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Article 37
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A customer shall meet the following qualifications to be able to submit a margin account opening application:
- 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.
- The customer has opened a consignment trading account for at least three months.
- 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.
- 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:
- The customer has opened more than five margin accounts.
- 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.
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Article 38
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A call (or put) warrant issuer, exchange traded note issuer, and securities firm or bank engaged in structured products business or engaged in trading equity derivatives, may, to meet hedging needs, open a margin account and engage in short selling of securities, to whom the preceding article does not apply.
In respect of the consignment trading account with a domestic securities firm or bank, the account number should start with three digits "864", followed by a three-digit serial number, and then another digit as inspection number. In case of a branch of a foreign issuer of warrants in the territory of the Republic of China or a foreign exchange traded note issuer, however, the account number of its consignment trading account should start with five digits "95864", followed by a one-digit serial number, and then another digit as inspection number.
The consignment trading account number of a domestic call (or put) warrant issuer to which the reduced tax rate and hedging requirement, etc. in Article 2-3 of the Securities Transaction Tax Act apply shall start with three digits "929", followed by a three-digit serial number, and then another digit as inspection number; the consignment trading account of a branch of a foreign issuer of warrants in the territory of the Republic of China shall start with five digits "95829", followed by a one-digit serial number, and then another digit as inspection number.
Securities brokers may accept only requests from securities firm and bank for transactions involving securities sold short or covering short position and may accept its requests for redemption by delivery of spot securities.
In the event of an error to a securities broker's consignment trading, it may declare an error account or correct the account number, except for errors caused by a securities firm's or bank's own hedging.
An enterprise exclusively or concurrently engaged in futures proprietary trading (dealing) that is also a market maker for equity options or single stock futures may, for its risk mitigation or hedging needs, open a margin account with which to sell securities short, to whom the preceding article does not apply.
The enterprise exclusively or concurrently engaged in futures proprietary trading (dealing) described in the preceding paragraph shall have its number to start with three digits "939", followed by a three-digit serial number, and then another digit as inspection number.
In the case of a privately placed securities investment trust fund managed by a SITE, the custodian of the trust fund may apply to open a margin account, to whom the provisions of paragraph 1, subparagraphs 1 to 3 of the preceding article do not apply.
In the case of a privately placed securities investment trust fund managed by a SITE, the outstanding balance of long or short margin positions, combined with other sales of borrowed securities may not exceed 50% of the size of the fund in each instance, and shall be controlled by the TWSE as a segregated account. If that limit is exceeded, the TWSE shall through the securities firm notify the SITE to lower the balance to 50% within two business days from the date on which it receives the notice from the securities firm. If the SITE fails to do so within the time limit, the TWSE may instruct the securities firm to dispose of the collateral on the next business day, by the mutatis mutandis application of Article 81, paragraph 3, to the extent required to achieve compliance.
In the case of a discretionary investment account managed by an SITE or a securities investment consulting enterprise ("SICE"), or of discretionary investment business conducted by a securities broker concurrently operating an SICE, or of discretionary futures trading business operated by a managed futures enterprise, the custodian institution for discretionary investment assets may open a margin account on behalf of its customer. Customers with a discretionary investment account shall be governed by the provisions of paragraph 1, subparagraph 1 of the preceding article, and not by the provisions of paragraph 1, subparagraphs 2 or 3 of the preceding article. For the margin account, neither the outstanding balance of margin purchase positions nor the outstanding balance of short sale positions, combined with the outstanding balance of other sales of borrowed securities, may exceed 50% of the net asset value of the discretionary investment account, except in the case of discretionary futures trading business operated by a managed futures enterprise, for which neither the outstanding balance of margin purchase positions nor the outstanding balance of short sale positions, combined with the outstanding balance of other sales of borrowed securities, may exceed 20% of the net asset value of the discretionary investment account.
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