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Article 53
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A securities firm shall calculate, on a daily mark-to-market basis, 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) + market value of securities deposited as collateral or other merchandise} ÷ {original margin purchase amount(s) + market value of underlying securities sold short} × 100 percent
The market value of securities and other merchandise under the preceding paragraph shall be calculated based on the paragraph below , provided that for the six business days prior to an ex-rights or ex-dividend date for a TWSE or TPEx listed 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 and the market value of TWSE or TPEx listed securities pledged as collateral 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.
- TWSE or TPEx listed book-entry central government bonds, local government bonds, corporate bonds, financial bonds: par value.
- TWSE or TPEx listed securities: the closing price of Taiwan Stock Exchange or Taipei Exchange.
- Gold that is registered for trading over the counter: the average price at closing based on the highest buying price quote and the lowest selling price quote ("the average closing price").
- An open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate: the net asset value per beneficiary unit of the prior business day.
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 TPEx 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 or TPEx listed securities for margin purchase and short sale, or 50 percent of the closing price if they are not qualified according to Article 2 or 3 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale, or are suspended according to Article 4 or 5 of the same Standards. 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 number of new beneficial right units after a split of the ETF beneficial certificates and beneficial certificates of futures trust exchange-traded funds acquired by a securities firm through margin purchases shall be deposited into the securities firm's segregated account for margin purchases and short sales as margin balance. The number of new beneficial right units after a split of the ETF beneficial certificates and beneficial certificates of futures trust exchange-traded funds deposited as additional collateral by a securities firm in accordance with Article 57 shall be deposited into the securities firm's segregated account for margin purchases and short sales as securities to be deposited as additional collateral.
The market value of collateral securities for margin purchases and the original collateral and short margin for short sales, the market value of securities deposited as collateral or other merchandise referred to in paragraph 1 means the balance of the money, market value of securities and other merchandise in a customer margin account after deducting the short sale fee, competitive auction lending fee, negotiated lending fee, and 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.
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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 Article 54:
- TWSE or TPEx listed book-entry central government bonds, local government bonds, corporate bonds, financial bonds.
- TWSE or TPEx listed securities whose trading method has not altered or other than those listed on the Taiwan Innovation Board, primary listed on the Taiwan Innovation Board or managed stocks for OTC trading, excluding ETF beneficial certificates being 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 and of a domestically offered and domestically invested securities investment or a domestically offered and domestically invested futures trust fund which is offered to the 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 securities do 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 the Book-Entry Central Government Securities Clearing Bank for margin sale transfer.
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