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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 54
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Where the overall collateral maintenance ratio of the customer margin account is lower than 130 percent, the securities firm shall issue a margin call to the customer demanding the deposit, within two business days from the day the margin call is received, of additional margin collateral for the margin purchase or short sale that falls below the collateral maintenance ratio, to cover the margin deficiency.
Margin deficiencies that a customer is required to cover under the preceding paragraph shall be calculated by the following formulas:
■ deficiency in margin for margin purchase = original margin purchase amount - (closing price on the day of calculation × number of shares purchased on margin × margin purchase leverage ratio) - (par value, closing price and average closing price of the day of calculation or net asset value per beneficiary unit of the prior business day × unit number of shares of the stock under paragraph 3 and securities deposited as collateral or other merchandise under Article 57 × margin purchase leverage ratio)
■ deficiency in margin for short sale = (closing price on the day of calculation × number of shares sold short × margin percentage required for short sale - initial margin for short sale) + (closing price on the day of calculation × number of shares sold short - original short sale proceeds) - (par value, closing price and average closing price of the day of calculation or net asset value per beneficiary unit of the prior business day × unit number of shares of the securities deposited as collateral under Article 57 or other merchandise).
In the formula for calculating the deficiency for margin purchase under the preceding paragraph, if the stock under paragraph 3 of the preceding article or the securities deposited as collateral or other merchandise under Article 57 are categorized as book-entry central government bonds, local government bonds, corporate bonds, financial bonds, gold that is registered for trading over the counter, an open-end type securities investment trust fund beneficiary certificate and futures trust fund beneficiary certificate, its financing ratio shall be calculated based on the maximum financing ratio of TWSE or TPEx listings announced by the competent authority; for others that are not eligible for margin purchase or short sale under Article 2 or 3 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale or are temporarily suspended under Article 4 or 5 of the same Standards, then the margin purchase leverage ratio shall be set at zero.
Where trading of securities has been suspended or halted, the collateral maintenance ratio in paragraph 1 of the preceding article and the margin deficiencies required to cover in paragraph 2 of this article shall be calculated based on the closing price of the business day immediately before suspension or halting of trading.
For purposes of calculation of the collateral maintenance ratio in the preceding article and the margin deficiencies that a customer is required to cover in paragraph 2 of this article, if a closing price is not available for the given day, it shall be calculated as the price determined by the following principles:
- When the highest buy price quoted as of market close on the given day is higher than the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the TPEx, the highest buy price quoted will be the price.
- When the lowest sell price quoted as of market close on the given day is lower than the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the TPEx, the lowest sell price quoted will be the price.
- When the above circumstances are not met, the auction reference price at market opening on the TWSE or the basis price for the opening of trading on the TPEx will be the price.
The terms "the auction reference price at market opening" and "the basis price for the opening of trading" in the preceding paragraph shall have the meaning specified in Article 58-3, paragraph 4 of the TWSE Operating Rules, or Article 60-1 of the TPEx Trading Rules.
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