Article NO. Content

Title:

Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities 

Amended Date: 2021.04.01 (Articles 5, 53, 63 amended,English version coming soon)
Current English version amended on 2020.12.08 
Categories: Securities Exchange Market > Margin Transaction
Article 38     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 securities firm or bank, the account number should start with three digits "929", 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, however, the account number of its consignment trading account should 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.

Interpretation:

Relevant Laws: