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This Risk Disclosure Statement and General Authorization Agreement is established according to Article 2 of the Operational Rules Governing Day Trades of Securities ("Operational Rules").
The principal shall have a full understanding of the following before engaging in day trades of securities:
- Day trading of securities shall mean trading, by the normal settlement method, in which, by agreement of the principal and the securities firm, with respect to a TWSE (or TPEx) listed security designated by the competent authority, after a buy order or sell order for the security is executed on the cash (spot) market, an equal quantity of the security is offset through the same brokerage account on the same day, and the settlement of funds is conducted based on the price difference after the offsetting of the opposite trades.
- If a TWSE (or TPEx) listed security that is eligible for day trading has been publicly announced by the TWSE or the TPEx under relevant bylaws or rules as being placed under an altered trading method or under dispositive measures, the security may not be an object of a day trade.
- Day trades of securities are limited to day trades between trades executed in normal trading before market close, and to day trades between a buy or sell trade executed in normal trading before market close and an opposite offsetting trade executed in after-hours fixed-price trading.
- Day trades do not apply to odd-lot trades, block trades, trades conducted under Article 74 of the TWSE Operating Rules, and trades conducted through over-the-counter price negotiation under Article 32-1, and trades under Article 39, of the Taipei Exchange Rules Governing Securities Trading on the TPEx.
- If the principal, after selling securities on the spot market, fails to undertake an opposite purchase to close out the day trade when the order quantity exceeds the aggregate sum of the balance of those securities deposited in the principal's depository account and the quantity of the principal's cash purchases of the securities executed the same day, Chapter 3 of the Operational Rules, governing the lending of securities to cover a shortfall in securities deliverable in day trading, shall apply, unless the trade category in changed. In such case, the securities broker shall borrow securities from a customer then relend them to the principal, or another securities broker shall borrow the securities from a customers of its own and relend them to the securities broker to be further lent to the principal for settlement purposes.
If the securities broker is unable to lend securities to the principal pursuant to the preceding paragraph, it must, on the business day following the sale of the securities on the spot market, authorize a securities finance company to bid or negotiate on its behalf for the borrowing of securities. Where the quantity of securities borrowed by the securities broker through the bidding or negotiation procedures is still insufficient, the TWSE or TPEx will arrange on its behalf for the borrowing of the remaining quantity of securities required for settlement in accordance with the TWSE Securities Borrowing and Lending Rules or the TPEx Securities Borrowing and Lending Rules.
The principal shall, on the first business day after the trade date of the sale of the spot securities, make a forced repurchase through the securities broker for purposes of returning the securities borrowed. If it is unable to make a forced repurchase of the full quantity on the first business day after the trade date of the sale of the spot securities, it shall, beginning from the second business day after the trade date of the sale of the spot securities, continuously repurchase the securities until the full quantity is repurchased. The principal shall continue to borrow in the above manner securities that have not been forcibly repurchased.
- When there is book closure by an issuer of a security eligible for day trading, all sell-first buy-later day trading of that security, and all operations for lending of that security to cover shortfalls in day trading, shall be suspended beginning from five business days before the book closure date. This restriction shall not apply, however, if the cause for the book closure by the issuer has no effect on the exercise of shareholder rights.
If a business day under the preceding paragraph is a trading day, but the commencement date of book closure of the issuing company is scheduled to fall on a date from (and inclusive of) the second settlement day after the last trading day before the Lunar New Year Holidays to (and inclusive of) the second trading day following the Lunar New Year Holidays, the following provisions shall apply:
- If the commencement date of book closure is scheduled to fall on the second settlement day after the last trading day before the Lunar New Year Holidays, then the first settlement day after the last trading day is included in the calculation of "business days."
- If the commencement date of book closure is scheduled to fall during the Lunar New Year Holidays or on the first trading day following the Lunar New Year Holidays, then the two settlement days after the last trading day are both included in the calculation of "business days."
- If the commencement date of book closure is scheduled to fall on a weekend or other regular holiday after the first trading day following, or on the second trading day following, the Lunar New Year Holidays, then the first settlement day after the last trading day is included in the calculation of "business days."
- The principal shall evaluate its own financial position, risk tolerance and investment experiences while taking into the following risk factors before engaging in a day trade:
- Investment risk: The principal shall assess the investment risks arising from price fluctuation if it chooses to engage in a day trade in securities with a high price fluctuation.
- Trading costs: The principal shall understand the trading costs resulting from frequent trading activities.
- Risks of failure of opposite offsetting:
- Failure to to undertake an opposite purchase after purchasing securities on the spot market: The principal shall assess the securities to purchase, and may need to prepare sufficient funds for settlement in the event of failure of opposite offsetting.
- Failure to undertake an opposite purchase after selling securities on the spot market: The principal shall be solely liable for all fees incurred in connection with any borrowing of securities, or bidding or price negotiation for the borrowing of securities, to cover any shortfall in securities deliverable in day trading, or with settlement-driven securities borrowing, and for any price difference and other fees incurred in connection with a forced repurchase, in the event of failure to undertake an opposite purchase after selling securities on the spot market.
- The securities broker may collect full funds or a certain percentage of funds from the principal in advance depending on the circumstance. The collection of advance funds is governed mutatis mutandis by the Operation Directions for the Advance Collection of Funds and Securities by Securities Brokers in Brokerage Trading.
- The securities broker shall, after the closing of the market each business day, assess whether to increase, or decrease, a principal's single-day trading limit or day trading limit, based on the principal's profit or loss following day trading
- If the principal's cumulative loss from day trading of the preceding month reaches half of the single-day trading limit or day trading limit, the securities broker shall suspend day trading by the principal. The securities broker shall reassess the principal's single-day trading limit or the day trading limit after the principal has submitted proof of adequate financial capability, unless the principal is a professional institutional investor.
The information contained in the risk disclosure statement is intended to be enumerative only, not exhaustive, on the risks arising from day trades and other circumstances that affect the market. Prior to trading, the principal is required to carefully review the risk disclosure statement, gaining an understanding of other possible affecting factors, and perform well-thought financial planning and risk evaluation so as to avoid insufferable loss from hasty day trading.
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I, the principal, hereby represent that prior to my day trades of securities, I have carefully reviewed the risk disclosure statement and been provided with an explanation by ____ from ________ Securities Co., Ltd., and understand and guarantee to be solely liable for the risk of day trades.
I agree that ________ Securities Co., Ltd. may directly offset an equal quantity of the security for a buy order or sell order for the security that is executed on the cash (spot) market through the same brokerage account on the same day and I do not need to submit an individual application for each of the trades. I will, however, issue a statement not to offset the securities before the market is closed on the same trading day if I choose not to so offset.
If, after selling securities on the spot market, I am unable to undertake an opposite purchase to close out the day trade when the order quantity exceeds the aggregate sum of the balance of those securities deposited in the depository account and the quantity of the cash purchases of the securities executed the same day, I agree the aforementioned securities company may, on the first business day following its sale of the securities on the spot market, make a forced repurchase through the head office's "special account for handling shortfalls in securities deliverable in day trading" for purposes of returning the securities required for the closing out of the day trade, bidding or negotiation, or settlement. I may have no objections to the price and time of such forced repurchase.
The above statement is made to
________ Securities Co., Ltd.
Signature of the representative from the securities firm providing the explanation: ________________
Principal's signature: ______________ Date: ______________
National ID No.: ________________________
Uniform Business Code of Profit-Seeking Enterprise: __________________
Representative: ______________
TEL: ______________ FAX: ______________
Address: ______________
(This Risk Disclosure Statement and General Authorization Agreement shall be executed in duplicate, with one copy to be kept by the securities firm for filing and the other by the principal for reference.)
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