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1     These Standards and Procedures are adopted pursuant to Articles 4 and 5 of the Standards Governing Eligibility of Securities for Margin Purchase and Short Sale (hereinafter referred to as the "Eligibility Standards").
2     Securities that have been deemed eligible for margin purchase and short sale are subject to the following treatments if they exhibit any one of the conditions stated in Article 4, Paragraph 1, and Article 5, Paragraph 1 of the Eligibility Standards:
  1. For stocks that are suspended of all trading activities, delisted from the GTSM, or require advance full delivery for settlement, and exchange-traded funds that are delisted from the GTSM: Securities which the GTSM has ordered to suspend trading activities, delist from the GTSM, or require advance full delivery as the settlement method shall cease all margin purchases and short sales from the second business day after the announcement, or from the first business day after the announcement if such orders are issued in accordance with Article 287, Paragraph 1, Subparagraph 5 of The Company Act, or if it involves the receivership of a financial institution by the competent authority. However, this does not apply to trading suspensions or delistings that are due to stock capital reduction, merger, or change of listing to TWSE where shareholders' existing stocks are replaced with new stocks of different rights and obligations.
  2. For securities investment trust enterprises that do not publish financial statements for the funds they issue, or fund managing companies that match the descriptions stated in Article 96, Paragraph 1 of the Securities Investment Trust and Consulting Act: The GTSM will suspend all margin purchases and short sales on the beneficiary certificates of that equity fund from the second business day after the announcement.
  3. For GTSM listed stocks with net worth per share falling below the face value, or cumulative losses by those without face values or those whose face values do not equal to NT$10:
    1. The GTSM reviews each company's latest audited financial statements and auditor-reviewed 1st-quarter financial statements (auditor's review is not required for primary listed companies) on the 5th business day of the 5th month after the end of each fiscal year, and identifies companies with net worth per share that fall below their face values. For companies that are without face values or with face values that are not equal to NT$10, the GTSM will identify companies that show accumulated losses in both their latest annual reports and the 1st-quarter statements. The identified companies shall be suspended of all margin purchases and short sales from the second business day after the GTSM announces its findings.
    2. In addition, the GTSM reviews each company's latest half fiscal year audited financial statements (auditor-reviewed statements are permitted for primary listed companies) on the final business day of the 3rd month after the end of a half fiscal year, and identifies companies with net worth per share that fall below their face values. If a company's stock has no face value or a face value other than NT$10 per share, and it has accumulated losses in the most recent semi-annual report, the company in question shall be suspended from conducting any margin purchases and short sales from the second business day after announcement of such findings.
  4. For securities that encounter a major settlement default with margin purchase and short sale balances outstanding above a specified percentage: The GTSM listed securities that have been deemed eligible for margin purchases and short sales shall be suspended of such activities if the amount of settlement default occurring in one day exceeds NT$50 million while the margin purchase or short sale balance represents more than 15% of outstanding shares listed on the GTSM. In which case, the suspension shall begin from the second business day after the GTSM announces its findings.
  5. Securities with extreme price volatility: The GTSM will reduce margin purchase ratio by 10% and demand an additional 10% collateral on short sales in the following business day for securities that exhibit trade activities matching the criteria described in Article 10, Paragraph 3, Item 1, for five consecutive business days or for six of the last ten business days.
  6. Securities with abnormal changes in trade volume: The GTSM will reduce margin purchase ratio by 10% and demand an additional 10% collateral on short sales in the following business day for securities that exhibit trade activities matching the criteria described in Article 10, Paragraph 3, Item 2, for five consecutive business days or for six of the last ten business days.
  7. Securities with overly concentrated ownership: The GTSM will reduce margin purchase ratio by 10% and demand an additional 10% collateral on short sales in the following business day for securities that satisfy the criteria described in Article 10, Subparagraph 3, Item 3.
  8. For securities that conform to Article 6, Paragraph 2 of GreTai Securities Market Directions for Announcement or Notice of Attention to Trading Information and Dispositions: The GTSM will reduce margin purchase ratio by 10% and demand an additional 10% collateral on short sales over the period during which the treatment is imposed. The reduction in margin purchase ratio and the demand for additional collateral on short sale shall be raised to 20% if Article 8 coincides with other conditions described in this Paragraph.
  9. Other circumstances that make it unadvisable to continue a margin purchase or short sale: The GTSM may suspend margin purchase and short sale of any security if advised against during its supervisory meeting.
Paragraphs 3 through 8 above do not apply to exchange-traded fund (ETF) beneficiary certificates.
3     Securities that have been suspended of margin purchasing and short selling due to the provisions stated in Article 4, Paragraph 1, Subparagraphs 1 through 3, Article 11, and Article 5, Paragraph 1, Subparagraphs 1 through 3 and 7 of the Eligibility Standards may resume such activities from the second business day after the GTSM announces that the contributing causes have been resolved. This does not apply to suspensions that are imposed by the GTSM's supervisory board, in which case margin purchases and short selling may resume only after the expiry of the board's decisions.
4     With regard to securities that have been suspended of margin purchases and short sales because of the conditions described in Article 4, Paragraph 1, Subparagraph 4 of the Eligibility Standards, the issuer may submit an audited annual financial report, an audited semi-annual financial report (or auditor-reviewed semi-annual reports for primary listed companies), or an auditor-reviewed quarterly financial report (auditor's review is not required for primary listed companies) to apply for the resumption of margin purchasing and short selling. Upon receipt of the financial reports, the GTSM will disclose such information into the information system and conduct a review five days later. If the company is found to have maintained its net worth above the face value, or is no longer in cumulated deficits for those without a face value or with a face value other than NT$10, margin purchasing and short selling may resume from the fifth business day after the GTSM announces its findings. Companies that do not appeal to the suspension shall be re-assessed at the following dates. If the company is found to have maintained its net worth above the face value, or is no longer in cumulated deficits for those without face values or with face values other than NT$10, margin purchasing and short selling may resume from the second business day after the GTSM announces its findings.
  1. The GTSM conducts follow-up reviews of each company's latest audited annual financial statements on the fifth business day of the 4th month after the end of a fiscal year.
  2. The GTSM conducts follow-up reviews on each company's latest auditor-reviewed 1st-quarter financial statements (auditor's review is not required for primary listed companies) on the fifth business day of the 5th month after the end of a half fiscal year.
  3. The GTSM conducts follow-up reviews on each company's latest audited half fiscal year financial statements (or auditor-reviewed statements for primary listed companies) on the fifth business day of the 3rd month after the end of a half fiscal year.
  4. Where the laws have imposed other reporting deadlines with regard to the three financial statements mentioned above, the GTSM will conduct reviews on the fifth business day after such deadlines.
5     With regard to securities that have been suspended of margin purchasing and short selling due to conditions described in Article 4, Paragraph 1, Subparagraph 7 of the Eligibility Standards, the GTSM will announce the resumption of such activities on the day after the company is found to have satisfied both criteria below, and effect from the second business day onwards:
  1. No settlement defaults with an aggregate value of more than NT$10 million have occurred for six consecutive business days.
  2. The margin purchase and short sale balance outstanding as at the last business day of the abovementioned 6-day span represent less than 15% of total securities listed on the GTSM.
6     Securities with margin purchase ratios or collateral requirements adjusted due to extreme price volatility or abnormal changes in trade volume may have these ratios reverted to normal from the business day after the security is found to be absent of such extremity or abnormality for six consecutive business days.
7     Securities with margin purchase ratios or collateral requirements adjusted due to overly concentrated ownership may have these ratios reverted to normal from the business day after the security is found to be absent of such concentration.
8     Securities that exhibit extreme price volatility, abnormal changes in trade volume, or overly concentrated ownership shall have margin purchase ratio and short sale collateral requirements adjusted by 10% at the most, even if all three conditions occur simultaneously. In such case, however, the ratios may revert to normal only if the security no longer exhibits extreme price volatility and abnormal trade volume for six consecutive business days, and is simultaneously absent of concentrated ownership.
9     Securities that exhibit extreme price volatility, abnormal changes in trade volume, or overly concentrated ownership shall be disclosed in the GTSM's Margin Purchase and Short Sale Balance Report. Securities that are subject to the 10% adjustment on margin purchase ratios and short sale collaterals will be disclosed in the report and announced through the GTSM's information system. Adjustments back to the normal ratios will also be announced through the GTSM's information system.
10     The assessment criteria set forth in Article 4, Paragraph 1, Subparagraphs 8 through 10 of Standards Governing Eligibility of Securities for Margin Purchase and Short Sale are as follows:
  1. Timeframe of assessment:
    1. Price and trade volume: Assessed on a daily basis. Price and volume changes for the 30 business days preceding the assessment date (referred to as The Timeframe) are taken into consideration.
    2. Share ownership: Based on the ownership diversity report produced after the annual general meeting of a GTSM listed company.
  2. Sampled range:
    Apart from managed stocks listed on the GTSM and stocks registered on the Emerging Stock Market, all listed ordinary shares satisfying the criteria below are eligible for margin purchase and short sale over the GTSM.
  3. Assessment standards:
    1. Any one of the following is considered extreme price volatility. Where there are no other securities of the same industry listed on the GTSM, comparisons can be made to other equivalents listed on TWSE. If there are neither comparable securities listed on TWSE, the assessment standard shall be deemed inapplicable to the company under assessment:
      1. The daily price movement (in absolute terms) averaged over The Timeframe exceeds the daily movement of the sampled securities in the corresponding period by more than two standard deviations, and exceeds the daily movement of other securities in the same industry by more than 150%.
      2. The spread-to-average ratio (the difference between the high and the low over The Timeframe, divided by the average price) of the security exceeds the spread-to-average ratio of the sampled securities in the corresponding period by more than two standard deviations, and exceeds the spread-to-average ratio of other securities in the same industry by more than 150%.
    2. Any one of the following is an abnormal change in trade volume:
      1. The security experiences a turnover rate that is more than 10 times the average turnover rate of sampled securities over The Timeframe.
      2. The security experiences a turnover rate that is less than 10% of the average turnover rate of sampled securities over The Timeframe, with trade volumes accumulating to less than 1,000 trade units.
    3. Any one of the following is a concentration of share ownership:
      1. Less than 1,000 registered shareholders.
      2. The number of shareholders holding 1,000 to 50,000 shares is less than 500.
      3. The aggregate shareholding interest held by the company's directors, supervisors, managers, and major shareholders (those with more than 10% interest) account for 75% of listed shares if the company has 50 million or fewer shares circulating in the GTSM; or 80% for companies with more than 50 million up to 500 million outstanding shares; or 85% for companies with more than 500 million outstanding shares.
    4. GTSM listed companies that do not submit ownership diversity reports to the GTSM within 20 days after their annual general meetings shall be treated equally as being concentrated in share ownership.
11     These Standards and Procedures, and any subsequent amendments hereto, shall be implemented upon submission to and ratification by the competent authority.