against the obligation. If there is still a deficiency remaining after such offsetting, the securities firm shall request the customer to make up the deficiency on the next business day. If the deficiency is not fully made up, the securities firm may, within the extent required to satisfy the obligation, dispose of the balance in the customer's margin account in accordance with the provisions of paragraph 3. If there is any surplus remaining after the obligation is satisfied by proceeds of the disposition, it shall be returned to the customer. If the proceeds of the disposal are insufficient to fully satisfy the obligation, or if, for said collateral for the margin purchase and/or short sale 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, the securities firm shall request the customer to satisfy the remaining obligation within a specified time limit, and, if the obligation remains unsatisfied after the time limit, shall report the case to the TWSE or the TPEx as an event of default and cancel the customer's margin account accordingly. The TWSE or the TPEx shall promptly forward the message to securities finance enterprises and to all securities firms engaged in margin purchase and short sale business:
  1. Failure to settle a short sale in accordance with Article 76.
  2. Failure to settle a margin purchase or short sale at maturity.
  3. Failure to replace securities or other merchandise deposited as additional collateral against margin requirements as required under Article 60.
    Where any circumstances under paragraphs 1 and 2 apply to a customer, the securities firm shall, starting the next business day and on the TWSE centralized exchange market or through the TPEx trade system or through tender offer or competitive auction, place an order with another securities broker to dispose of the customer's collateral and securities or other merchandise deposited through a Margin Trading Default Processing Account opened by it. If a customer uses book-entry central government bearer bonds, local government bonds, corporate bonds, financial bonds to settle a margin sale , a securities firm may negotiate the price and dispose the aforesaid with a bonds dealer; if a customer uses open-end fund beneficiary certificates to settle a margin sale, a securities firm may dispose the aforesaid by buying back from a securities investment trust enterprise.
    If a customer fails to return the securities for satisfaction of the loan according to Article 76, the securities firm shall proceed with disposition from the next business day. The securities firm may conduct reverse auction in accordance with the preceding paragraph if the subject security cannot be disposed of on account of a suspension of trading under Article 50 or 50-3 of the Operating Rules of the TWSE or Article 12-1 of the TPEx Rules Governing Securities Trading on the TPEx.