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Title: Adjusted Net Capital Reporting Procedures for Futures Commission Merchants
Date: 2006.06.06 ( Announced )
Date: 2006.06.06 ( Amended )

Article Content

 
Article 1     These procedures are promulgated pursuant to Letter No. Taiwan-Finance-Securities 04496 of the Securities and Futures Commission, Ministry of Finance.
Article 2     The calculation methodology for adjusted net capitalization shall be the "Calculation Methodology for Adjusted Net Capital" for futures commission merchants promulgated by the competent authority. Clearing members shall also use this calculation methodology.
Article 3     A futures commission merchant (including futures commission merchants that offer re-consigned foreign futures trading services) or clearing member must calculate its adjusted net capitalization daily. Within ten days of the end of each month, a spreadsheet of adjusted net capitalization must be reported to the Exchange.
    When a futures commission merchant's adjusted net capital is less than 40 percent of the client margin required for its clients' open positions, the futures commission merchant shall report to the Exchange weekly.
    When a clearing member's adjusted net capital is less than 40 percent of the aggregate amount of clearing margins required for open positions, the clearing member shall report to the Exchange weekly.
    When the decrease in a futures commission merchant or a clearing member's adjusted net capital reaches 20 percent, this shall be reported to the Exchange within two business days.
Article 4     A futures commission merchant or clearing member shall submit its spreadsheet of adjusted net capital in the written form or the media mandated by the Exchange.
Article 5     The Exchange's adjusted net capital adequacy control ratios for futures commission merchants are based on the provisions of Article 22 of the Rules Governing Futures Commission Merchants. Adjusted net capital adequacy control ratios for clearing members are:
  1. Early Warning. A clearing member's adjusted net capital reaches 25 percent of the aggregate clearing margins required for its open positions.
  2. Reporting. A clearing member's adjusted net capital reaches 20 percent of the aggregate clearing margins required for its open positions.
  3. Limit. A clearing member's adjusted net capital reaches 15 percent of the aggregate clearing margins required for its open positions.
Article 6     When positions held by a futures commission merchant reach the volume specified as the standard for reporting in Article 22 of the Rules Governing Futures Commission Merchants, the futures commission merchant shall immediately file a report to the Exchange.
    The Exchange shall notify clearing members entrusted with clearing when the number of positions held by a futures commission merchant reaches the threshold for limit specified in Article 22 of the Rules Governing Futures Commission Merchants.
    The Exchange shall add futures commission merchants whose number of positions has reached the reporting and limit standards to its control watch list and increase surveillance.
Article 7     The procedure for handling a clearing member whose number of positions has reached the adjusted net capital adequacy control ratio is as follows:
  1. When the number of held positions meets the early warning standard, the Exchange shall require the member to provide it with its most recent adjusted net capital data, and after verification, this information shall be entered into the clearing system for control.
  2. When the number of held positions meets the reporting standard, the member should report to the Exchange that day, and the Exchange shall add clearing members that have already reached the reporting standard to its watch list and monitor the member's situation at all times.
  3. When the number of held positions meets the limit standard, the Exchange shall temporarily stop the clearing member from adding new positions or take other measures and notify the clearing member to implement an improvement plan. If the clearing member does not improve, the Exchange may terminate the member's clearing member status.
Article 8     These procedures and any amendments shall take effect after having been approved by the competent authority.