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Title: Operating Rules of the Taiwan Futures Exchange Corporation
Date: 2003.02.10 ( Announced )
Date: 2017.02.24 ( Amended )

Article Content

 
Chapter 1 General Principles
Article 1     These Operating Rules (hereinafter referred to as the "Rules") are promulgated pursuant to Articles 15 and 47 of the Futures Trading Act.
Article 2     Except as otherwise provided in applicable laws and regulations and the Articles of Incorporation of the TAIFEX, the business operations of the TAIFEX shall be handled in accordance with these Rules.
Article 3     The Competent Authority referred to in these Rules shall be the Financial Supervisory Commission.
    The term "overseas Chinese and foreign nationals" as used in these Rules includes onshore overseas Chinese and foreign nationals and offshore overseas Chinese and foreign nationals.
    The term "onshore overseas Chinese and foreign nationals" as used in these Rules means natural persons with residence in the territory of the ROC who hold an Overseas Compatriot Identity Certificate, or hold an ROC passport with an Overseas Compatriot Identity Endorsement, or hold an Alien Resident Certificate, and foreign institutional investors residing within the territory of the ROC.
    The term "offshore overseas Chinese and foreign nationals" as used in these Rules means overseas Chinese and foreign nationals, including natural persons and foreign institutional investors, outside the territory of the ROC.
    The term "foreign institutional investor" as used in these Rules means either an institutional investor established outside ROC territory in accordance with local law, or a branch company established in ROC territory by an overseas juristic person.
    The term "mainland area investor" as used in these Rules means a person permitted to conduct futures trading in Taiwan pursuant to the Regulations Governing Securities Investment and Futures Trading in Taiwan by Mainland Area Investors.
Article 4     The TAIFEX also engages in futures clearing house business through the establishment of a Clearing Department that handles futures trading clearing and settlement operations and has independent operations, finances, and accounting.
Chapter 2 Exchange Market
Article 5     The trading hours of the centralized futures exchange market (hereinafter referred to as the "Exchange") established by the TAIFEX shall be divided into the regular trading session and the after-hours trading session, and the trading hours for each trading session shall be as prescribed in each respective futures trading contract, provided that there will be no trading during the after-hours trading session on a make-up work day. If the futures trading contract does not provide for after-hours trading sessions, the trading hours referred to in the trading rules and specification of the contract shall be the regular trading session.
    If the futures trading contract provides for a regular trading session and an after-hours trading session, the trading conducted during the after-hours trading session shall belong to the next following regular trading session. Unless otherwise provided, the trading and clearing related operations shall be conducted in the next following regular trading session.
    Where necessary in the opinion of the TAIFEX or where recommended by a futures industry association or the Federation of Futures Industry Associations, a request may be made to the Competent Authority to alter the trading hours under paragraph 1.
Article 6     The holiday schedule of the Exchange shall be identical with that of banks, provided that where necessary in the opinion of the TAIFEX or recommended by a futures industry association or the Federation of Futures Industry Associations, a request may be made to the Competent Authority to alter the holiday schedule.
Article 7     Participation in futures trading on the Exchange shall be confined to shareholders of the TAIFEX that have entered into a contract to use the centralized futures exchange market (hereinafter referred to as "futures commission merchants" and "market usage contract," respectively).
    The prohibition against participation by non-shareholders in the preceding paragraph shall not apply during the initial 2 years after the TAIFEX begins operation.
Article 8     Guidelines for the management of the TAIFEX's exchange market shall be separately prescribed by the TAIFEX.
Article 9     To detect operational risks of futures commission merchants in the early stage and give warnings in a timely manner, so as to preserve the sound operation of the centralized futures exchange market, the TAIFEX shall formulate Guidelines Governing Early Warning Procedures for Operational Risks and carry out auditing of futures commission merchants.
Article 10     Futures commission merchants shall utilize the trading information and facilities provided by the TAIFEX in accordance with the rules of the TAIFEX, and shall be liable for compensation for any damage incurred by the TAIFEX for reasons imputable to the futures commission merchants.
    Rules governing the use of the trading information and facilities provided by the TAIFEX shall be prescribed separately.
    Futures commission merchants and their principals shall not request compensation when normal operations are obstructed by interrupted transmissions or malfunctions of trading information and facilities provided by the TAIFEX.
Article 11     The TAIFEX shall prepare a futures trading record and relevant data after the close of the trading sessions every trading day, and shall publish such information with utmost dispatch and disclose it in appropriate places.
    The futures trading record referred to in the preceding paragraph and the particulars required to be included therein shall be prepared in accordance with Article 17 of the Regulations Governing the Futures Exchange.
Article 12     The TAIFEX shall provide at designated places the contract specifications of listed futures trading contracts and financial and business information of futures commission merchants and clearing members for public review.
Chapter 3 Futures Commission Merchants
Article 13     Futures commission merchants applying to participate in futures trading on the Exchange shall obtain permits and licenses from the Competent Authority, shall meet the financial standards prescribed in the Regulations Governing Futures Commission Merchants, and shall complete an application, sign the market usage contract, and submit them, accompanied with two copies each of the following documents, to the TAIFEX:
  1. Photocopy of the futures commission merchant permit.
  2. Documentation of company registration and documentation of business registration.
  3. Articles of incorporation and roster of shareholders and their respective shareholdings.
  4. Roster of directors, supervisors, managerial officers, associated persons, and registration forms showing the same.
  5. A statement declaring that the directors, supervisors and managerial officers do not fall within any of the categories under Article 28 of the Futures Trading Act.
  6. Floor plan of the facilities of the place of business and a certificate proving the site has passed inspection.
  7. Proof of completion of installation of information processing and transmission facilities necessary at the futures trading operations site.
  8. Proof of obtainment of an agreement from a clearing member to handle clearing and settlement operations on its behalf, or acquisition of its own clearing membership.
  9. Most recent financial report audited and certified by a certified public accountant.
  10. Other documents as required by the TAIFEX.
Article 14     In any of the following events, a futures commission merchant shall report to the TAIFEX for transmittal to the Competent Authority:
  1. Where business operations are commenced, suspended, resumed, or terminated;
  2. Where there is a change of the clearing member or settlement bank mandated to handle clearing and settlement;
  3. Where customer margin accounts are opened, changed, or closed;
  4. Where the futures commission merchant, or any of its directors, supervisors, managerial officers, associated persons, or any other employees becomes involved in a lawsuit or arbitration arising in connection with its business operations, or is subject to compulsory execution as an obligor, or the futures commission merchant is a bankrupt, or has a negotiable instrument dishonored by a bank, or is refused transactions by a bank;
  5. Where any director, supervisor, managerial officer, or associated persons falls under any category enumerated in Article 28 of the Futures Trading Act;
  6. Where there is factual evidence that any director, supervisor, managerial officer, or associated person has engaged or been involved in any other dishonest or improper activity, indicating such person is not suitable to engage in futures business;
  7. Where any director, supervisor, managerial officer, associated person, or other employee has violated the Futures Trading Act or any order promulgated by the Competent Authority in accordance with the Futures Trading Act;
  8. Where there is any change in the shareholding of any director, supervisor, managerial officer, or shareholder holding more than 10 percent of the shares of the futures commission merchant;
  9. Where there is any change in financial ratio, or other material event affecting the financial structure, that under foreign futures trading laws and regulations shall be reported to the local Competent Authority for futures business or other regulatory authorities;
  10. Where the volume of its futures trading for its own account or customer accounts has reached the threshold requiring reporting under ROC or foreign futures trading laws and regulations; or
  11. Where there is any other matter that the Competent Authority requires to be reported.
    For matters under subparagraphs 1 and 2 of the preceding paragraph, the futures commission merchant shall report in advance. For matters under subparagraphs 3 to 7, the futures commission merchant shall report within 5 business days from the day on which it becomes aware of the matter or on which the matter occurs. For matters under subparagraph 8, the futures commission merchant shall put together all of the relevant information and report before the 15th day of the following month. For matters under subparagraphs 9 and 10, the futures commission merchant shall report to the TAIFEX at the same time it reports the matters to the foreign futures exchange or other competent authorities.
    The term "business day" as used in these Regulations means a trading day on the domestic futures market.
Article 15     In any one of the following events, a futures commission merchant shall submit applications and supporting documents to the TAIFEX, which will, after attaching with them a statement of opinion, forward them to the Competent Authority for approval:
  1. Change of name of the futures commission merchant;
  2. Change of the amount of capital, designated operating funds, or other funds for business operations;
  3. Change of its place of business or its branch offices;
  4. Change of the scope of business operations;
  5. Acquisition of all or a substantial portion of the business or property of another futures commission merchant; or transfer of all or a substantial portion of its business or property;
  6. Merger or dissolution;
  7. Investment in any foreign futures-related institution;
  8. Any other event that the Competent Authority requires to be reported for approval.
    Where amendment is required to any item under the subparagraphs of the preceding paragraph, the futures commission merchant shall submit the amendment registration fee along with an application and supporting documents to the TAIFEX.
Article 16     Amendment of the futures commission merchant's Articles of Incorporation or items to be registered or filed in accordance with the Company Act shall be reported to the TAIFEX for recordation.
    Any change in the futures commission merchant's directors, supervisors, managerial officers, or associated persons shall be registered in accordance with the Regulations Governing Responsible Persons and Associated Persons of Futures Commission Merchants, and the TAIFEX shall be notified by copy of any change in the directors, supervisors, or managerial officers.
Article 17     Futures commission merchants that have been approved by the Competent Authority to establish branch offices and have been issued permit certificates to do so shall submit the following documents to the TAIFEX for recordation:
  1. Photocopy of the permit certificate for establishment of a branch office.
  2. Registration forms for the managerial officers and associated persons of the branch office.
Article 18     Financial reports produced by a futures commission merchant in accordance with regulations promulgated by the Competent Authority shall be audited and certified by a certified public accountant, approved by the board of directors, recognized by the supervisor, and then publicly announced in a newspaper.
    The financial reports referred to in the preceding paragraph (including balance sheets, statements of comprehensive income, statements of changes in equity, statements of cash flows, and their accompanying notes or supplementary schedules), minutes of board of directors meetings, supervisor audit report, and newspapers containing public announcements, where for the first half of the fiscal year, shall be sent to the TAIFEX within 2 months of the end of the first fiscal half-year. Where for the full fiscal year, they shall be sent to the TAIFEX for recordation within 3 months of the end of each fiscal year.
    The shareholders meeting of a futures commission merchant shall be held within 6 months of the end of the fiscal year. Within one week of their recognition by the shareholders meeting, the minutes of the shareholders meeting and the business report shall be sent to the TAIFEX for recordation. Any discrepancy between the annual financial report recognized by the shareholders meeting and the financial report publicly announced and sent to the TAIFEX shall be publicly announced and reported to the TAIFEX within 2 days of occurrence.
    On a monthly basis, futures commission merchants shall prepare a monthly summary of accounting items, a monthly financial ratio statement, and a monthly futures trading volume statement, and bank deposit statements and all attachments (all including those of all branch offices). The above items shall be reported by electronic media to the TAIFEX by the 10th day of the following month.
    Procedures for submission of the various financial statements via electronic media shall be prescribed by the TAIFEX.
    Materials submitted by futures commission merchants pursuant to the second and fourth paragraphs shall be compiled by the TAIFEX and then forwarded to the Competent Authority.
Article 19     Any time the owners' equity of a futures commission merchant is less than 60 percent of the minimum paid-in capital or the adjusted net capital amount is less than 20 percent of the total amount of customer margins required for the open positions of futures traders, the futures commission merchant shall immediately report to the Competent Authority and the TAIFEX.
    Any time the owners' equity of a futures commission merchant is less than 40 percent of the minimum paid-in capital or the adjusted net capital amount is less than 15 percent of the total amount of customer margins required for the open positions of futures traders, the futures commission merchant shall immediately cease accepting any orders from principals except for orders for disposal of the then-open positions, and shall submit an improvement plan to the Competent Authority and the TAIFEX.
    The adjusted net capital amount shall be calculated in accordance with the regulations of the Competent Authority. The ratios referred to in the preceding two paragraphs may be adjusted by the Competent Authority depending on domestic and foreign economic and financial conditions and the business status of futures commission merchants.
Article 19-1     The adjusted net capital amount of futures commission merchants shall not be less than 6 percent of the total amount of customer margin account.
Article 20     A futures commission merchant shall prepare and keep at its place of business all certificates, vouchers, account books, statements, records, contracts, and relevant supporting documents concerning all transactions, settlement, and clearing.
    The TAIFEX may dispatch personnel to inspect or inquire about the certificates, vouchers, account books, statements, records, contracts, and relevant supporting documents referred to in the preceding paragraph and futures commission merchants shall not evade or refuse such inspection or inquiry.
    Except as otherwise provided by the Commercial Accounting Act, the period for keeping the certificates, vouchers, account books, statements, records, contracts and relevant supporting documents referred to in the preceding paragraph shall be as prescribed in the Table of Mandatory Preservation Periods for Accounts, Statements, Vouchers, and Certificates of Futures Commission Merchants promulgated by the TAIFEX.
    The TAIFEX may notify futures commission merchants to furnish their financial and business data as may be required, and may publicly report such data.
Article 21     A futures commission merchant shall install internal auditors to regularly or from time to time examine the company's finances and business, and shall prepare audit reports for inspection.
    The TAIFEX may dispatch personnel to inspect or inquire about the audit reports referred to in the preceding paragraph and relevant documentation, and futures commission merchants shall not evade or refuse such inspection or inquiry.
    A futures commission merchant shall adopt an internal control system in accordance with the Competent Authority's Regulations Governing Internal Control Systems of Service Enterprises in the Securities and Futures Market and the TAIFEX's regulatory standards for internal control systems of futures commission merchants, and shall operate in accordance with its internal control system.
Article 22     All futures commission merchants shall have in place an electronic mailbox capable of handling Chinese-language text. General notices, announcements, or other documents issued by the TAIFEX may be transmitted to the futures commission merchants' Chinese electronic mailboxes instead of physically delivering them.
    The TAIFEX may deliver emergency notifications or give other notices orally, by telephone, or by other means.
Article 23     The TAIFEX shall assign a code number to each futures commission merchant. All vouchers, certificates, and forms related to trading and clearing shall contain the code number as well as the name of the futures commission merchant.
Article 24     Futures commission merchants shall employ qualified, registered associated persons to carry out business operations.
    Futures commission merchants shall be fully liable for all actions carried out by their employed personnel in the course of performing their business duties on the Exchange.
    The personnel referred to in the preceding paragraph shall abide by all provisions of these Rules, market announcements, and other related rules, and may not claim ignorance as an excuse for failing to do so.
    When amendment to the registered personnel of a futures commission merchant is to be made, the futures commission merchant shall not be relieved of liability for the employed personnel's behavior until registration of the amendment is completed.
Article 25     During business hours, no personnel other than the futures commission merchant chairman, general manager, business department manager, branch manager, and registered, qualified associated persons employed by the futures commission merchant shall be allowed to enter a futures commission merchant's trading post.
Article 26     Reports submitted to the TAIFEX by a futures commission merchant shall not contain false or untrue information.
Article 27     A futures commission merchant shall not in any way retain the TAIFEX's managerial officers or associated persons to work for it on a part-time basis or bestow on them any honorary positions.
Chapter 4 Futures Trading Contracts
Article 28     Futures trading contracts shall be traded on the Exchange after they have been submitted by the TAIFEX to the Competent Authority and approved.
Article 29     The TAIFEX shall publicly announce the relevant particulars 3 trading days prior to the listing of a futures trading contract.
    The particulars to be announced prior to the listing shall include the name of the futures trading contract, the delivery months, the last trading date, trading hours, contract size, minimum fluctuation, daily price limits, margins, daily settlement price, final settlement day, final settlement price, settlement method, and other particulars required to be announced.
Article 30     The TAIFEX shall assign codes and abbreviations to listed futures trading contracts for uniform use.
Article 31     If any of the following circumstances applies to a futures trading contract, the TAIFEX may apply to the Competent Authority for approval to suspend trading or terminate listing:
  1. The contract has lost its economic justification;
  2. The contract is not consistent with the public interest;
  3. One of the TAIFEX's committee's has so recommended.
Article 32     Where the TAIFEX suspends trading or terminates listing of a futures trading contract with the approval of the Competent Authority, the TAIFEX shall give 30 days advance public notice of such suspension or termination unless otherwise provided.
Chapter 5 Trading on the Exchange
Article 33     Except as otherwise permitted by the Competent Authority, trading of futures trading contracts on the Exchange shall be conducted via the automated computer trading system.
Article 34     Except as otherwise permitted by the Competent Authority, futures trading contracts publicly announced by the TAIFEX for listed trading shall be traded on the Exchange.
Article 35     The validity of orders for purchase and sale of futures trading contracts on this Exchange shall be limited to the session during which the orders are entered. Except where otherwise provided, futures commission merchants may key in orders in the chronicle sequence in which the orders are placed by the principles, starting from 15 minutes prior to the opening of the trading hours of the regular trading session, and 10 minutes prior to the opening of the trading hours of the after-hours trading session. Such order-entry shall include the futures commission merchant code number, clearing member code number, order form serial number, account number of the principal, contract ticker symbol, price, volume, type of transaction (sale/purchase), and whether a new position is being established or old position offset. Upon acceptance by the computer of the TAIFEX, the order confirmation or execution report shall be given to the participating futures commission merchant. The information to be included on the purchase/sale order-entry confirmation or execution report forms may be adjusted by the TAIFEX depending on actual needs.
    The serial numbers of order forms shall be sequentially assigned in the order that the orders are received from principals by the futures commission merchant. The serial numbers of orders for proprietary trading by futures commission merchants shall be sequentially numbered in the order that the orders are entered.
Article 35-1      The TAIFEX's computerized trading system accepts market orders, limit orders, and market with protection orders.
    A "market order" means a buy or sell order for which no price limit is designated and for which the trade price is determined by competitive bidding procedures.
     A "limit order" means a buy or sell order for which a price is designated. The trade price may be equal to or lower than the price designated in the case of purchases and may be equal to or higher than the price designated in the case of sales.
     A "market with protection order (MWP)" means a buy or sell order for which no price limit is designated, but after the MWP order has been received by the TAIFEX trading system, a buy MWP will be converted to a limit order with the price of the current best bid plus a protected range, and a sell MWP will be converted to a limit order with the price of the current best offer minus a protected range. However, when no corresponding bid/offer is available, the MWP will be rejected.
     The protected range referring in the preceding paragraph will be prescribed by the TAIFEX.
     Market with protection orders shall be placed during trading session only.
Article 35-2      Limit orders may specify that the order must be executed immediately or canceled, or executed immediately in full or canceled. Market orders and market with protection orders shall specify that the order must be executed immediately or canceled (an "immediate-or-cancel" order), or executed immediately in full or canceled (a "fill-or-kill" order).
     Trading orders specifying immediate execution in full or else cancellation ("fill-or-kill") as referred to in the preceding paragraph may be entered during trading session only.
Article 35-3     Orders for purchase or sale of futures trading contracts are divided into single orders for the same contracts, and combination orders for simultaneous trading of different contracts.
     Combination orders shall be confined to the trading session for the relevant contracts. Except as otherwise specified, combination order price shall be quoted as the spread between, or the sum of, the relevant contracts.
     Types of combination orders shall be publicly announced by the TAIFEX.
Article 36      Futures commission merchants applying for cancellation or alteration of trading orders, or making inquiries about order information, shall without exception do so via computer, no order can be cancelled or altered during the last 2 minutes prior to the opening of trading session.
    Application for alteration of trading order details shall be accomplished by first canceling the original order and then placing a new order, except under the circumstances listed below:
  1. merely reducing the quantity of a trading order;
  2. in the case of a limit order that is not an immediate-or-cancel (IOC) or fill-or-kill (FOK) order, merely changing the price of the order or changing it into a market order or a market with protection order.
     Order cancellations or order alterations as referred to in the preceding paragraphs shall be confined to orders not yet executed after their entry into the computer trading system. If an existing order mentioned in subparagraph 2 of the preceding paragraph has already been partially executed, the order may not be changed into a fill-or-kill market order or a fill-or-kill market with protection order.
     A futures commission merchant applying to simultaneously cancel multiple trading orders shall do so in compliance with the TAIFEX Operation Directions for the Use of Kill Switch by Futures Commission Merchants. Those Directions shall be separately prescribed by the TAIFEX.
Article 37     The priority for order matching shall be determined based upon the following principles:
  1. Market orders shall have priority over limit orders.
  2. Higher-priced buy orders shall have priority over lower-priced buy orders. Lower-priced sell orders shall have priority over higher-priced sell orders.
  3. For market orders and equal-price limit orders, priority shall be determined by the chronological sequence in which the orders were placed.
     Market with protection orders will be deemed as limit orders after the prices have been converted, and their priority will be determined in accordance with the principles set forth in the preceding paragraph.
Article 38     Order matching methods shall be divided into call market method and continuous market method.
    Trade prices generated by call market shall be determined by the following principles:
  1. Satisfying the maximum trade volume, buy orders with prices higher than the determined price and sell orders with prices lower than the determined price shall be all satisfied.
  2. Where there are buy and sell orders with prices equal to the determined price, at least one side shall be all satisfied.
  3. Where two or more prices conform to the principles in the preceding two subparagraphs, the price closest to the settlement price of the previous day shall be used at market opening and the price closest to the price of the most recently concluded transaction shall be used after market opening.
    Trade prices generated by continuous market shall be determined by the following principles:
  1. Where a newly entered order finds counterparties with limit orders, the determined price shall be the best bid or offer price of the counterparties.
  2. Where a newly entered order finds counterparties without limit orders, the determined price shall be the most recently traded price in the current session; if there is no traded price for the current session, the determined price shall be the settlement price of the preceding trading day.
  3. Where a newly entered order is a limit order and where a counterparty has placed a market order and no determined price can be generated by the principles in the preceding two subparagraphs, the determined price shall be the bid or offer price of the newly entered order.
  4. Where a buy limit order higher than the determined price, a sell limit order lower than the determined price, or a market order, is not fully satisfied, the traded price of the unsatisfied portion shall then be determined pursuant to the preceding three subparagraphs.
     If a newly entered order under the preceding paragraph is a market with protection order, it will be deemed as a limit order after the price has been converted, and its trade price will be determined in accordance with the principles set forth in the preceding paragraph.
    The daily price limits and the minimum fluctuation of futures trading contracts shall be specified in each respective contract.
Article 38-1     Unless a combination order for futures contracts is executed against a combination order comprising identical component contracts, at least one among the counterparties against which the component contracts of the combination order are executed shall be a single order.
    The counterparties against which a combination order for options contracts is executed shall be confined to single orders.
Article 39     The TAIFEX's computer records shall be the authoritative version of information of which a futures commission merchant is notified by the TAIFEX such as execution reports, trade price, position balance, and calculation of margins.
Article 40     Buy and sell orders for futures trading contracts shall be priced within the price limit on the current trading session.
Article 41     The intended volume of a futures trading contract order may be executed in part unless the order states that it must be executed immediately in full or else canceled. The unexecuted portion, unless the original order states that it must be executed immediately or else canceled, shall be satisfied by continued matching based on the original order price.
Article 42     Disclosures of the prices and volumes of buy and sell orders entered shall be determined by the TAIFEX.
Article 42-1     In addition to placing buy and sell orders, futures commission merchants may handle requests for quotes via computer.
    Market makers engaging in market making business shall accept quote requests and two-way quotes pursuant to regulations.
    Guidelines for market makers engaging in market making business shall be separately prescribed by the TAIFEX.
Article 43     The volume per order entered for the same futures trading contract by a futures commission merchant trading for its own account or for the account of a customer may not exceed the standard specified by the TAIFEX; however, this restriction does not apply if the trade is conducted pursuant to the TAIFEX Operational Rules Governing Block Trades.
    The standard volume per trading quote referred to in the preceding paragraph may be adjusted by the TAIFEX based on market conditions.
    The Operational Rules Governing Block Trades referred to paragraph 1 shall be separately prescribed by the TAIFEX.
Chapter 6 Brokerage Trading by Futures Commission Merchants
Article 44     Except where provided otherwise, a futures commission merchant shall comply with the following provisions when conducting futures trading on behalf of customers:
  1. When a futures commission merchant is mandated to open an account, it shall enter into a brokerage contract with the principal specifying the account opening date, and the name, gender, age, profession, address, telephone number, and personal identification card number of the principal; where the principal is a juristic person it shall specify its name, address, uniform invoice number, and the respective rights and obligations of the futures commission merchant and the principal, and shall recognize these Rules, relevant public announcements, and the Rules Governing Brokerage Contracts of Futures Commission Merchants as being integral parts of the contract.
  2. If the principal is a natural person, the principal shall open the account by appearing in person with his or her national identity card and affixing his or her signature or seal on site at the place of business, except in the following circumstances:
    1. If the principal applies with the Futures Commission Merchant to conduct the preliminary account opening procedures outside its place of business.
    2. If the principal stipulates that the maximum amount of initial margin required for the aggregate total of open positions and new orders during a trading session shall not exceed NT$1 million, account opening may be conducted by letter or electronically in a manner that suffices to confirm that the applicant is the principal him/her and his/her expression of intent. The Futures Commission Merchant may decide at its own discretion the method of credit check. In the event of any subsequent adjustment to the maximum amount, it shall conduct a new credit check in accordance with relevant regulations. However, the maximum amount restriction does not apply if the principal applies for account opening with a citizen digital certificate supplemented by video conferencing.
  3. If the principal is a juristic person, the juristic person and the representative shall affix their signatures or seals on the brokerage contract and shall issue a power of attorney.
  4. The futures commission merchant shall assign an account number to the principal.
  5. When the principal signs the brokerage agreement, a seal specimen or signature card of the principal shall be kept. The handling of futures trading procedures shall be effected against the same seal specimen or signature.
    The TAIFEX shall prescribe matters for attention concerning futures commission merchants accepting preliminary account opening application procedures from principals outside of the places of business of the futures commission merchants.
Article 44-1     When a futures commission merchant accepts to open an account for a custodian institution representing a principal that mandates the [futures commission merchant] to conduct discretionary futures trading, the names of both principal and mandatary shall be specified in the account name, a brokerage contract for account opening and discretionary futures trading shall be signed, and an agreement shall be entered into for the custodian institution to be the agent for collection/payment and settlement of margin and premium, and the following documents shall also be submitted:
  1. A photocopy of the written agreement signed by the principal, mandatary, and custodian institution regarding their respective rights and obligations. However, if a Chinese-language legal opinion issued by a lawyer may be substituted for the written agreement detailing the rights and obligations of the three parties pursuant to Article 17, paragraph 7 of the Regulations Governing the Conduct of Discretionary Investment Business by Securities Investment Trust Enterprises and Securities Investment Consulting Enterprises of the Securities Investment Trust and Consulting Association of the ROC (the "Discretionary Investment Business Regulations"), then those provisions shall be followed.
  2. Where the principal mandating the discretionary futures trading is a natural person, a photocopy of his/her National Identity Card shall be submitted. Where the principal mandating the discretionary futures trading is a juristic person or other institution, a photocopy of its juristic person registration document, photocopy of the notice of issuance of uniform number for taxable entities issued by the tax authorities (a profit-seeking enterprise may be exempt from submitting such copy of notice), and photocopy of the National Identity Card of the representative of the juristic entity shall be submitted.
  3. Photocopies of the company registration documents of the mandatary for the discretionary futures trading and the custodian institution, and photocopies of the National Identity Card of the responsible persons thereof.
  4. A photocopy of the National Identity Card of the person who makes decisions in the discretionary trading (including any deputy thereof) and of any other associated persons who execute trades, and original copy of power of attorney issued by the discretionary futures trading mandatary to the aforesaid personnel.
  5. The letter containing instructions from a foreign qualified institutional investor, when that investor, pursuant to Article 17, paragraph 10 of the Discretionary Investment Business Regulations, applies to convert a futures trading account originally used for its own trades to a discretionary futures trading account, or when the investor, after converting the account from one for its own use to a discretionary futures trading account, reverts to a futures trading account for its own use.
    A futures commission merchant shall not accept a mandate to engage in futures trading until after the procedures for opening of a new account for discretionary futures trading as prescribed in preceding paragraph have been completed and the required account-opening information and account number have been entered into the computer files of the TAIFEX. In case of any change, after account-opening, in the person who makes decisions in the discretionary trading (including any deputy thereof) or any other associated persons who execute trades, a mandate to engage in futures trading shall not be accepted unless and until the required documents listed in subparagraph 4 of paragraph 1 have been updated.
    Where the principal mandating the discretionary futures trading consists of multiple persons who are jointly mandating the same managed futures enterprise, futures trading may not begin until after identity registration has been carried out by submitting the applicable documents in accordance with the TAIFEX's Directions for Registration Processing for Managed Futures Enterprises Accepting Joint Mandates for Discretionary Futures Trading.
    Where the principal mandating the discretionary futures trading consists of multiple persons who are jointly mandating the same managed futures enterprise, the identity documents to be submitted under paragraph 1, subparagraph 2, are the identity document of each principal and the Joint Mandate ID Number document issued by the TAIFEX in accordance with the Directions for Registration Processing for Managed Futures Enterprises Accepting Joint Mandates for Discretionary Futures Trading. Among the account-opening information required to be entered into the computer files of the TAIFEX under paragraph 2, the "ID/uniform ID number" shall be the Joint Mandate ID Number assigned by the TAIFEX in accordance with the Directions for Registration Processing for Managed Futures Enterprises Accepting Joint Mandates for Discretionary Futures Trading.
Article 44-2     An overseas Chinese or foreign national, or mainland area investor, that engages in domestic futures trading shall appoint an agent or representative within the territory of the ROC to file tax returns and pay taxes on his or her behalf. Documents evidencing such appointment shall be completed and submitted to the competent tax authority for approval. In case of a change of agent or representative, the successor agent or representative shall prepare another set of such documents evidencing its appointment to file and pay taxes on behalf of the client, and shall submit such documents to the competent tax authority for approval.
    The documentation evidencing the mandate relationship for the purpose of filing tax returns and paying taxes as described in the preceding paragraph shall be filled out in the form prescribed by the Ministry of Finance.
Article 44-3     An offshore overseas Chinese or foreign national, or mainland area investor, that engages in domestic futures trading shall appoint a local agent or representative to carry out procedures such as opening an account for domestic futures trading, exercising rights related to futures trading, applying for foreign exchange settlement, and paying taxes.
    The required qualifications for the agent or representative referred to in the preceding paragraph are as follows:
  1. Requirement of an agent:
    1. If a natural person: Must have legal capacity. If the person is a natural person who is an overseas Chinese or a foreign national, he must be living within ROC territory and possess an Overseas Compatriot Identity Certificate, or an ROC passport with an Overseas Compatriot Identity Endorsement, or an Alien Resident Certificate.
    2. If a juristic person: Must be established in accordance with ROC acts and be qualified to act as an agent.
    3. If a foreign juristic person: Must have established a branch company within ROC territory and be qualified to act as an agent.
  2. Requirement for a representative: Must be the representative at a representative office established in the ROC, or be the responsible person at a branch office.
    Where an agent is either a juristic person or a foreign juristic person as set forth under subparagraph 1, items 2 and 3 of the preceding paragraph, one natural person must be designated to carry out the services of agent.
    A futures commission merchant may act as agent for an offshore overseas Chinese or foreign national, or mainland area investor. The matters and scope for which it may serve as agent shall be as prescribed by the competent authority. Before acting as agent for an offshore overseas Chinese or foreign national, or mainland area investor, a futures commission merchant shall verify that the appointing offshore overseas Chinese or foreign national, or mainland area investor, has not opened with a custodian bank any custodial securities trading account, NT Dollar deposit account, or securities custody account. If it has opened such an account, it shall cancel the account and obtain written evidence of the cancellation.
    When a futures commission merchant acts as agent for an offshore overseas Chinese or foreign national, or mainland area investor, it may not act as an agent for the trading of securities, opening of an NT Dollar deposit account, or conducting of physical delivery. If any likelihood arises that trading by the offshore overseas Chinese or foreign national, or mainland area investor, involves physical delivery, the futures commission merchant acting as agent shall immediately notify the offshore overseas Chinese or foreign national, or mainland area investor, to liquidate the position or to appoint a custodian bank to replace it as agent. If the agent has not been replaced in time and exercise/assignment is made requiring physical delivery, the futures commission merchant acting as agent, within 3 business days from obtaining the deliverables, shall complete the disposal of them and deposit the funds obtained into the customer margin account with the futures commission merchant engaged for futures trading by the offshore overseas Chinese or foreign national, or mainland area investor.
Article 44-4     Overseas Chinese and foreign nationals, and mainland area investors may engage in domestic futures trading only after submitting the relevant documents and carrying out identity registration as required in accordance with the Operation Directions for Applications by Overseas Chinese, Foreign Nationals, and Mainland Area Investors for Registration to Invest in Domestic Securities or Trade Domestic Futures.
    Offshore overseas Chinese and foreign nationals that have mandated an offshore foreign futures commission merchant that has opened an omnibus account with a futures commission merchant to engage in domestic futures trading through the omnibus account also may engage in domestic futures trading only after submitting the relevant documents and carrying out identity registration as required in accordance with the Operation Directions for Applications by Overseas Chinese, Foreign Nationals, and Mainland Area Investors for Registration to Invest in Domestic Securities or Engage in Domestic Futures Trading. However, this requirement does not apply to those engaging in domestic futures trading through an undisclosed omnibus account.
    When carrying out the registration under paragraph 1 or paragraph 2, offshore overseas Chinese and foreign nationals, and mainland area investors, shall submit an application form together with all the following documents:
  1. a power of attorney for the agent or letter of appointment for the representative;
  2. identity documents conforming to the provisions of Article 3, paragraph 4;
  3. other documents as required by the Competent Authority or TAIFEX.
    The identity registration procedures under paragraph 1 or paragraph 2 are not required for those who have already carried out identity registration with the Taiwan Stock Exchange Corporation ("TWSE") and obtained the qualification for investing in domestic securities.
    When an overseas Chinese, foreign national, or mainland area investor duly carries out the identity registration, the TAIFEX may reject the application if any one of the following situations exists:
  1. the registered documents or particulars thereof are found to be fraudulent or untrue;
  2. the registered documents are incomplete or have not been fully filled out, and the applicant has failed, upon notification by the competent authority, to provide the missing information within the specified time period; or
  3. the registrant has committed a major violation of applicable futures laws or regulations;
  4. the TWSE or TAIFEX cancels the registration pursuant to the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals, Regulations Governing Securities Investment and Futures Trading in Taiwan by Mainland Area Investors, or the Directions for Futures Trading by Overseas Chinese and Foreign Nationals.
    After an overseas Chinese, foreign national, or mainland area investor has registered, TAIFEX may reject the registration if any one of the circumstances set out in the preceding paragraph is discovered. If the registration has already carried out, the TAIFEX may cancel the registration, and notify any futures commission merchants that has opened an account to immediately cease accepting new orders from that investor; provided, this restriction does not apply to new orders undertaken to dispose of pre-existing transactions. When the claims and liabilities of the account are fully settled, the futures commission merchant shall cancel the account immediately.
    An offshore overseas Chinese or foreign national referred to in the proviso to paragraph 2 may engage in domestic futures trading only after information including that investor's Chinese and English name, identity category, date of establishment or birth, and nationality or area have been reported to the TAIFEX by the offshore foreign futures commission merchant, the domestic agent of the offshore foreign futures commission merchant, or the futures commission merchant that processed the opening of the omnibus account. When necessary, the TAIFEX may require the submission of statements or registration of identity.
Article 44-5     A futures commission merchant processing account opening for an onshore overseas Chinese or foreign national to engage in domestic futures trading shall obtain the documents listed below from the onshore overseas Chinese or foreign national before it may open an account:
  1. Photocopy of certification of completion of identity registration;
  2. Overseas Chinese and foreign natural persons: an Overseas Compatriot Identity Certificate and a passport, or an ROC passport with an Overseas Compatriot Identity Endorsement, or an Alien Resident Certificate and a passport;
  3. Foreign institutional investors: Ministry of Economic Affairs recognition certificate, company registration certification, business registration certification, and national identity card (or alien resident certificate or passport) of the responsible person.
    A futures commission merchant that processes the account opening for domestic futures trading of an offshore overseas Chinese or foreign national, or of a mainland area investor, shall open such account only after receiving the following documents submitted by the offshore overseas Chinese or foreign national, or mainland area investor, and signed by its respective domestic agent or representative:
  1. Photocopy of certification of completion of identity registration.
  2. Photocopy of the national identity card, alien resident certificate or company registration (or amendment registration) certification of the domestic agent or representative.
  3. The photocopy of the contract with the domestic agent or power of attorney for the agent, the content of which shall comply with the applicable provisions of these Rules and the laws and regulations of the competent authority.
    The photocopy of the contract in the preceding subparagraph 3 may be replaced by a statement submitted by the domestic agent. The statement shall state that the content of the contract entered into between the offshore overseas Chinese or foreign national, or mainland area investor, and the domestic agent complies with the applicable provisions of these Rules and the laws and regulations of the competent authority.
    A futures commission merchant processing omnibus account opening for an offshore foreign futures commission merchant to engage in domestic futures trading shall comply with the preceding paragraph 2 and paragraph 3 and additionally shall obtain the following documents which are signed or sealed by the domestic agent before it may open an account:
  1. certification that it is a qualified member of a foreign futures exchange recognized by the competent authority;
  2. statement that within the past 1 year, it, in its home country, or its branch unit in Taiwan, has not been sanctioned by a relevant authority or self-regulatory institution for securities or futures by the suspension of the securities or futures brokerage business of its head (or a branch) office;
  3. statement that within the past 3 years, it has not breached a futures trading contract or securities trading contract in its home country or Taiwan, or violated the reporting obligations where the circumstances are serious;
  4. statement that within the past 3 years, it has not had its omnibus account cancelled by the TAIFEX.
    A futures commission merchant processing account opening for an overseas Chinese or foreign national, or mainland area investor, to engage in trading on the TAIFEX, after completing account-opening procedures, shall notify the TAIFEX.
    Paragraph 4 shall apply mutatis mutandis when a futures commission merchant processes omnibus account opening for an offshore foreign futures commission merchant to engage in foreign futures trading, provided that the requirement under paragraph 2, subparagraph 1 shall not apply.
    An overseas subsidiary in which a securities firm or futures commission merchant has greater than 50 percent shareholding may apply to open an omnibus account if the overseas subsidiary has been granted permission by the competent authority where it is located to operate futures brokerage business and meets the qualifications of paragraph 4, subparagraphs 2 to 4.
Article 44-6     Only futures commission merchants that meet the financial standards prescribed by the TAIFEX may process the opening of omnibus accounts for offshore foreign futures commission merchants, and accept orders from overseas Chinese and foreign nationals to engage in futures trading under omnibus accounts.
    An offshore foreign futures commission merchant opening an omnibus account may not accept orders to engage in domestic futures trading through the omnibus account by any persons other than offshore overseas Chinese and foreign nationals, and it also may not use the omnibus account to engage in proprietary trading.
    Paragraph 1 shall apply mutatis mutandis when a futures commission merchant processes omnibus account opening for an offshore foreign futures commission merchant to engage in foreign futures trading.
    The financial standards of paragraph 1 shall be separately prescribed by the TAIFEX.
Article 44-7     An offshore overseas Chinese or foreign national, or a mainland area investor, engaging in domestic futures trading shall designate a domestic agent or representative to apply to open a segregated foreign exchange deposit account for futures trading. The agent it designates to open the account must be an onshore futures commission merchant, financial institution, or a securities firm approved by the competent authority to act as a custodian institution.
    The segregated foreign exchange deposit account for futures trading referred to in the preceding paragraph must be opened at a domestic financial institution under the name of a segregated custodial account mandated with the custodian institution, provided that for an offshore overseas Chinese or foreign national, or a mainland area investor, that engages only in domestic futures trading and furthermore does not handle physical delivery and does not invest in domestic securities, its segregated foreign exchange deposit account for futures trading may be opened under its own name, or its futures trading payment/receipt operations may be done through its offshore deposit account, free of any requirement to open a segregated account for futures trading at a domestic institution.
    An offshore overseas Chinese or foreign national, or mainland area investor, that has already invested in domestic securities in accordance with the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals or the Regulations Governing Securities Investment and Futures Trading in Taiwan by Mainland Area Investors may use its New Taiwan Dollar account for securities trading to purchase foreign currencies announced by the TAIFEX to engage in futures trading.
Article 44-8     Funds remitted in under the preceding article by an offshore overseas Chinese or foreign national, or mainland area investor, may be used for the following purposes only:
  1. To engage in domestic futures trading, provided that this restriction shall not apply where the competent authority provides otherwise.
  2. To cover securities settlement when, as evidenced by relevant transaction statements, the funds it has remitted in under the Regulations Governing Investment in Securities by Overseas Chinese and Foreign Nationals or the Regulations Governing Securities Investment and Futures Trading in Taiwan by Mainland Area Investors are insufficient to meet its settlement requirements in securities investments.
Article 44-9     An offshore overseas Chinese or foreign national or a mainland area investor engaging in domestic futures trading shall do so in a foreign currency announced by the TAIFEX, and may not convert the funds into New Taiwan Dollars except in a circumstance described in paragraph 2 or in any of the following circumstances:
  1. to pay the amount payable by comparing the profits or losses on all open positions on each futures trading contract upon settlement at maturity or closing out before maturity;
  2. to pay commissions due to futures brokers and taxes; or
  3. for the purposes set forth in subparagraph 2 of the preceding article.
    For the purpose of making the payments referred to in subparagraphs 1 or 2 of the preceding paragraph, an offshore overseas Chinese or foreign national, or mainland area investor, may, through its agent, designate in advance a futures commission merchant to convert funds into New Taiwan Dollars, provided that the New Taiwan Dollar balance of each individual trader or omnibus account may not exceed NT$5 million.
    The total of the cumulative realized New Taiwan Dollar gains of an offshore overseas Chinese or foreign national or a mainland area investor from engaging in domestic futures trading, plus the combined New Taiwan Dollar balance from the preceding paragraph and from the trading of futures trading contracts denominated in New Taiwan Dollars and listed on a foreign futures exchange pursuant to an agreement signed between the TAIFEX and the given foreign exchange and approved by the competent authority ("international cooperative products"), may not exceed NT$300 million for any individual trader or omnibus account.
    When the New Taiwan Dollar balance exceeds the limit under the preceding paragraph, then within 5 days, the offshore overseas Chinese or foreign national or the mainland area investor shall designate through its agent a futures commission merchant, or a foreign futures commission merchant that has foreign futures exchange or foreign futures clearing house member status and that has received competent authority approval for domestic handling of matters connected with international cooperative products, to make a conversion into a foreign currency announced by the TAIFEX. The New Taiwan Dollar balance subsequent to such conversion may not exceed NT$10 million.
    The New Taiwan Dollar balance referred to in paragraph 3 may be used only for the purposes listed in the subparagraphs below; the method for its calculation shall be separately prescribed by the TAIFEX:
  1. to pay margins and premiums required for trades;
  2. to pay the amount payable by comparing the profits or losses on all open positions on each futures trading contract upon settlement at maturity or closing out before maturity; or
  3. to pay futures brokers' fees, taxes, interest, or other amounts required to complete clearing and settlement.
  4. for transfers of funds approved by the competent authority pursuant to Article 71, subparagraph 4 of the Futures Trading Act.
    When an offshore overseas Chinese or foreign national or a mainland area investor applies for exchange settlement under paragraph 1, 2, or 4, the application for exchange shall be handled by the futures commission merchant, or a foreign futures commission merchant that has foreign futures exchange or foreign futures clearing house member status and that has received competent authority approval for domestic handling of matters connected with the international cooperative products, in accordance with applicable foreign exchange acts and regulations, unless the application for exchange is for the purpose specified in subparagraph 2 of the preceding article, in which case the application shall be made by the agent.
    When a futures commission merchant accepts an offshore overseas Chinese or foreign national, or a mainland area investor, to engage in domestic futures trading, the relevant application for exchange settlement shall be handled in accordance with paragraphs 1, 2, and 4.
    It shall be a matter for the FSC, after consulting with and obtaining approval from the competent authority for foreign exchange business, to determine any adjustment to the limits on funds denominated in New Taiwan Dollars set out in paragraphs 2, 3, and 4.
Article 44-10     To engage in domestic futures trading, an offshore overseas Chinese or foreign national, or a mainland area investor, shall appoint a bank approved by the FSC to offer custodial services, or a securities firm approved by the competent authority to act as a custodian institution, or a futures commission merchant to act as its agent and to handle matters related to futures trading, such as clearing and settlement and reporting of relevant information.
    Where an offshore overseas Chinese or foreign national places an order to engage in domestic futures trading through an offshore foreign futures commission merchant that has established an omnibus account at an onshore futures commission merchant, the matters set out in the preceding paragraph shall be handled by a custodian bank, a securities firm, or a futures commission merchant, designated as agent by such foreign futures commission merchant.
Article 44-11     An offshore overseas Chinese or foreign national, or a mainland area investor, placing an order to engage in domestic futures trading through a domestic futures commission merchant shall provide a record of the order and have the custodian bank, securities firm, or futures commission merchant designated as its agent handle the clearing and settlement procedures.
Article 44-12     The custodian bank, securities firm, or futures commission merchant designated as agent shall establish accounts in which information on the utilization of the funds of each offshore overseas Chinese and foreign national, or mainland area investor shall be fully recorded on a daily basis, and report to the competent authority for foreign exchange business the previous day's foreign exchange settlement of funds, foreign exchange deposit balance, and summary information on the equity in the customer margin account with the futures commission merchant by 12 noon of the next business day; within ten days from the end of each month, the custodian institution shall prepare for the previous month an itemized statement of the equity in the customer margin account with the futures commission merchant and the cumulative foreign exchange settlement amount, and report the same to the competent authority for foreign exchange business with a copy to the TAIFEX for registration.
    A futures commission merchant handling trading in domestic futures by offshore overseas Chinese and foreign nationals, or mainland area investors, shall make daily reports of the status of foreign exchange settlement of funds and summary information on the equity in the customer margin account. The TAIFEX will prescribe regulations governing these operations.
    Paragraphs 1 and 2 shall apply mutatis mutandis when a futures commission merchant handles trading in foreign futures by offshore overseas Chinese and foreign nationals.
Article 44-13     If an offshore overseas Chinese or foreign national, or a mainland area investor, violates any provision of Article 44-7 to Article 44-12, paragraph 1, or Article 49-1, paragraph 3, of these Rules, or fails to produce any document requested by the Competent Authority under Article 98 or 99 of the Futures Trading Act, the TAIFEX may notify the futures commission merchant to immediately cease accepting orders from that offshore overseas Chinese or foreign national, or mainland area investor, or notify the futures commission merchant that it may not accept any order from that offshore overseas Chinese or foreign national, or mainland area investor, during a period set by the TAIFEX; provided, this restriction shall not apply to orders placed to dispose of pre-existing transactions.
    Where an offshore overseas Chinese or foreign national, or mainland area investor, violates the provisions of the preceding paragraph and the circumstances are serious, the TAIFEX may, in addition to notifying the futures commission merchant to immediately cease accepting orders from that offshore overseas Chinese or foreign national, or mainland area investor, in accordance with the preceding paragraph, also may notify the futures commission merchant to cancel the account opened by the offshore overseas Chinese or foreign national, or mainland area investor, under the preceding paragraph after the claims and liabilities thereof have been fully settled.
Article 45     Upon accepting a principal's mandate to open a futures trading account, a futures commission merchant shall provide a brokerage contract and a risk disclosure statement for the principal to sign or seal and keep a copy of it, with the date noted thereupon, after having explained the contract content and futures trading procedures to the principal.
    The futures commission merchant shall provide the brokerage contract, risk disclosure statement, and explanatory documents specifying the respective rights and obligations of the futures commission merchant and the principal under their contractual relationship. Unless the principal opens the account electronically, qualified associated persons of the futures commission merchant shall give the principal a detailed explanation of the same (including margin call methods and provisions for substituted off-set operations for the principal by the futures commission merchant). The brokerage contract shall not be signed until the principal has provided a statement confirming that it has received full disclosures and has read and understood the relevant documents.
Article 46     A futures commission merchant shall closely inspect the information filled out by principals opening new accounts for errors or omissions. It shall not accept the mandate until the account opening procedures have been completed and the new account information and account number have been keyed into the TAIFEX's computer files.
    When a principal reports a change in any account information set out in any of the subparagraphs below, a principal who is a natural person shall appear in person with identity documents and documents certifying the change in account information to register the change and affix his or her signature or seal on site. If the principal is a juristic person, the juristic person shall issue a power of attorney and register the change based on the documents certifying the change of account information. If the account opening was duly performed by an agent on behalf of the principal, the agent shall bring the documents certifying the change of account information and carry out the registration of the change:
  1. Change in name, ID number, or seal specimen or signature specimen originally left on record.
  2. New addition of, or change to, a mandatary; however, termination of a mandate does not fall within this restriction.
  3. New addition of, or change to, a deposit account opened by the principal at a financial institution as set out in Article 54.
  4. New addition of, or change to, the principal's own deposit account stipulated for the transfer of margin deposits.
    When the principal applies to change any account information other than information specified in any subparagraph above, the principal may use the procedures in the preceding paragraph, or the principal may use a written application, in which case the written application documents shall be signed in person by the principal using the original specimen seal or specimen signature, or made using electronic documents signed with an electronic signature issued by a certification authority. However, an application to change the registered domicile address may be made only by written application, or in person by the procedures set out in the preceding paragraph.
     An FCM shall adopt risk control mechanisms and audit procedures addressing all instances in which a principal has issued a written power of attorney authorizing another person to engage in futures trading and electronic documents signed with an electronic signature issued by a certification authority are used to make a change to account information other than information specified in the subparagraphs of paragraph 2 or registered domicile address.
    After verifying the accuracy of the information, the futures commission merchant shall make the change to the account information, and record the change on-line via computer connection.
Article 46-1     A futures commission merchant processing omnibus account opening to engage in domestic futures trading shall, after having completed the procedures for opening an account and keyed the account information and number into the computer files of the TAIFEX, file a report together with the documents listed below to the TAIFEX within 3 business days:
  1. Photocopy of the omnibus account mandate contract.
  2. Photocopy of the contract signed between the offshore foreign futures commission merchant and the domestic agent, the power of attorney for the agent, or the statement issued by the domestic agent.
  3. Photocopy of certification that the offshore foreign futures commission merchant has completed identity registration.
  4. Photocopy of certification that the offshore foreign futures commission merchant meets the conditions for opening an omnibus account.
  5. Photocopy of the identity document of the domestic agent.
  6. Photocopy of the agreement of the outcome of negotiations in respect of the omnibus account position declarant.
  7. Other documents required by the TAIFEX.
    The position declarant referred to in subparagraph 6 of the preceding paragraph must be the offshore foreign futures commission merchant, the domestic agent of the offshore foreign futures commission merchant, or the futures commission merchant that processed the opening of the omnibus account.
    If the reporting documents in paragraph 1 are incomplete or contain any falsehood, the TAIFEX may notify the futures commission merchant that processed the opening of the omnibus account to supplement or correct them within a time limit; if the futures commission merchant fails to do so within the time limit, or the offshore foreign futures commission merchant does not meet the qualifications required to open an omnibus account, the TAIFEX may notify the futures commission merchant to immediately cease accepting orders from that offshore foreign futures commission merchant; provided, this restriction shall not apply to orders placed to dispose of pre-existing transactions.
    The futures commission merchant shall cancel the omnibus account opened by the offshore foreign futures commission merchant under the preceding paragraph after the claims and liabilities thereof have been fully settled.
Article 46-2     Where an offshore overseas Chinese or foreign national places orders with an offshore foreign futures commission merchant that has opened an omnibus account at a domestic futures commission merchant to engage in domestic futures trading, the below-listed information of the individual client under omnibus accounts shall be reported to the TAIFEX by the offshore foreign futures commission merchant, the domestic agent of the offshore foreign futures commission merchant, or the futures commission merchant that processed the opening of the omnibus account, in accordance with the requirements announced by the TAIFEX.
  1. For a disclosed omnibus account, the reporting party shall make a daily report of the itemized position information. When there is any change to an individual trader under the account or the content of information thereof, the reporting party shall report the itemized information of the individual trader including the trader's name and ID number.
  2. For an undisclosed omnibus account, when the institutional investor limit under the TAIFEX trading rules for any given contract is exceeded or when the TAIFEX deems it necessary, the reporting party shall report the itemized position information. When there is any change to an individual trader under the account or the content of information thereof, the reporting party shall report the itemized information of the individual trader including the trader's Chinese and English name, identity category, date of establishment or birth, and nationality or area.
    If an offshore overseas futures commission merchant that opens an omnibus account violates paragraph 7 of Article 44-4, paragraph 2 of Article 44-6, or the reporting obligations set out in the preceding paragraph, the TAIFEX may notify the futures commission merchant to immediately cease accepting orders under that omnibus account or notify the futures commission merchant that it may not accept any order from that offshore overseas futures commission merchant during a period set by the TAIFEX; provided, this restriction shall not apply to orders placed to dispose of pre-existing transactions.
    Where an offshore overseas futures commission merchant violates paragraph 7 of Article 44-4, paragraph 2 of Article 44-6, or the reporting obligations set out in paragraph 1 of the present article, and the circumstances are serious, the TAIFEX may, in addition to notifying the futures commission merchant to immediately cease accepting orders under that omnibus account in accordance with the preceding paragraph, also may notify the futures commission merchant to cancel the omnibus account opened by the offshore overseas futures commission merchant under the preceding paragraph after the claims and liabilities thereof have been fully settled.
Article 47     A futures commission merchant shall refuse to open an account for a principal found to meet any of the following descriptions:
  1. A person under 20 years of age;
  2. A person who has been declared bankrupt and whose rights have not yet been restored;
  3. A person who has been declared by a court to be under guardianship or guidance, unless such declaration has been voided;
  4. An agent appointed by a juristic person to open an account who is unable to provide documentation of the authorization to open the account;
  5. An overseas Chinese or foreign national, or mainland area investor, that mandates it to open an account but fails to produce documentary proof of registration issued by the TWSE or the TAIFEX;
  6. An offshore overseas Chinese or foreign national, or mainland area investor, opening an account that fails to produce the photocopy of its contract with a domestic agent, power of attorney for the agent, or the statement from its domestic agent;
  7. Personnel and employees of the Competent Authority, futures exchanges, futures clearing institutions, futures industry associations, or the Federation of Futures Industry Associations;
  8. (Deleted)
  9. A person who has defaulted on a futures trading contract or securities trading contract and the case is not yet closed and 5 years have not yet elapsed;
  10. A person who has been convicted by a final judgment of violating any law or regulation governing futures trading or securities trading, where 5 years have not elapsed since the judgment; or who is on record as having been suspended from trading securities or futures by notice of the Competent Authority, and where 5 years have not elapsed since expiry of the suspension period;
  11. A futures commission merchant that has not obtained approval from the Competent Authority to engage in proprietary trading.
  12. A principal that applies to convert an account it originally opened as a discretionary futures trading account to a futures trading account for its own trading use.
    Internal personnel of futures commission merchants shall comply with applicable regulations when opening accounts and engaging in futures trading.
    A futures commission merchant discovering that any circumstance in any subparagraph of paragraph 1 applies to a principal that has already opened an account shall immediately cease accepting orders from the principal. Provided, this restriction shall not apply to orders for offsetting existing open positions.
    When the claims and liabilities of the principal referred to in the preceding paragraph have been fully settled, the futures commission merchant shall cancel the account.
Article 47-1     A futures commission merchant shall refuse to open an omnibus account for an offshore foreign futures commission merchant to which any of the following circumstances applies:
  1. it does not meet the requirements of Article 44-5, paragraph 4, subparagraph 1 or 7;
  2. within the past 1 year, it, in its home country, or its branch unit in Taiwan, has been sanctioned by a relevant authority or self-regulatory institution for securities or futures by the suspension of the securities or futures brokerage business of its head (or a branch) office;
  3. within the past 3 years, it has breached a market trading contract or breached an information reporting obligation, where the circumstances were serious;
  4. within the past 3 years, it has had an omnibus account cancelled by the TAIFEX.
    In the event that any of the circumstances set out in the preceding paragraph prohibiting processing of omnibus account opening applies to an offshore foreign futures commission merchant that has already opened an omnibus account, the [domestic] futures commission merchant shall immediately cease accepting new orders therefrom; provided, this restriction does not apply to new orders undertaken to dispose of pre-existing transactions.
    The futures commission merchant shall cancel the omnibus account opened by an offshore foreign futures commission merchant described in the preceding paragraph after the claims and liabilities thereof have been settled.
Article 48     When a futures commission merchant accepts a futures trading order made face to face by a principal or his/her representative or agent, the principal shall fill out the trading order form and add his/her signature or seal. When an order is made in writing, by telephone, telegraph, or other means, the associated person who accepts the order shall fill out the trading order form based on the order particulars. For orders made in writing, by telephone, by telegraph, or by teletext or video messaging, the futures commission merchant may fill out the order form by electronic means; if the associated person to whom that order belongs can be determined, individual order forms need not be printed out, provided that trading order records, segregated by associated person and chronological order, shall be printed out, and after closing of the regular trading session, shall be signed by the associated person that accepts the order and the department supervisor. Where orders are made through electronic media such as voice message, the Internet, private line, or closed private network the futures commission merchant is not required to prepare and complete an order form on the principal's behalf; provided that it shall immediately print records of the trading orders in the order that they were received, and upon closing of the regular trading session, the processing person and the department supervisor shall sign such records.
    The trading order record of the preceding paragraph shall contain the name and account number of the principal, order method, date and time of the order, period of validity, the name of the futures exchange, the name of the futures trading contract, volume, and the delivery month, type of order (market order, limit order, market with protection order, or other), and the name or code number of the associated person taking the order.
    Where an order is given over the Internet, the futures commission merchant shall record the principal's Internet Protocol (IP) address and electronic signature; where an order is given by a telephone voice menu system, the futures commission merchant shall record the principal's telephone number by using the caller ID display function provided by telecommunications institutions; however, the aforementioned telephone number may be omitted when printing out the order record.
    Unless the principal places the order in person and signs/seals the order form or the parties commit otherwise by prior agreement, a futures commission merchant shall deliver the order form to the principal to sign or seal after the order is placed unless the principal is asked in advance to fill out a Non-in-Person Order Signature/Seal Waiver Consent Form.
    When a futures commission merchant accepts and executes futures trading orders by telephone, it shall make a synchronous tape recording and keep the record at its business place.
    When a futures commission merchant accepts transmission of the contents of a futures trading order by fax, telegraph, computer system, or other equipment, the transmitted contents shall be kept on file for inspection.
    Except in the case of orders placed by voice message, the transmission of electronic documents such as futures trading orders, order confirmations, and execution reports between a futures commission merchant and a principal employing an electronic trading method shall carry an electronic signature issued by a certificate authority for identification and verification. However, this restriction shall not apply in cases in which an order is placed by means of a private line or closed private network and in which all the following requirements are furthermore met: the provisions of paragraph 13 of this article have been complied with, security measures are employed such that the identity of the principal can be verified, the full and confidential transmission of the electronic document is ensured, and the futures commission merchant and principal are unable to deny the trade.
    The printed trading order records and order records in the form of computer files for any trading orders referred to in paragraph 1 made by an electronic means such as voice message, the Internet, private line, or closed private network, or filled out by electronic means by the futures commission merchant, shall be kept for at least 5 years. Recordings and the contents of transmissions referred to in paragraphs 5 and 6 shall be kept for at least 1 year. However, in the event of any dispute over a futures trading order, the records shall be kept until it has been confirmed by the principal, or until a final determination has been rendered through arbitration or a final and unappealable judgment has been handed down by a court. If a trading order is filled out by electronic means and is not individually printed out, it shall be stored in a non-revisable, non-erasable electronic storage medium.
    In the event of telephone recording equipment malfunctions or operational omissions, the futures commission merchant shall, within 2 trading days of the occurrence, submit a report to the TAIFEX stating the incident, cause, and remedial measures taken.
    Where a trading order form is filled out and submitted electronically, or record-keeping operations for trading orders made through voice message, the Internet, private line, closed private network, or other electronic trading modes conform to the following provisions, trading order records need not be printed out:
  1. Records are kept using a non-revisable, non-erasable electronic storage medium, and are completed on the same day the trade is executed.
  2. Comprehensive indexing and management procedures are instituted.
  3. Dedicated personnel are placed in charge of administering the records, and the electronic data files can be converted to printed format at any time.
    The particulars required to be stated in trading orders under paragraph 1 are as provided by the Competent Authority.
    A futures commission merchant that fills out a trading order form electronically shall do so in accordance with the TAIFEX's Guidelines for Futures Commission Merchants that Fill Out Trading Orders Electronically, and only after submitting the relevant documentation to the TAIFEX to apply for approval. Such rules shall be separately prescribed by the TAIFEX.
    If a futures commission merchant accepts trading orders placed by a principal using Direct Market Access shall handle such orders in accordance with the TAIFEX's Guidelines for Futures Brokerage Merchants Engaging in Direct Market Access Business, and shall submit the relevant documentation to the TAIFEX to apply for approval before conducting such business. Those Guidelines shall be separately prescribed by the TAIFEX.
    A futures commission merchant is prohibited from using computer-set group codes in the handling of futures brokerage trading orders, provided that this restriction does not apply if the futures commission merchant is a managed futures enterprise, securities investment trust enterprise, or securities investment consulting enterprise authorized to conduct discretionary futures trading on behalf of a principal or principals.
Article 48-1     The website provided by futures commission merchants shall show, in a conspicuous manner, the risk disclosure statement and the alternative to be adopted in case of inability to execute electronic transmission, and the most up-to-date information shall be transmitted. The futures commission merchant shall carefully select hyperlink websites, and shall be responsible for the supervision and administration of their associates' use of electronic mail, group electronic mail, bulletin board systems, website, and so forth in activities associated with business operations.
Article 48-2     A futures commission merchant that uses auction terminals shall do so in accordance with the TAIFEX's Guidelines for the Management of Futures Auction Terminals.
Article 49     A futures commission merchant accepting an order shall execute the order in accordance with the instructions contained in the order. The principal or its agent may notify the futures commission merchant to cancel an order before the order is executed.
Article 49-1     A futures commission merchant accepting orders to engage in domestic futures trading under an omnibus account may not accept any trading order for a futures trading contract that stipulates physical delivery, unless otherwise provided by the TAIFEX.
    A futures commission merchant may not accept any order to handle physical delivery from an offshore overseas Chinese or foreign national, or mainland area investor, whose agent is a futures commission merchant. If any likelihood arises that trading by such offshore overseas Chinese or foreign national, or mainland area investor, involves physical delivery, the futures commission merchant shall immediately notify the offshore overseas Chinese or foreign national and its agent to liquidate the position or to appoint a custodian bank to replace the agent.
    If the offshore overseas Chinese or foreign national, or mainland area investor, referred to in the preceding paragraph has not replaced its agent in time and exercise/assignment is made requiring physical delivery, the dispositive measures in Article 44-13 of these Rules shall be taken and the provisions of the brokerage contract and the rules of the TAIFEX shall be complied with.
Article 49-2     A futures commission merchant intending to accept orders from a principal to engage in day trading of futures contracts shall sign a risk disclosure statement with the principal, and shall add normative provisions and matters for attention relating to day trading of futures contracts.
    Futures commission merchants shall incorporate the below-listed operational norms and risk management mechanisms into their internal control systems, and faithfully implement them, in accordance with the Chinese National Futures Association Self-Regulatory Rules for Brokerage Domestic Day Trading by Futures Commission Merchants:
  1. qualifying requirements for principals that may engage in day trading;
  2. procedures and methods for controlling the placement of orders in day trading;
  3. intraday risk control mechanisms for day trading;
  4. norms for compulsory closing out of day trading positions.
  5. method for handling any balance of open positions after market close remaining to a principal from day trading.
Article 50     A futures commission merchant shall prepare a trade report statement immediately after the trade is matched and deliver the same to the principal to sign or seal. Orders that are not matched shall be affixed with a seal indicating the transaction was not completed and then, along with the matched orders, shall be kept together with other business vouchers for recordation.
    If the principal has placed the trading order through an agent and it is the agent that confirms the trade report statement referred to in the preceding paragraph, the order form from the principal itself shall be submitted therewith.
    When a futures commission merchant accepts an order for a futures trade, if trade confirmation has been carried out and records retained after the execution of the transaction by the principal, the futures commission merchant may be exempted from the requirement under paragraph 1 of this article to obtain a signature or seal.
    The format of the trade report statement referred to in the preceding paragraph shall be prescribed by the TAIFEX.
Article 51     A futures commission merchant's associated persons shall notify the principal of the status of trades as specified on the execution report as soon as trading orders are matched.
    The principal may seek verification from the futures commission merchant of relevant information regarding any futures trading order that it has placed. The futures commission merchant handling the order shall truthfully provide such information.
Article 52      A futures commission merchant may accept trading orders in the form of market orders, limit orders, market with protection orders, careful discretion orders, or other types of orders. An order made without specifying whether it is a limit order, market with protection order, or any other specific type of order shall be deemed a market order.
    Orders as referred to in the preceding paragraph shall be valid only during the current trading session. For orders accepted by futures commission merchants through the Internet or other electronic means of transaction, the valid date and trading session for the order shall be stipulated; for orders made over the Internet, the valid date and trading session for the order shall be displayed on the electronic interface where the order information is entered.
    "Market order" refers to an order in which the principal, without setting a limit on the price, mandates the futures commission merchant to place an order to trade.
    "Limit order" refers to an order in which the principal mandates the futures commission merchant to place an order to trade within a designated price limit.
     "Market with protection order" refers to an order with no price specified when entered by the futures commission merchant, and after it is received by the TAIFEX trading system, the price is determined in accordance with TAIFEX rules.
    "Careful discretion order" refers to an order in which the futures commission merchant accepts authorization by a specified customer to decide on its behalf, within a range of price limits specified by that specified customer, the time and price at which a trading order is placed.
    The term "specified customer" in the preceding paragraph means a principal who meets one of the following conditions:
  1. The principal is a professional institutional investor, meaning the principal is a domestic or foreign bank, insurance company, bills finance company, securities firm, fund management company, government investment institution, government fund, pension fund, mutual fund, unit trust, securities investment trust company, securities investment consulting company, trust enterprise, futures commission merchant, futures service enterprise, or leverage transaction merchant.
  2. The principal is a juristic person or fund whose CPA-audited or reviewed financial report for the most recent period shows total assets in excess of NT$50 million. However, in the case of a juristic person outside the territory of the ROC, its financial report is not required to be CPA-audited or reviewed.
  3. The principal is a natural person who meets all of the following conditions:
    1. The natural person provides proof of financial resources of NT$50 million or more.
    2. The natural person possesses adequate professional knowledge or trading experience with respect to financial products.
    3. The natural person furnishes a signed statement specifying that a registered qualified associated person of a futures commission merchant has explained in detail to him/her the rights, obligations, and risks related to careful discretion orders, and that he/she has been fully advised of and understood the same before signing the statement as a specified customer.
     The requirement, as set out in subparagraph 3, item B of the preceding paragraph, that a natural-person specified customer shall possess adequate professional knowledge or trading experience with respect to financial products means that the person meets one of the following condictions:
  1. The person has in the past held a position at a securities, futures, financial, or insurance institution, or has other academic or work qualifications sufficient to demonstrate possession of professional knowledge of futures.
  2. The person meets all of the following condictions:
    1. At least six months have elapsed since the person established an account.
    2. The person provides proof of the number of his/her trades on the futures market for the most recent year having reached 20; the same shall apply in the case where 1 year has not elapsed since the person established an account.
    3. The person has never had any record of default in futures trading, or has had a record of default in futures trading, but three years have elapsed since the settlement of the default case.
    When a futures commission merchant accepts authorizations to place careful discretion orders, it shall specifically state the words "careful discretion order" on the trading order form and keep records of principals' careful discretion orders pursuant to regulations.
Article 53     Except where otherwise provided, a futures commission merchant may not accept futures trading orders without first collecting in full the margin from the principal.
    A futures commission merchant accepting trading orders under an omnibus account shall collect in full the trading margin in advance for the aggregate trading volumes of each individual trader under the account.
    When carrying out offsetting of TAIEX Futures and Mini-TAIEX Futures positions and specified position combinations and specified position offsets for futures trading contracts under an omnibus account, a futures commission merchant shall do so in respect of open positions of single individual futures traders.
    A futures commission merchant accepting orders from offshore overseas Chinese and foreign nationals, or mainland area investors, to engage in TAIFEX futures trading shall conduct margin receipt/payment in a foreign currency announced by the TAIFEX, unless otherwise provided by the TAIFEX.
    The futures commission merchant shall stipulate with the principal that the margin shall be collected in accordance with the standards prescribed by the TAIFEX or the standards as prescribed under the SPAN margin calculation method. The amount of margin collected from the principal by the futures commission merchant may not be less than the amount as stipulated.
    The standards referred to in the preceding paragraph shall be prescribed and adjusted by the TAIFEX respective to specific futures trading contracts.
Article 53-1     A futures commission merchant intending to accept orders from a principal to engage in day trading of futures contracts shall first collect the futures trading margin in full in accordance with the TAIFEX's rules concerning the calculation and collection of margin for day trading.
    The amount of margin for futures day trading that a futures commission merchant collects from its principal may not be lower than the standard prescribed by the TAIFEX.
    The TAIFEX shall publicly announce the kinds of futures contracts, contract delivery months, and trading hours for which futures commission merchants may engage in day trading.
Article 54     A futures commission merchant shall not accept orders to engage in futures trading until the principal has opened a deposit account in a designated financial institution.
    The margin collected by the futures commission merchant from the principal may be in cash or in the securities approved by the Competent Authority.
    A futures commission merchant depositing securities as margin shall do so in the manner set out below; the relevant operation procedures shall be separately prescribed by the TAIFEX.
  1. A futures commission merchant shall stipulate with the futures trader that securities deposited by the futures trader as margin may be used only to offset the margin required for the trader's own open positions and new orders, or, with the consent of the futures trader, may be utilized by the futures commission merchant or the clearing member to offset the margin required for positions carried by the clearing member.
  2. When the futures commission merchant deposits an NT Dollar amount in the futures brokerage business customer margin account in the form of central book-entry bonds, it shall deposit all of the central book-entry bonds with the TAIFEX to cover the NT Dollar margin required for open positions and new trades of its brokerage business.
    A futures commission merchant making payment of excess cash, margin, or premium as instructed by the principal shall do so by transfer into the principal's deposit account referred to in paragraph 1.
Article 55     In addition to the margin as specified in Article 53, a futures commission merchant may collect additional margin depending on the principal's credit status or the nature of the trading.
    When the amount of the margin is adjusted, a futures commission merchant shall notify the principal to pay the difference within the time period provided in the brokerage contract.
Article 56     A futures commission merchant shall open a "customer segregated margin account" (hereinafter, "Customer Margin Account") in an institution designated by the Competent Authority to handle deposits and transfer of margin and premium between the futures commission merchant and its principals, and shall report the balance of deposits and status of central book-entry bonds in the Customer Margin Account to the TAIFEX on a daily basis. The reporting procedures shall be as set out in the Taiwan Futures Exchange Corporation Rules Governing Online Reporting Procedures for Futures Commission Merchants.
    When a futures commission merchant accepts orders to engage in futures trading, all payments and receipts shall be transacted through the Customer Margin Account. All withdrawals of funds and central book-entry bonds from the customer margin account shall be conducted by means of account transfer and a detailed record with accompanying payment vouchers shall be kept.
    The futures trader shall transfer the securities deposited as margin that a futures commission merchant receives or delivers during futures trading into the TAIFEX's segregated margin collateral account. However, where the futures trader agrees that the futures commission merchant or clearing member may utilize the securities to offset the margin required for the positions carried by the clearing member, the futures trader shall transfer the securities into the futures commission merchant's segregated margin collateral account. When the futures commission merchant deposits an NT Dollar amount in the futures brokerage business customer margin account in the form of central book-entry bonds and conducts the operations to post the bonds as margin collateral, the futures commission merchant shall transfer the central book-entry bonds into the TAIFEX's margin collateral account on the business day after the day it receives such central book-entry bonds.
    A futures commission merchant shall publicly post the name of the institution in which the Customer Margin Account has been opened and the account number in a conspicuous place in the futures commission merchant's place of business; the same shall apply to any modification or cancellation of the account.
    A futures commission merchant shall not exercise overdrafts on funds or securities deposited in the Customer Margin Account of any principal, nor create any security interests or other rights thereupon, nor divert them to serve as another principal's margin, premiums, clearing and delivery fees, commissions, or processing fees, or to cover insufficient funds of other principals.
    A financial institution that concurrently conducts futures trading operations shall not open any Customer Margin Account with a financial institution that it operates itself.
Article 57     A futures commission merchant engaging in futures trading for customer accounts shall mark to market on a daily basis the combined total of the owner equity balance and the collateral value of each principal in the Customer Margin Account. Where the combined total is lower than the maintenance margin provided in the brokerage contract, the futures commission merchant shall notify the principal to replenish the combined total of the owner equity balance and the collateral value by the amount that it falls short of the initial margins for its open positions within a specified deadline.
    If the principal is unable to replenish the shortfall within the deadline as provided in the preceding paragraph, the futures commission merchant may liquidate its open positions.
    The maintenance margin provided in the brokerage contract as referred to in paragraph 1 may not be less than the standard publicly announced by the TAIFEX.
    The initial margins and maintenance margins publicly announced for each contract by the TAIFEX shall be calculated by taking the clearing margin of each respective contract as the basis amount and adding a certain percentage that is to be prescribed by the TAIFEX. The initial margins and maintenance margins under the SPAN margin calculation method shall be calculated by taking the clearing margin under the SPAN margin calculation method as the basis amount and adding a certain percentage. The calculation method shall be prescribed by the TAIFEX.
Article 57-1     When there is a negative balance in the equity amount or the total equity value in the principal's Margin Account, the futures commission merchant shall report to the TAIFEX, and when there is a negative balance in the equity amount, the futures commission merchant shall deposit its proprietary funds into the customer margin account.
    The standards, content, and procedures for reports under the preceding paragraph shall be prescribed by the TAIFEX.
Article 57-2     Unless a futures commission merchant has an agreement otherwise with the principal in writing, for any open position held by a principal in day trading of futures contracts, the futures commission merchant shall notify the principal and request that the principal voluntarily close out the position by the deadline set by the futures commission merchant. In the event that it is impossible to deliver notice to the principal or that the principal fails to voluntarily close out the position by the deadline, unless due to reason of force majeure, the futures commission merchant shall close out the position in futures trading on that day before the close of the regular trading session.
    For any position that has not yet been closed out in the regular trading session on that day after following the method in the preceding paragraph, if the principal is unable, on that day by the deadline set by the futures commission merchant, to replenish the margin to the initial margin level for that futures contract, the futures commission merchant shall during the next regular trading session close out the position until it is liquidated out in full.
Article 57-3     When handling position transfer operations upon application by a principal, a futures commission merchant shall do so in accordance with the TAIFEX Directions for Futures Commission Merchants Handling Position Transfers for Futures Traders.
Article 58     Where any of the following circumstances exists with respect to a principal, the futures commission merchant shall respond according to the Guidelines for Futures Commission Merchants in Reporting Default by Principals.
  1. Where, after a futures commission merchant liquidates in full a principal's open position of futures trading contracts according to the terms of the brokerage contract, the equity amount in the principal's Margin Account is negative, and the principal fails to pay the full amount of the margin call within 3 trading days of notification; provided, this restriction shall not apply in any of the following circumstances where the TAIFEX sets a different deadline for the margin call:
    1. where the futures commission merchant conducts operations for the collection and disposal of the securities deposited by the principal in accordance with the TAIFEX Guidelines for Futures Commission Merchants and Clearing Members Conducting Operations in Relation to the Posting of Securities as Margin Collateral.
    2. where a serious domestic or international political or economic emergency results in illiquidity in the domestic futures market.
  2. Failure to perform settlement obligations on the expiration day of futures trading contracts.
    The Guidelines for Futures Commission Merchants in Reporting Default by Principals referred to in the preceding paragraph shall be separately prescribed by the TAIFEX.
Article 58-1     Where any event listed in paragraph 1 of the preceding article occurs with respect to a discretionary futures trading account, except under the circumstances set out in paragraph 2 below, the futures broker shall handle the matters in accordance with provisions governing breach by an ordinary principle.
    Where any event listed in paragraph 1 of the preceding article occurs with respect to a discretionary futures trading account, and it is the result of failure by the mandatary to perform any responsibility that it is obligated to perform as a result of an unauthorized transaction, such event shall be handled as follows:
  1. The futures broker, by no later than 5 p.m. on the date on which the breach is confirmed, shall prepare a written report on relevant facts with the seal of the company and the signature or seal of its responsible person fixed thereupon, together with a photocopy of the notification of unauthorized transaction issued by the custodian institution, related transaction vouchers, and the brokerage contract (including the documents submitted for account opening), and shall fax the aforesaid to the TAIFEX. The broker shall notify the TAIFEX by telephone before forwarding an original copy of the documents to the TAIFEX for reporting to the competent authority. However, those that meet the conditions of Article 42, paragraph 5 of the Discretionary Investment Business Regulations may substitute a notice of unauthorized trade issued by a party authorized to do so under the relevant contract or legal opinion for the notice of unauthorized trade issued by the custodian institution.
  2. In connection with the futures trading account, the futures broker shall immediately take the measures specified in paragraphs 3 and 4 of Article 47 of the TAIFEX Operating Rules. Other accounts in the name of the same principal shall not be subject to restrictions under Article 47 of the TAIFEX Operating Rules.
    The TAIFEX shall relay information reported per subparagraph 1 of paragraph 2 hereinabove to all futures brokers and the Chinese National Futures Association.
Article 59     If a principal's rights or interests are impaired or any other dispute arises when the TAIFEX notifies other futures commission merchants of a report of default by a principal as filed by a futures commission merchant, the futures commission merchant that filed the report of default shall bear all liability.
Article 60     A futures commission merchant that accepts orders from principals to engage in futures trading may not breach the provisions of the brokerage contract it enters into with the principal.
Article 61     Futures commission merchants shall keep itemized records of accounts for each principal and mark them to market on a daily basis to reflect changes in each principal's margin account fund balance, securities balance, and collateral value, and shall prepare itemized statements thereof, and furthermore shall report the total equity value in the principal's Customer Margin Account to the TAIFEX on a daily basis. The reporting procedures shall be as set out in the Taiwan Futures Exchange Corporation Rules Governing Online Reporting Procedures for Futures Commission Merchants.
    After completing the accounting referred to in the preceding paragraph, a futures commission merchant shall carry out the following procedures:
  1. Deduct the principal's futures trading losses from the Customer Margin Account.
  2. Deposit the principal's futures trading earnings into the Customer Margin Account.
  3. Immediately issue a margin call to the principal to deposit funds in cash replenishing his owner equity balance to the initial margin amount when the combined total of the owner equity balance and the collateral value in the Customer Margin Account falls below the maintenance margin requirement.
  4. Follow the principal's instructions regarding handling of the excess combined total of the principal's owner equity and securities balance in the Customer Margin Account over the required initial margin.
    Payment of a margin call as referred to in paragraph 2, subparagraph 3 shall be made by the principal within the time period specified in the brokerage contract.
Article 62     A futures commission merchant shall produce monthly account statements in duplicate, and shall deliver one copy to the principal by the fifth day of the following month and keep one copy in its own files.
    The content of the account statement referred to in the preceding paragraph shall include the following items:
  1. Name and account number of the principal.
  2. The type, volume, unit price, and date of all trades transacted during the given month.
  3. Itemized margin and premium payments for futures trading during the given month.
  4. Itemized deposits and withdrawals of funds and securities by the principal from/to the Customer Margin Account, the month-end owner equity balance, and the collateral value of the principal.
  5. Itemized and total futures trades by the principal and their delivery months.
  6. Itemized and total amounts of exchange fees and taxes withheld.
  7. Itemized and total amounts of profits or losses on futures trading.
  8. Other particulars related to futures trading.
    Futures commission merchants shall keep copies of the account statements on file for 2 years and may store them in [electronic] media format.
Article 63     A futures commission merchant shall maintain confidentiality regarding a principal's account information and order matters and shall make no external disclosures except in the case of inquiries conducted in accordance with laws and regulations or lawfully conducted by the TAIFEX.
Article 64      A futures commission merchant reporting an out-trade because of an error occurring in futures brokerage trading, or reporting an account number correction because of an error by a trader, shall do so in compliance with the Rules for the Reporting and Handling of Out-Trades and Account Number Corrections by Futures Commission Merchants promulgated by the TAIFEX.
    A futures commission merchant shall open a segregated Error Account in its own name and list the company's profit-seeking enterprise uniform invoice number along with the account number. Taxes and exchange fees on trading through the Error Account shall be paid in accordance with regulations.
Article 65     Futures commission merchants engaged in futures trading are prohibited from any of the following actions:
  1. Conceal or alter any trading information transmitted from the TAIFEX.
  2. Recommend specific types of futures trades or provide judgments on the rise or fall [of prices] to the principal or to unspecified multiple persons without a reasonable basis, to encourage or induce unnecessary or unreasonable trading.
  3. Directly or indirectly set up any fixed site outside the futures commission merchant's principal place of business or branch offices to sign brokerage contracts with futures traders. However, this restriction shall not apply if the Competent Authority has provided otherwise.
  4. Directly or indirectly set up any fixed site outside the futures commission merchant's principal place of business or branch offices for the purpose of accepting orders by principals to engage in futures trading.
  5. Misappropriate a principal's funds or securities.
  6. Keep custody for a principal of a principal's funds, seal specimen, or passbook. However, this restriction shall not apply if the Competent Authority has provided otherwise.
  7. Lend funds to or borrow funds from a principal or act as an intermediary between a lender and the principal.
  8. Make unauthorized alterations to a time stamp affixed on any order, trade report statement, or other voucher.
  9. Conduct futures trading on behalf of a principal in a volume or open position in excess of the amount permitted by futures trading laws or regulations.
  10. Provide accounts for purposes of trading by a principal.
  11. Accept discretionary authorization by a principal to determine the trading contract, volume, and price of futures trading without official approval.
  12. Use a principal's account or name to engage in futures trading.
  13. Engage in futures trading that does not conform to the specifics or terms or conditions of a principal's order.
  14. Conduct futures trading on behalf of a principal without the principal's authorization.
  15. Make profit guarantees or profit-sharing or risk-sharing agreements with a principal; or accept orders on an installment payment basis.
  16. Open accounts or engage in futures trading on behalf of others. However, this restriction shall not apply if the competent authority has provided otherwise.
  17. Solicit, broker, or promote the trading of futures trading contracts other than those as announced by the Competent Authority under Article 5 of the Futures Trading Act.
  18. Enter into a brokerage contract with a principal by fraud, coercion, or any other improper means.
  19. Provide information on recommended trades to a principal by any means, provided that where other laws or regulations provide otherwise, this restriction shall not apply.
  20. Use information obtained through business relationships for the purpose of trading futures for oneself or to provide others such information for their use in trading futures.
  21. Make use of non-employees to carry out business relating to futures trading. However, this restriction shall not apply if the competent authority has provided otherwise.
  22. To produce or assist another person to produce false futures-related trading records.
  23. Violate the standards of self-governance adopted by the Federation of Futures Industry Associations.
  24. Otherwise violate futures regulations or requirements of the Competent Authority governing compulsory or prohibited acts.
Article 66     A futures commission merchant that declares bankruptcy, is dissolved, suspends operations, or is ordered by law to stop accepting orders from principals shall, in accordance with the orders of the Competent Authority, transfer all related accounts of principals to another futures commission merchant with whom a succession contract has been entered into; except in cases where the futures commission merchant is a clearing member, which shall be handled in accordance with Article 54 of the Futures Trading Act.
    Within 2 trading days of receiving such order from the Competent Authority, a futures commission merchant, unless it has legitimate reason otherwise as submitted to and approved by the Competent Authority, shall transfer the deposits, securities balance, and the collateral value in the Customer Margin Account and the itemized Customer Margin/ Equity statements to the other futures commission merchant referred to in the preceding paragraph. All expenses arising from the transfer shall be borne by the transferring futures commission merchant.
    A futures commission merchant shall, within 2 months of commencing operations, submit to the Competent Authority and the TAIFEX for recordation a photocopy of the succession contract under which the other futures commission merchant agrees to accept transfer of the accounts of principals in the event of any circumstances as provided in paragraph one.
    Where any futures commission merchant suspends operations, before it winds-up all futures trading matters initiated prior to the suspension, its operations within such scope shall be deemed as not suspended.
Chapter 7 Proprietary Trading by Futures Commission Merchants
Article 67     A futures commission merchant operating proprietary futures trading business shall obtain permission and issuance of a permit license from the Competent Authority before engaging in proprietary futures trading on the Exchange.
Article 68     A futures commission merchant operating proprietary futures trading business shall exercise diligence to avoid impairing the formation of fair prices and the soundness of operations, and may not use information gained in business relationships to engage in practices that could result in harm to its customers.
Article 69     A futures commission merchant operating both brokerage and proprietary futures trading business shall conduct such operations separately. It shall not allow business information to flow between or be jointly utilized by such separate operations, and shall not allow such operations to impair customer rights and interests.
Article 70     A futures commission merchant operating brokerage and proprietary futures trading business shall denote in writing for each order whether it is a trade for a customer account or a proprietary trade.
Article 71     A futures commission merchant engaging in proprietary futures trading on its own account on the Exchange may not mandate a futures brokerage merchant to conduct the trading, unless it has obtained the permission of the Competent Authority.
Article 72     A futures commission merchant engaging in futures proprietary trading may make two-way quotes in accordance with the guidelines of the TAIFEX.
Article 72-1     A futures commission merchant operating proprietary trading business, when engaging in day trading of futures contracts, shall incorporate the below-listed operational norms and risk management mechanisms into its internal control system, and faithfully implement them:
  1. Operational methods for the placement and management of orders for day trading of futures contracts.
  2. Intraday risk control mechanisms for day trading of futures contracts.
  3. Method of handling any balance of open positions remaining from day trading after the close of market.
Article 72-2     The open positions in day trading of futures contracts engaged in by a futures commission merchant operating proprietary trading business, except in force majeure circumstances, shall be liquidated by close of the regular trading session of the same day.
    For any position that fails to be liquidated during the regular trading session on the same day through the method in the preceding paragraph, unless any shortfall in margin is covered on the same day to the extent that it meets the initial margin requirement for the futures contract, the position shall continue to be liquidated in the next regular trading session until the position has been closed out in full.
Chapter 8 Clearing Members
Article 73     Participants in clearing and settlement operations of the Exchange shall enter into a clearing and settlement contract with the TAIFEX and obtain clearing member licenses.
Article 74     The TAIFEX's clearing memberships shall be divided into the following three categories depending on the scope of their operations:
  1. Individual clearing member
  2. General clearing member
  3. Special clearing member.
    The qualifications and application procedures for clearing memberships as referred to in the preceding paragraph shall be promulgated by the TAIFEX; the qualifications shall also be submitted to the Competent Authority for approval.
Article 75     Clearing members shall provide clearing and settlement funds, and may not participate in clearing and settlement operations on the Exchange until after the TAIFEX has signed and returned one of the original copies of the clearing and settlement contract to the clearing members.
Article 76     Clearing members shall comply with the following provisions:
  1. Comply with the provisions of these Rules, the clearing and settlement contract, and any other rules and public announcements; and with any amendments thereto.
  2. Fulfill all clearing and settlement obligations to the TAIFEX, and all related responsibilities.
  3. Pay all clearing and settlement fees, clearing and settlement funds and other fees within the time periods provided by the rules of the TAIFEX.
  4. Reliably preserve daily clearing and settlement records for their own positions and those of customers and produce financial reports or other statements in accordance with the rules of the TAIFEX.
  5. Remain in compliance with clearing member qualifications in accordance with the rules of the TAIFEX.
  6. Maintain confidentiality regarding all order matters and make no external disclosures except in the case of inquiries conducted in accordance with laws and regulations or lawfully conducted by the TAIFEX.
  7. Comply in all other matters required by the rules of the TAIFEX.
Article 77     Where any of the following circumstances applies to a clearing member, the TAIFEX may terminate the clearing and settlement contract and take measures as provided in Article 54 of the Futures Trading Act.
  1. Where the relevant Competent Authority has cancelled the clearing member's company registration or dissolved the clearing member.
  2. Where the Competent Authority has issued a disposition canceling the clearing member's operations permit.
  3. Where the clearing member has been pronounced bankrupt by a final court ruling.
  4. Where the clearing member is unable to fulfill clearing and settlement obligations.
  5. Where the clearing member violates a law or regulation or continues to fail to comply following imposition of an administrative disposition by the Competent Authority on the basis of a law or regulation.
  6. Where the clearing member violates the Articles of Incorporation or Operating Rules of the TAIFEX, the Brokerage Contract Rules, or other rules or regulations, and where the circumstances are serious.
  7. Where the clearing member's clearing or settlement practices violate good faith and integrity in a manner sufficient to harm others.
  8. Where the clearing member is unable to maintain compliance with the TAIFEX's clearing member qualifications and, following an inquiry by the TAIFEX and the setting of a deadline for improvement, the clearing member fails to implement improvements or continues to fall short of standards after implementing improvements.
Article 78     A clearing member accepting a mandate to engage in futures clearing and settlement operations shall enter into a contract with the mandating futures commission merchant to handle clearing and settlement operations for it, and shall provide a copy to the TAIFEX.
    Matters to be stipulated in the contract for mandated futures clearing and settlement operations referred to in the preceding paragraph shall be prescribed separately by the TAIFEX.
Article 79     Margins collected by a clearing member from the mandating futures commission merchant may be in cash or securities approved by the Competent Authority.
    The ratio of securities referred to in the preceding paragraph to the total margin amount and the rate of haircut for such securities posted as margin shall comply with the regulations of the Competent Authority and the TAIFEX.
Article 80     The mandating futures commission merchant shall open a "Customer Margin Account" in a financial institution designated by the clearing member for margin payment and collection purposes.
    A mandating futures commission merchant that engages in proprietary futures trading shall open a "proprietary margin account" in a financial institution designated by the clearing member.
    The clearing member, the financial institution referred to in the preceding paragraph, and the mandating futures commission merchant shall enter into a contract governing transfer of margin funds between the clearing member and the mandating futures commission merchant by the financial institution upon notification by the clearing member.
    The clearing member shall provide the TAIFEX with a copy of the contract referred to in the preceding paragraph.
Article 81     If a clearing member's mandating futures commission merchant breaches its clearing and settlement obligations, the clearing member shall perform its clearing and settlement obligations to the TAIFEX notwithstanding such breach, and shall immediately file a report, annexing relevant materials, to the TAIFEX. The procedural guidelines for such report filing shall be separately prescribed by the TAIFEX.
    A clearing member accepting a mandate to engage in futures clearing and settlement operations shall not violate the agreement mandating that clearing member to handle clearing and settlement.
Article 82     The provisions of Article 9, Article 10, Article 14, Article 15, Article 18, Article 20, Article 21, Article 22, Article 23, Article 24, Article 26, Article 27, Article 53, Article 55, and Article 61 shall apply mutatis mutandis to clearing members.
Chapter 9 Clearing and Settlement
Article 83     At the close of the regular trading session each day, the TAIFEX shall carry out registration based on the day's transaction records and shall prepare an Itemized Table of Futures Trading Positions and an Itemized Table of Clearing Margin Balances broken down by clearing members to confirm clearing members' position structure and volume and margin payment and collection amounts for the current day.
    The Itemized Table of Futures Trading Positions of the preceding paragraph includes calculation of expiring positions in international cooperative products transferred to the TAIFEX each day prior to market opening.
    In the Itemized Table of Clearing Margin Balances referred to in paragraph 1, the margin for the contracts in each trading account shall be calculated on the basis of the total number of contracts [i.e. by gross margining], except in cases involving specified position combinations, futures contract spread combinations, or the SPAN margin calculation method, as provided by the Futures Exchange. Positions in different trading accounts may not be directly offset except by futures commission merchants qualified to engage in proprietary trading.
    The futures contract spread combinations referred to in the preceding paragraph do not apply to omnibus accounts.
Article 84     Except where otherwise provided, a clearing member shall mark to market on a daily basis the equity for futures transactions that it clears on its own account or on mandate, based upon the difference between the transaction price and the settlement price on the transaction date, or the difference between the daily settlement price and the settlement price for the previous trading day.
Article 85     The settlement price referred to in the preceding article shall be stipulated in each futures trading contract.
Article 86     Clearing members shall complete payment or collection of margin fund amounts payable or receivable as specified in the TAIFEX's Clearing Margin Collection/Payment Notification as follows:
  1. Where margin funds are payable, the clearing member shall deposit the proprietary and customer margin funds respectively into its Proprietary Clearing Margin Account and Customer Clearing Margin Account in the settlement bank within the time period prescribed by the TAIFEX.
  2. Where margin funds are receivable, the clearing member may file an application for collection with the TAIFEX within the time period prescribed by the TAIFEX. The TAIFEX shall deposit the proprietary and customer-owned funds separately into the clearing member's Proprietary Clearing Margin Account and Customer Clearing Margin Account in the settlement bank.
Article 87     The TAIFEX shall compile margin account transfer information and submit it to the settlement bank on a daily basis, and mandate the settlement bank to carry out procedures for funds transfer between the margin accounts of the TAIFEX and the clearing members.
    In the course of carrying out the funds transfer procedures referred to in the preceding paragraph, if it occurs that the funds in the clearing member's clearing margin account are insufficient, the clearing bank shall still deduct the balance remaining.
Article 88     After confirming the settlement bank's completion of margin fund transfers, the TAIFEX shall each day compile a clearing margin account balance sheet, broken down by the clearing member's Proprietary Margin Account and Client Clearing Margin Account, and submit it to the clearing member.
Article 89     The TAIFEX may adjust the clearing margin of, or issue margin call to, any or all clearing members based upon market conditions or the clearing members' open positions or financial condition.
    Clearing members shall, within one hour of receiving margin call notification from the TAIFEX, deposit all funds payable into the clearing margin account it has opened with the settlement bank.
Article 90     When clearing members conduct clearing and settlement of futures trading on a mandated or proprietary basis, the open interest of each futures trading contract after the close of the regular trading session on the last trading day shall be disposed of in accordance with these Operating Rules and the TAIFEX's rules regarding settlement upon expiration of futures trading contracts.
Article 91     For futures trading contracts to be settled by physical delivery upon expiration, the clearing member shall, pursuant to the TAIFEX's notice, complete settlement procedures as provided below:
  1. Where the underlyings are payable, the underlyings or vouchers therefor shall be delivered within the delivery period and in accordance with the types of deliverable underlyings as prescribed by the TAIFEX.
  2. Where the underlyings are receivable, the underlyings or vouchers therefor shall be collected after the settlement price has been paid without error.
    To effect physical delivery of futures trading contracts, the TAIFEX may, through the centralized securities depository enterprise or other institution, carry out receipt/delivery procedures of the deliverable underlyings by book-entry transfer or other means.
Article 92     For futures trading contracts to be settled in cash at expiration, the equity shall be calculated at the final settlement price set by the TAIFEX. Clearing members shall, pursuant to notice by the TAIFEX, complete the settlement procedures as provided below:
  1. Where the settlement price is payable, the settlement price shall be paid within the settlement period and in accordance with the amount calculated by the TAIFEX.
  2. Where the settlement price is receivable, the settlement price shall be calculated and received by the TAIFEX.
Chapter 10 Margins and Premiums
Article 93     The TAIFEX may collect clearing margin from clearing members in cash or in securities approved by the Competent Authority.
    Operation procedures regarding the deposit of securities as margin by clearing members shall be separately prescribed by the TAIFEX.
    The means of collection, standards, and haircut rates for using securities for margin requirement referred to in paragraph 1 shall be prescribed by the TAIFEX and submitted to the Competent Authority for approval.
    Clearing members shall record the following information for segregated proprietary and customer accounts on a daily basis:
  1. Volume and position composition of futures trading.
  2. Margin calculation, payment and collection.
  3. Calculation, payment and collection of equity changes from market fluctuations.
  4. Margin balance.
  5. Margin calls or margin withdrawals.
  6. Other information required to be recorded.
    Account book management by clearing members referred to in the preceding paragraph with regard to the conduct of clearing and settlement mandated by a futures commission merchant shall separately record proprietary trading and trading for customer accounts by the futures commission merchant.
Article 94     Clearing members shall set up segregated "Proprietary Clearing Margin Accounts" and "Customer Clearing Margin Accounts" with a settlement bank through which all proprietary and customer margin transfers with the TAIFEX shall be carried out.
    The clearing member and the settlement bank shall enter into a contract with the TAIFEX to carry out the margin transfers referred to in the preceding paragraph stipulating that the settlement bank shall, upon notification by the TAIFEX, carry out the transfer of margin between the clearing margin accounts of the clearing member and the TAIFEX.
Article 95     The TAIFEX may open "margin accounts" with settlement banks, centralized securities depository enterprises, or other institutions to handle margin collection and payment.
    The TAIFEX shall record the daily balances of the margin in the account referred to in the preceding paragraph, segregated according to the clearing member's proprietary and customer accounts, and shall post the figures online so clearing members may check their account balances.
Article 96     Clearing members shall mark to market on a daily basis the total amount of margin payable by comparing the profits or losses on all open positions on each futures trading contract and the margin amounts mandated by the TAIFEX's rules.
Article 97     Interest on the funds deposited by clearing members into the "clearing margin account" opened by the TAIFEX with the settlement bank shall be calculated by the TAIFEX daily and shall be paid out once every 6 months; the standards for interest calculation, and any amendment thereto, shall be separately prescribed by the TAIFEX in consultation with the Chinese National Futures Association.
Chapter 11 Position Limits
Article 98     Pursuant to the provisions of the "Criteria Governing Surveillance of Market Position," the TAIFEX may impose position limits upon a principal, futures commission merchant, or clearing member.
    The "Criteria Governing Surveillance of Market Position" referred to in the preceding paragraph shall be promulgated by the TAIFEX subject to their approval by the Competent Authority.
Article 99     Futures commission merchants or clearing members may be notified by telephone or in writing when the TAIFEX sets or adjusts position limits. Position limits shall be effective from the time of notification of the futures commission merchant or clearing member or from a date specified by the TAIFEX.
Article 100     Where the positions held by the futures commission merchant or clearing member exceed the limit standards set by the TAIFEX; the TAIFEX may make the following dispositions:
  1. Limits on adding new positions;
  2. Margin call;
  3. Other measures necessary to protect market order or safeguard futures trading.
Chapter 12 Disposition of Defaults by Clearing Members
Article 101     Where any of the following circumstances exists in respect of a clearing member, the TAIFEX shall consider that clearing member in default:
  1. Failure to pay the clearing margin within the deadline specified by regulations;
  2. Failure to fulfill settlement obligations within the specified time period;
  3. Violation of provisions of the clearing and settlement contract.
    Where a clearing member is in default under any of the circumstances enumerated in the preceding paragraph, the TAIFEX, in addition to handling the matter under the provisions of this Chapter, may make any additional necessary disposition against the clearing member pursuant to the provisions of the clearing and settlement contract.
Article 102     Where a clearing member is unable to pay the clearing margin within the time period set by the TAIFEX, the clearing member shall apply to the TAIFEX, providing written documentation demonstrating that the failure to pay is not the result of financial factors. After approval by the TAIFEX, the clearing member shall take the following measures:
  1. On the following trading day, pay the clearing margin in full one hour prior to the opening of the regular trading session.
  2. On the following trading day, submit a written report, with relevant supporting documentation, explaining the reasons for the occurrence of the incident.
    When any of the circumstances in the preceding paragraph occurs in respect of a clearing member, the TAIFEX shall dispose of the matter by the following means:
  1. Impose a default penalty of not more than NT$300,000 on the defaulting clearing member.
  2. Submit an investigation report of the incident to the Disciplinary Committee for recordation.
  3. Report to the Competent Authority for recordation.
    Where a clearing member in default fails to complete the procedures provided in paragraph 1, subparagraph 1, the TAIFEX shall treat the matter as default by the clearing member because of financial factors.
Article 103     Where a clearing member is in default due to financial factors, the TAIFEX may take the following measures:
  1. Suspend the defaulting clearing member's clearing and settlement operations and report the matter in writing to the Competent Authority.
  2. Notify all clearing members and futures commission merchants through the TAIFEX's online information system.
  3. Check the defaulting clearing member's clearing margin balance, bank account balance, operating bond, clearing and settlement fund, and other assets and immediately pursue protective measures in respective of the obligatory rights.
  4. Dispose of the defaulting clearing member's positions and margin funds.
  5. Conduct an audit of the defaulting clearing member and an investigation and analysis of the incident.
Article 104     Where a clearing member is in default due to financial factors, the TAIFEX may dispose of positions and margin in that clearing member's account by the following means:
  1. Halt all trading between the defaulting clearing member and its mandating futures commission merchant; provided, this restriction shall not apply to trading for the purpose of liquidating existing positions;
  2. Freeze or transfer funds and securities in the defaulting clearing member's clearing margin account;
  3. Pursuant to the provisions of Article 54 of the Futures Trading Act, open a default handling account with a clearing member that has engaged in a succession agreement with the defaulting clearing member and liquidate proprietary positions held by the defaulting clearing member and the defaulting futures commission merchant;
  4. A futures commission merchant that has engaged in a succession agreement with the defaulting futures commission merchant shall, at the instructions of the TAIFEX, liquidate open positions of the defaulting customer.
    A defaulting futures commission merchant shall submit itemized trading statements for all of its customers to the succeeding futures commission merchant. In the event the defaulting futures commission merchant refuses to hand over the itemized trading statement, the TAIFEX may liquidate all customer positions of the defaulting futures commission merchant.
    Non-defaulting customers of the defaulting clearing member and defaulting futures commission merchant shall, according to the provisions of paragraph 1, subparagraph 1 of this Article, liquidate their positions or apply to have their positions transferred to another futures commission merchant. Where a customer fails to do so within 5 days, the succeeding futures commission merchant may liquidate all open positions in that customer's account.
    A non-defaulting mandating futures commission merchant shall select another clearing member and enter into an agreement mandating that clearing member to handle clearing and settlement, and shall not resume trading until after notifying the TAIFEX of the execution of the agreement.
Article 105     Where any of the circumstances referred to in the preceding article exists in respect of a clearing member, the TAIFEX may appropriate the following, in the order listed:
  1. The defaulting clearing member's clearing margin;
  2. The defaulting clearing member's deposits to the clearing and settlement fund;
  3. Other clearing members' deposits to the clearing and settlement fund;
  4. The TAIFEX's compensation reserve fund;
  5. Levies on other clearing members in a proportion determined by the TAIFEX.
    The defaulting clearing member shall bear indemnity for funds appropriated under subparagraphs 3 to 5 of paragraph 1.
Chapter 13 Clearing and Settlement Funds
Article 106     Clearing members shall deposit clearing and settlement funds in accordance with the TAIFEX's rules and such deposits shall be confined to cash.
Article 107     The TAIFEX shall set up dedicated accounts for the deposit of clearing and settlement funds and utilization of those funds shall be confined to the following:
  1. Bank deposits;
  2. Purchase of treasury bills or government bonds;
  3. Other uses approved by the Competent Authority.
    The use in subparagraph 2 of the preceding paragraph shall not exceed 50 percent of the total amount of the clearing and settlement fund.
    Certificates of deposit, treasury bills, and government bonds acquired by the TAIFEX according to the provisions of paragraph 1 shall be in the custody of a bank with which the TAIFEX has set up a dedicated account for the clearing and settlement fund and engaged in a formal custodial agreement.
    Interest accrued through the TAIFEX's utilization of the clearing and settlement funds deposited by clearing members shall be settled by the TAIFEX every 6 months and shall, after deduction of necessary expenses and taxes, be distributed among each of the depositing clearing members.
Article 108     A clearing member to which any of the following circumstances applies shall, within a time period specified by the TAIFEX, increase its deposits to the clearing and settlement fund:
  1. Irrevocable execution of assets by a court;
  2. Dishonor of any issued bills due to insufficient funds where there is no record of cancellation of the dishonored bill;
  3. A substandard rating under the TAIFEX's Guidelines for Early Warning of Operational Risk of Futures Commission Merchants and Clearing Members, or occurrence of consecutive losses and owner's equity lower than 60 percent of paid-in capital;
  4. A substandard rating for internal auditing where improvements have not been made after guidance and reassessment;
  5. Likelihood of an increase in market risk under the provisions of the internal control system of a clearing member or its mandating futures commission merchant, or inability to practically implement provisions of its internal control system;
  6. Material violations of laws or regulations or bylaws of this Corporation, resulting in multiple instances of sanctions being imposed by the Competent Authority or this Corporation without improvement;
  7. Other severe unforeseen incidents or upon instructions of the Competent Authority;
  8. When the clearing and settlement fund is insufficient to cope with perceived market risk, the TAIFEX may adjust the clearing and settlement fund requirements for all clearing members.
    The amount of increase referred to in the preceding paragraph shall be recommended by the Clearing Committee and shall be implemented following a resolution of the board of directors; when necessary, a board of directors meeting may be convened at any time for such a resolution followed by implementation.
    Standards for determination of matters under subparagraph 5 of paragraph 1 shall be publicly announced by this Corporation.
Article 109     When clearing and settlement funds are appropriated according to the provisions of Article 49, paragraph 1, Subparagraph 3 of the Futures Trading Act, the amount of appropriation each clearing member shall be responsible for shall not exceed the member's deposit to the clearing and settlement fund. Appropriation sharing ratios shall be set by the TAIFEX.
Article 110     After application of clearing members' deposits to the clearing and settlement fund under the preceding Article, the amount of the appropriated funds shall be replenished within the time period prescribed by the TAIFEX's rules.
Article 111     If a clearing member's deposit to the clearing and settlement fund has been subject to compulsory execution by the court, that clearing member shall immediately replenish such funds.
Article 112     Following the termination of a clearing member's clearing and settlement contract, that member must close its clearing and settlement operations on the Exchange and settle all accounts before application may be filed for refund of the member's clearing and settlement fund deposit..
Chapter 14 Exchange Fees and Clearing Fees
Article 113     The type, rate, and amount of all fees collected from clearing members and futures commission merchants by the TAIFEX shall be set by the TAIFEX and submitted to the Competent Authority for approval.
Article 114     Clearing members and futures commission merchants shall pay all fees set according to the provisions of the previous Article within the time period prescribed by the TAIFEX.
Chapter 15 Market Surveillance and Emergency Measures
Article 115     To maintain fairness in futures trading, prevent illegal price manipulation and maintain clearing and settlement security, the TAIFEX shall conduct surveillance and investigation of market trading and clearing and settlement. The method of surveillance and investigation shall be prescribed by the TAIFEX and submitted to the Competent Authority for approval.
    During the course of surveillance and investigation referred to in the preceding paragraph, the TAIFEX may, when necessary, demand to examine and review the relevant records of, or demand clarification from, futures commission merchants and clearing members. Futures commission merchants and clearing members may not evade or refuse such demands.
Article 116     The TAIFEX shall immediately adopt measures to safeguard market order or trading fairness when any of the following circumstances exists in the futures market or in futures trading:
  1. Where the futures market or related spot markets exhibit signs of manipulation, cornering, or speculative hoarding, or there are concerns of manipulation, cornering, or speculative hoarding in those markets;
  2. Where the volume of futures contracts held by a futures trader or futures commission merchant threatens to influence the market;
  3. Where malfunction or disruption of futures clearing or related payment and collection operations systems threatens to affect performance of futures trading contract clearing and settlement obligations;
  4. Where measures adopted by the ROC government, another nation's government, or another futures exchange threaten to affect the TAIFEX's futures trading;
  5. Where there is a disruption or malfunction in power supplies, computerized trading systems, or communications transmission equipment; natural disaster, rioting, or war; or any other instance of force majeure affecting the normal operations of the Exchange;
  6. Where the futures market or related spot markets experience a major default;
  7. Where a futures commission merchant or clearing member experiences a financial crisis or declares bankruptcy; or there is a threat a futures commission merchant or clearing member will be unable to perform their clearing and settlement obligations;
  8. Where a futures trader, futures commission merchant, clearing member, or other futures market participant commits a serious violation of relevant law, rules, or regulations, the circumstances of which threaten to affect the market;
  9. Where other circumstances exist that threaten to seriously affect futures market trading order, fairness, liquidity, or the normal conduct of clearing and settlement.
    Measures for handling the disruption or malfunction of computerized trading systems or communications transmission equipment, as referred to in the previous paragraph, shall be separately prescribed by the TAIFEX.
Article 117     In response to any of the circumstances set forth in the preceding Article, the TAIFEX may adopt the following measures:
  1. Adjust margin levels or collection deadlines.
  2. Adjust financial standards for futures commission merchants and clearing members.
  3. Restrict the number of trades executed or positions held by futures traders.
  4. Restrict the number of trading orders futures commission merchants may accept or positions they may hold.
  5. Restrict clearing members' positions
  6. Suspend or terminate futures trading, partially or entirely.
  7. Restrict futures trading prices to a specific range.
  8. Restrict futures trading to liquidation of existing positions.
  9. Order futures commission merchants or clearing members to liquidate their positions or their customer's trading, in whole or in part.
  10. Alter or limit trading hours.
  11. Alter or limit the conditions of futures trading contract settlement.
  12. Terminate a futures commission merchant's market usage contract.
  13. Terminate a clearing member's clearing and settlement contract.
  14. Other necessary measures.
Article 118     When the TAIFEX announces a suspension in trading under the preceding Article, all trades transacted prior to the suspension announcement shall be considered valid.
Chapter 16 Arbitration
Article 119     Disputes over futures trading that arise between a futures commission merchant and the principal, or between a clearing member and the mandating futures commission merchant may be submitted to arbitration.
    Stipulations for arbitration under the preceding paragraph shall be prescribed in the brokerage contract and the clearing and settlement contract by the futures commission merchant and the clearing member, respectively, and shall serve as the arbitration contract required under the Commercial Arbitration Act.
Article 120     Disputes over futures trading that arise between a futures commission merchant and another futures commission merchant, or between a clearing member and another clearing member, may be submitted for arbitration under the procedures provided in the Commercial Arbitration Act.
    The TAIFEX may mediate disputes referred to in the preceding paragraph or may request reconciliation by a futures industry association or the Federation of Futures Industry Associations prior to arbitration.
Article 121     Where a futures commission merchant or clearing member is a party involved in arbitration as prescribed in this chapter, the TAIFEX shall be notified of the arbitration procedure and provided with copies of relevant documents.
Article 122     When a party to a dispute enters into arbitration under the provisions of this chapter, a written request may be submitted to the TAIFEX, through the arbitrator, for the TAIFEX to provide any necessary information.
Article 123     Disputes arising between the TAIFEX and a futures commission merchant or a clearing member over the content of the market usage contract or the clearing and settlement contract may be submitted to arbitration.
Article 124     In arbitration as prescribed in this chapter, application procedures, generation of an arbitrator, and other procedural matters shall be conducted in accordance with the provisions of the Futures Trading Act and the Commercial Arbitration Act.
Chapter 17 Penal Provisions
Article 125     Where any of the following circumstances exists in respect of a futures commission merchant or clearing member, unless otherwise provided in rules of the TAIFEX, the TAIFEX may notify the offending party of a deadline by which the infraction must be rectified or improved.
  1. Where a futures commission merchant violates the provisions of Article 14, Article 15, Article 16, Article 18, Article 23, or paragraph 2 of Article 58-1.
  2. Where a clearing member violates the provisions of Article 14, Article 15, Article 18, or Article 23 applied mutatis mutandis pursuant to Article 82.
  3. Where a futures commission merchant or clearing member violates applicable provisions of these Rules or other rules, public announcements, or circular letters.
Article 126     Where any of the following circumstances exists in respect of a futures commission merchant or clearing member, the TAIFEX may impose a penalty of not less than NT$10,000 and not more than NT$50,000. Where the offending party has been notified to rectify or ameliorate the infraction within a specific time period and fails to do so by the deadline, an additional penalty of NT$10,000 will be imposed for each day beyond the deadline until the date of improvement or amelioration:
  1. Where a futures commission merchant violates the provisions of Article 19-1; Article 20, paragraph 1 or paragraph 3; Article 21, paragraph 1 or paragraph 3; Article 24, paragraph 1; Article 25; Article 26; Article 36, paragraph 4; Article 44; Article 44-1; Article 44-3, paragraph 4 or paragraph 5; Article 44-5; Article 44-6; Article 44-9, paragraph 6; Article 44-12, paragraph 2; Article 44-13; Article 45; Article 46; Article 46-1; Article 46-2; Article 47; Article 47-1; Article 48; Article 49-2; Article 54, paragraph 4; Article 57-1; Article 62, paragraph 1; Article 64, paragraph 1; or Article 72-1.
  2. Where a clearing member violates the provisions of Article 20, paragraph 1 or paragraph 3, or Article 21, paragraph 1, or Article 26, applied mutatis mutandis pursuant to Article 82.
Article 127     Where any of the following circumstances exists in respect of a futures commission merchant or clearing member, the TAIFEX may impose a penalty of not less than NT$100,000 and not more than NT$300,000.Where the offending party has been notified to rectify or ameliorate the infraction within a specific time period and fails to do so by the deadline, an additional penalty of NT$30,000 will be imposed for each day beyond the deadline until the date improvement or rectification is made:
  1. Where a futures commission merchant violates Article 19, Article 27, Article 49, Article 49-1, paragraph 1 or 2; Article 53, paragraph 2, 3, or 5; Article 53-1, paragraph 1 or 2; Article 56, paragraphs 1 and 3; Article 57, paragraph 1; Article 57-2, Article 61, paragraph 1; Article 63, Article 65, Article 69, Article 72-2 and fails to rectify or improve the infraction within the time period provided under Article 125, paragraph 1, subparagraph 1 or subparagraph 3.
  2. Where a clearing member violates the provisions of Article 76, paragraph 1, subparagraph 6; Article 93, paragraph 4 or paragraph 5; or Article 27 applied mutatis mutandis pursuant to Article 82.
  3. Where a clearing member fails to rectify or improve the infraction within the time period provided under Article 125, paragraph 1, subparagraph 2 or subparagraph 3.
    Where a futures commission merchant or clearing member repeats an infraction under any subparagraph of the preceding paragraph within a half year of the previous infraction, the TAIFEX may impose a penalty of NT$500,000.
    Where a futures commission merchant or clearing member is investigated by the TAIFEX and there is discovered any circumstance set out in paragraph 1 hereof or in the preceding article, and during the course of the investigation it makes any false report or misrepresentation to the TAIFEX, the TAIFEX may impose a penalty of not more than NT$600,000.
Article 128     Where any of the following circumstances exists in respect of a futures commission merchant, the TAIFEX may suspend trading by the future commission merchant and notify the Competent Authority in writing, provided that this restriction shall not apply to trading for purposes of disposing existing positions:
  1. A violation of the provisions of Article 20, paragraph 2; Article 21, paragraph 2; or Article 125, paragraph 2 of evasion or refusal of inspection or inquiry by personnel assigned by the TAIFEX;
  2. A fall in the futures commission merchant's net value below one-half of its paid-up capital for 3 consecutive months without improvement;
  3. failure to pay penalty imposed under Article 126 or Article 127;
  4. Any other violation of these Rules, the Brokerage Contract Rules, other rules or regulations, or provisions of public announcements that threatens to affect the order of futures market trading, clearing and settlement.
    The TAIFEX may restore trading by the futures commission merchant after the circumstances set forth in the subparagraphs of the preceding paragraph have been eliminated.
Article 129     Where any of the following circumstances exists in respect of a clearing member, the TAIFEX may suspend the member's clearing and settlement operations and notify the Competent Authority in writing:
  1. A violation of the provisions of Article 20, paragraph 2; or Article 21, paragraph 2 as applied mutatis mutandis pursuant to Article 82 of evasion or refusal of inspection or inquiry by personnel assigned by the TAIFEX;
  2. A violation of the provisions of Article 115, paragraph 2 of evasion or refusal of inquiries or examination of relevant information by the TAIFEX;
  3. Failure by a clearing member to pay a penalty imposed under Article 126 or Article 127;
  4. Any other violation of these Rules, the Brokerage Contract Rules, other rules and regulations, or provisions of public announcements that threatens to affect the order of futures market trading, clearing, and settlement.
    The TAIFEX may restore clearing and settlement operations by the clearing member after the circumstances set forth in the subparagraphs of the preceding paragraph have been eliminated.
Article 130     Where any of the following circumstances exists in respect of a futures commission merchant, the TAIFEX may halt that merchant's trading or terminate its market usage contract:
  1. A violation of Article 26 through reporting of false information to the TAIFEX sufficient to result in losses to the TAIFEX or to others;
  2. Failure to collect margin from the principal prior to accepting an order;
  3. Proprietary trading by the futures commission merchant in violation of the provisions of Article 71;
  4. Violation of the provisions of the market usage contract.
Article 131     Where any of the following circumstances exists in respect of a clearing member, the TAIFEX may halt that clearing member's clearing and settlement operations or terminate its clearing and settlement contract.
  1. A violation of the provisions of Article 26 as applied mutatis mutandis under Article 82 through reporting of false information to the TAIFEX sufficient to result in losses to the TAIFEX or to others;
  2. A violation of the provisions of Article 101;
  3. Failure to collect margin funds from the mandating futures commission merchant prior to accepting a mandate to perform clearing operations;
  4. Failure to perform a fund contribution burden set by the TAIFEX as provided in Article 49, paragraph 1, subparagraph 5 of the Futures Trading Act;
  5. Violation of the provisions of Article 54, subparagraph 2;
  6. Violation of the provisions of the clearing and settlement contract.
Article 132     Dispositions made by the TAIFEX pursuant to Article 128 and Article 129 shall be filed with the Competent Authority for recordation.
    Disciplinary action taken by the TAIFEX pursuant to Article 130 and Article 131 shall be submitted to the Competent Authority for approval and recordation.
Article 133     When the TAIFEX discovers a violation of the Futures Trading Act or other applicable laws or regulations by a futures commission merchant or clearing member, it shall report the violation to the Competent Authority for handling.
Article 134     When an employee of a futures commission merchant or clearing member violates these Rules, the Brokerage Contract Rules, or other rules and regulations or provisions of public announcements, the TAIFEX may weigh the severity of the circumstances and notify the futures commission merchant or clearing member outright to issue a warning to the employee, or suspend the employee's execution of their duties for a period of one month to 6 months.
    Where the employee referred to in the preceding paragraph has violated the Futures Trading Act or other applicable laws or regulations, the matter shall be reported to the Competent Authority for handling.
Article 135     Dispositions made under these Rules shall take effect upon delivery of the notification to the futures commission merchant or clearing member.
Chapter 18 Supplementary Provisions
Article 136     These Rules and any amendments hereto shall take force upon promulgation following approval by the Competent Authority.