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Title: Taiwan Futures Exchange Corporation Rules Governing Surveillance Of Market Positions
Date: 2003.08.08 ( Announced )
Date: 2017.02.24 ( Amended )

Article Content

 
Article 1     These Rules are prescribed under Article 5 of the Futures Market Surveillance Regulations and Article 98 of the TAIFEX Operating Rules.
Article 2     For the purposes of executing market surveillance, establishing standards for warning and limitation of events likely to affect futures market order, and further maintaining futures market order and security, the TAIFEX imposes position limit standards on futures traders, futures commission merchants, and clearing members respectively.
Article 3     When executing market surveillance operations, the TAIFEX shall set standards for outstanding positions of futures traders or futures commission merchants based upon the following conditions:
  1. The standards governing open positions of futures traders shall be established in accordance with applicable regulations of the competent authority and the stipulations prescribed ad hoc by the TAIFEX for each futures trading contract.
  2. The adjusted net capital amount of futures commission merchants shall be no less than 15 percent of the total amount of client margins required for the open positions of futures traders.
    The provisions of subparagraph 1 of the preceding paragraph apply mutatis mutandis to the standards for open positions of offshore overseas Chinese and foreign nationals engaging in trading on the TAIFEX through an omnibus account.
Article 4     Where the open positions of a futures trader in a single futures commission merchant exceed the standards prescribed under the preceding article, the TAIFEX may adopt the following measures:
  1. Notify the futures commission merchant to make correction or improvement within a prescribed time limit.
  2. Impose a breach penalty of not less than NT$10,000 and not more than NT$50,000 per instance of excess. When a notice of correction or improvement is issued and no correction or improvement is made by the time limit, the TAIFEX may impose an additional penalty of NT$10,000 per day for each instance until the day of correction or improvement.
  3. Notify the associated clearing member.
  4. Report to the competent authority the circumstances of the futures trader's exceeding of the position limit.
    Where the open positions of a futures trader exceed the standards prescribed under the preceding article, and the futures commission merchant has been issued a notice to cease adding new position, if the futures commission merchant continues to accept brokerage orders to add new positions or engages in proprietary trading to add new positions, the TAIFEX may take the measures under the preceding paragraph:
    Where the open positions of an individual trader under an omnibus account exceed the standards prescribed under the preceding article, the TAIFEX may adopt the following measures:
  1. Notify the futures commission merchant to make correction or improvement within a prescribed time limit.
  2. Notify the futures commission merchant to which the omnibus account belongs to notify the foreign futures commission merchant to cease accepting brokerage orders to add new positions.
  3. If the foreign futures commission merchant has been notified to cease accepting brokerage orders to add new positions and continues to accept brokerage orders to add new positions, the TAIFEX may notify the [domestic] futures commission merchant to restrict or terminate futures trading by the foreign futures commission merchant in whole or in part. If the [domestic] futures commission merchant fails to restrict or terminate the trading in accordance with the TAIFEX's notice, a breach penalty of not less than NT$10,000 and not more than NT$50,000 per instance will be imposed. Where a notice to make corrections or improvements has been issued and no correction or improvement is made by the time limit, an additional penalty of NT$10,000 per day for each instance will be imposed until the day of correction or improvement.
  4. Report to the competent authority the circumstances of the exceeding of the position limit by the individual futures trader.
    Where the ratio of a futures commission merchant's adjusted net capital to the total amount of client margins required for open positions is lower than the standard prescribed in subparagraph 2 of paragraph 1 of the preceding Article, then except for purposes of disposing of preexisting trades, the futures commission merchant shall immediately cease accepting orders to add new positions, and shall at the same time submit a plan for improvement to the competent authority and to the TAIFEX. The TAIFEX will separately notify the mandated clearing member to strengthen its risk control and management.
Article 4-1     A futures commission merchant shall mark its adjusted net capital to market daily and report by electronic media the ratio of its adjusted net capital to the total amount of client margins required for open positions. Within 10 days after the end of each month, it shall report its adjusted net capital spreadsheet to the TAIFEX in writing.
    Whenever a futures commission merchant's adjusted net capital is less than 20 percent of the total amount of client margins required for the open positions of futures traders, then on the same day it shall provide a written report of the matter to the TAIFEX explaining the reason for the occurrence. Whenever a non-clearing member futures commission merchant's adjusted net capital is less than 40 percent of the total amount of client margins required for the open positions of futures traders for three consecutive days, then on the third day it shall provide a written report of the matter to the TAIFEX explaining the reason for the occurrence and provide the most recent data on its adjusted net capital. After its correctness is confirmed through calculation, the TAIFEX will immediately enter the data into the clearing system for control and management.
    Whenever a futures commission merchant's adjusted net capital is reduced by 20 percent or more, it shall on the same day report the matter to the TAIFEX by electronic media and provide a written explanation of the reason.
Article 4-2     If any of the following matters occurs to any clearing member for three consecutive days, then on the third day it shall provide a written report of the matter to the TAIFEX explaining the reason for the occurrence, and provide the most recent data on its adjusted net capital. After its correctness is confirmed through calculation, the TAIFEX will immediately enter the data into the clearing system for control and management:
  1. Adjusted net capital of an individual clearing member with designated operating funds of less than NT$100 million is less than 40 percent of the total clearing margin required for open positions.
  2. Adjusted net capital of an individual clearing member with designated operating funds of NT$100 million or more and less than NT$200 million is less than 35 percent of the total clearing margin required for open positions.
  3. Adjusted net capital of an individual clearing member, general clearing member, or special clearing member with designated operating funds or minimum paid-in capital of NT$200 million or more is less than 30 percent of the total clearing margin required for open positions.
Article 5     When executing market surveillance, the TAIFEX shall establish the following warning standards based upon the financial condition or open positions of clearing members:
  1. Ratio of a clearing member's adjusted net capital to the total clearing margin required for open positions as follows:
    1. Adjusted net capital of an individual clearing member with designated operating funds of less than NT$100 million is less than 35 percent of the total clearing margin required for open positions.
    2. Adjusted net capital of an individual clearing member with designated operating funds of NT$100 million or more and less than NT$200 million is less than 30 percent of the total clearing margin required for open positions.
    3. Adjusted net capital of an individual clearing member, general clearing member, or special clearing member with designated operating funds or minimum paid-in capital of NT$200 million or more is less than 25 percent of the total clearing margin required for open positions.
  2. Ratio of a clearing member's total open positions to total market positions as follows:
    1. Total open positions in any stock index futures contract reach 15 percent of total market positions therein; provided, this restriction does not apply to clearing members with total open positions of less than 3,600 contracts.
    2. Open short positions in any stock index call or put option contract reach 15 percent of the open short positions therein in the market; provided, this restriction does not apply to open short positions of the clearing member in calls or puts where less than 3,600 contracts.
    3. Open short positions in any equity call or put option contract reach 15 percent of the open short positions therein in the market; provided, this restriction does not apply to open short positions of the clearing member in calls or puts where less than 20,000 contracts.
    4. Total open positions in any interest rate futures contract reach 15 percent of the total positions therein in the market; provided, this restriction does not apply where the clearing member's total open position is less than 1,800 contracts.
    5. Gold futures contracts and New Taiwan Dollar-denominated gold futures contracts: total open positions in any contract reach 15 percent of the total positions therein in the market; provided, this restriction does not apply where the clearing member's total open position is less than 1,800 contracts.
    6. Open short positions in any gold call or put option contract reach 15 percent of the open short positions therein in the market; provided, this restriction does not apply to open short positions of the clearing member in calls or puts where less than 1,800 contracts.
    7. Total open positions in any single stock futures contract reach 15 percent of the total positions therein in the market; provided, this restriction does not apply where the clearing member's total open position is less than 20,000 contracts.
    8. Total open positions in any forex futures contract reach 15 percent of the total positions therein in the market; provided, this restriction does not apply where the clearing member's total open position is less than 1,800 contracts.
    9. Open short positions in any forex call or put option contract reach 15 percent of the open short positions therein in the market; provided, this restriction does not apply to open short positions of the clearing member in calls or puts where less than 1,800 contracts.
  3. Net position loss (the difference by which the net value in the clearing member margin account falls below the total margin for open positions) reaches 50 percent of the adjusted net capital amount.
    For the contracts listed in subparagraph 2 of the preceding paragraph, a market maker's open positions in futures and open short call or short put positions will not be counted in the clearing member's total open positions in the contracts.
Article 6     When executing market surveillance, the TAIFEX shall establish the following limit standards based upon the financial condition or open positions of clearing members:
  1. Ratio of a clearing member's adjusted net capital to total clearing margin required for open positions as follows:
    1. Adjusted net capital of an individual clearing member with designated operating funds of less than NT$100 million is less than 30 percent of the total clearing margin required for open positions.
    2. Adjusted net capital of an individual clearing member with designated operating funds of NT$100 million or more and less than NT$200 million is less than 25 percent of the total clearing margin required for open positions.
    3. Adjusted net capital amount of an individual clearing member, general clearing member, or special clearing member with designated operating funds or minimum paid-in capital of NT$200 million or more is less than 20 percent of the total amount of clearing margin required for open positions.
  2. Ratio of a clearing member's total open positions to total market positions as follows:
    1. Total open positions in any stock index futures contract reach 20 percent of total market positions therein; provided, this restriction does not apply to clearing members with total open positions of less than 3,600 contracts.
    2. Open short positions in any stock index call or put option contract reach 20 percent of the open short positions therein in the market; provided, this restriction does not apply to open short positions of the clearing member in calls or puts where less than 3,600 contracts.
    3. Open short positions in any equity call or put option contract reach 20 percent of the open short positions therein in the market; provided, this restriction does not apply to open short positions of the clearing member in calls or puts where less than 20,000 contracts.
    4. Total open positions in any interest rate futures contract reach 20 percent of the total positions therein in the market; provided, this restriction does not apply where the clearing member's total open position is less than 1,800 contracts
    5. Gold futures contracts and New Taiwan Dollar-denominated gold futures contracts: total open positions in any contract reach 20 percent of the total positions therein in the market; provided, this restriction does not apply where the clearing member's total open position is less than 1,800 contracts.
    6. Open short positions in any gold call or put option contract reach 20 percent of the open short positions therein in the market; provided, this restriction does not apply to open short positions of the clearing member in calls or puts where less than 1,800 contracts.
    7. Total open positions in any single stock futures contract reach 20 percent of the total positions therein in the market; provided, this restriction does not apply where the clearing member's total open position is less than 20,000 contracts.
    8. Total open positions in any forex futures contract reach 20 percent of the total positions therein in the market; provided, this restriction does not apply where the clearing member's total open position is less than 1,800 contracts.
    9. Open short positions in any forex call or put option contract reach 20 percent of the open short positions therein in the market; provided, this restriction does not apply to open short positions of the clearing member in calls or puts where less than 1,800 contracts.
  3. Net position loss (the difference by which the net value in the clearing member margin account falls below the total margin for open positions) reaches 60 percent of the adjusted net capital amount.
  4. Clearing margin required for new positions exceeds the total amount of excess clearing margin.
    For the contracts listed in subparagraph 2 of the preceding paragraph, a market maker's open positions in futures and open short call or short put positions will not be counted in the clearing member's total open positions in the contracts.
Article 7     When the financial condition or open positions of a clearing member reach a warning or limit standard, the TAIFEX may adopt the following measures:
  1. A clearing member reaching a standard prescribed in Article 5 shall report to the TAIFEX on the same day.
  2. Where a clearing member reaches a standard prescribed in subparagraphs 1 to 3 of Article 6 or where any irregularity is found in its financial, business, or credit status, the TAIFEX may adopt the following measures:
    1. Adjust the amount of the clearing margin.
    2. Issue multiple intraday margin calls.
    3. Order liquidation of futures trading contracts in whole or in part.
    4. Suspend its handling of clearing and settlement business other than for disposal of existing transactions.
    5. Any other measures necessary to maintain market order or to protect futures trading.
  3. Where a clearing member reaches the standard specified in subparagraph 4 of Article 6, its handling of clearing and settlement business shall promptly be suspended other than for disposal of existing transactions. However, in the TAIFEX's after-hours trading session after the deadline for depositing the post-trading margin call amount for the regular trading session, if the clearing margin required for the newly added position of a clearing member exceeds the total amount of its excess clearing margin, the TAIFEX may provisionally refrain from restricting the clearing member from adding new positions, within an amount up to 20% of the excess clearing margin at the deadline for depositing the post-trading margin call for the regular trading session.
     In the circumstance specified in the proviso of subparagraph 3 of the preceding paragraph, the clearing member shall, before the close of the next regular trading session, file relevant documentation with the TAIFEX. The TAIFEX, after reviewing the documentation, may implement the measures listed below, except in circumstances where the clearing member's inability to deposit the clearing margin into the TAIFEX'S clearing margin account is the result of malfunction or disruption of the margin deposit equipment or communications system, or system maintenance or malfunction of the online banking system, or other force majeure event.
  1. Notify the clearing member to make corrections or improvements within a prescribed time limit.
  2. Impose a penalty of not less than NT$10,000 and not more than NT$50,000.
  3. Suspend the application to the clearing member of the proviso of subparagraph 3 of the preceding paragraph.
  4. Suspend the clearing member's handling of clearing and settlement business other than for disposal of existing transactions.
Article 8     The TAIFEX may adjust the standard ratios and amounts set forth in these Rules based upon domestic economic and financial conditions, the futures market, and the business status of clearing members or futures commission merchants.
Article 9     To conduct surveillance over various trading markets, the TAIFEX may, upon approval by the competent authority, enter into or amend cooperation contracts with relevant domestic or foreign exchanges or institutions regarding exchange of market information, technical cooperation, and assistance in investigations.
    Before engaging in market information exchange or investigation assistance with domestic or foreign exchanges or institutions under the preceding paragraph, the TAIFEX shall report to the competent authority for approval.
Article 10     If the TAIFEX discovers any abnormal event when executing market surveillance, in addition to taking necessary measures, it shall promptly collect relevant data and carry out analysis, investigation, and preparation of surveillance reports, and report to the competent authority within 5 days from the occurrence of the event.
    If the TAIFEX discovers any suspected criminal offense when executing market surveillance, it shall directly inform the judicial authorities and report to the competent authority for recordation.
    The TAIFEX shall periodically hold surveillance/supervision work meetings and compile analysis/review reports on the execution of market surveillance operation on a monthly basis and report the same to the competent authority for recordation by the tenth day of each month.
Article 11     The TAIFEX's market surveillance work shall be executed by a dedicated unit and full-time personnel. Information regarding market surveillance shall be kept confidential except where duly provided for necessary investigations by judicial authorities or relevant institutions.
Article 12     These Rules and any amendments hereto shall take force upon approval by the competent authority.