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1     These Procedures are specially promulgated in order to handle the suspension or termination of operations of futures commission merchants or clearing members, to guarantee the rights and interests of futures traders, and to maintain the stability and normal operation of the futures market.
2     Except where otherwise provided by law or regulation, futures commission merchants (FCMs) or clearing members suspending or terminating operations shall do so in accordance with these Procedures. Matters not provided for herein shall be handled in accordance with applicable rules, official letters, and public announcements of the Taiwan Futures Exchange Corporation (TAIFEX).
3     Where an FCM concurrently holds clearing member status, its clearing member status shall be suspended when the FCM suspends operations or terminated when the FCM terminates operations.
4     Handling of suspension of FCM operations:
  1. Matters to be handled by the FCM suspending operations:
    1. Suspension of futures brokerage merchant operations:
      1. In cases of application for suspension by the FCM itself:
        1. The FCM shall file with the TAIFEX 30 days prior to the planned date of suspension by submitting a letter of application for suspension along with the minutes of the board of directors meeting, which will be forwarded by the TAIFEX to the competent authority.
        2. At the time the FCM submits its application, it shall also post public notice of matters related to the suspension of operations at its place of business and immediately notify futures traders of related matters to be handled. If the FCM has engaged a securities firm to manage futures introducing brokerage business ("the authorized introducing broker") it shall at the same time notify the authorized introducing broker, which shall immediately post public notice at its place of business of matters related to the suspension of operations by the authorizing FCM and assist the FCM with notification of relevant futures traders. The public notice and notification to traders shall include the following:
          1. The date of suspension.
          2. Restrictions on trading, and regulations governing application for return of outstanding margins and the deadlines involved.
          3. Matters relating to handling transfers of positions, margins, and premiums.
          4. Names and pertinent information on other FCMs which have entered into contracts for succession with the FCM undergoing suspension (below, "successor FCMs").
          5. Regulations governing margin calls and closing out open positions after the transfer of accounts.
          6. Designated contact person and telephone number.
          7. Other necessary matters.
        3. Prior to transfer of the futures trader's positions, margins, and premiums to the successor FCM, an FCM shall execute margin calls and closing out of positions with respect to its futures traders as control procedures in accordance with the TAIFEX's rules for risk management.
        4. Where procedures have not been completed for settlement on a futures position at its expiration or for exercise of an option on a position, an FCM shall conclude procedures for settlement or exercise prior to suspension of operations.
        5. No later than 5 business days prior to the date of suspension, the FCM shall provide the successor FCM with an electronic file containing basic information on the trading accounts of those futures traders who have positions, margins, or premiums in their trading accounts as the basis on which the successor FCM may set up temporary trading accounts for the futures traders whose business has been transferred. The FCM shall negotiate with the successor FCM regarding the content and the deadline for the transfer, in written form, of the aforesaid information and of other information in written or electronic form in relation to the positions, margins, and premiums of the futures traders whose business is being transferred, and such information shall be transferred to the successor FCM prior to the date of suspension.
        6. Where there are positions, margins, or premiums in futures traders' trading accounts after market close of the regular trading session and account settlement on the last day of business prior to the suspension of operations, the FCM shall transfer written and electronic information on those traders' positions, margins, and premiums to the successor FCM, and after transfer, the successor FCM shall execute margin calls and closing out of positions as risk management procedures. The transfer of positions, margins, and premiums shall be carried out according to the methods set out in the operating rules of the TAIFEX governing clearing-related matters. Fees arising out of transfers shall be borne by the FCM making the transfers.
        7. Where an out-trade or account number correction results in a failure to complete procedures for a position prior to suspension of operations, the successor FCM shall handle the position on behalf of the FCM undergoing suspension, and the FCM undergoing suspension shall bear any fees or gains or losses associated therewith.
        8. Within two business days after the date of suspension, the FCM shall report the results of handling of positions and margins to the TAIFEX, which will forward the report to the competent authority.
      2. In cases where the FCM receives a disposition requiring suspension of operations:
        1. An FCM that is ordered to suspend operations shall immediately carry out matters relating to public announcement of suspension and required notifications. The provisions of "II" under "a." ("in cases of application for suspension by the FCM itself") of this Point 4 shall apply mutatis mutandis to determine the matters it is required to perform.
        2. Except where provided otherwise, from the fourth business day after receiving an order to suspend operations, an FCM may only accept trading orders from futures traders for offsetting positions, and shall carry out risk management procedures.
        3. Except where provided otherwise, the provisions of "V" under "a." ("in cases of application for suspension by the FCM itself") of this Point 4 shall apply mutatis mutandis with respect to the delivery of information futures traders' personal data in written or electronic form and to information on their positions, margins, and premiums.
        4. Where futures traders' accounts have positions, margins, or premiums after market close of the regular trading session and account settlement on the last day of business prior to the suspension of operations, the FCM shall transfer those traders' positions, margins, premiums, and related data in electronic and written form to the successor FCM, and after transfer, the successor FCM shall execute margin calls and closing out of positions as risk management procedures. Where the FCM additionally receives an order from the competent authority prior to the date of suspension requiring that it perform transfers, it shall perform the transfers within two business days after receiving the order except where it reports a legitimate reason to the competent authority and receives its approval. Positions, margins, and premiums shall be transferred according to the methods set out in the operating rules of the TAIFEX governing clearing-related matters. Fees arising out of the transfers shall be borne by the FCM making the transfer.
        5. Out-trades or account number corrections and positions that expire prior to suspension shall be handled in accordance with the mutatis mutandis application of the provisions of "IV" and "VII" under "a" ("in cases of application for suspension by the FCM itself") of this Point 4.
        6. Within two business days after the date of suspension, the FCM shall report the results of handling of positions and margins to the TAIFEX, which shall forward the report to the competent authority.
      3. FCMs receiving notice to transfer [accounts] due to the TAIFEX's disposition to suspend or terminate trading:
        When an FCM receives a disposition by the TAIFEX requiring suspension or termination of trading, the TAIFEX may notify the FCM to carry out transfers of its futures traders' accounts. Matters to be carried out by the FCM being notified to make transfers shall be determined by the mutatis mutandis application of those matters specified in "b." above for cases where the FCM receives a disposition requiring suspension of operations.
    2. Suspension of futures proprietary merchant operations:
      1. A futures proprietary merchant that applies for suspension itself shall apply to the TAIFEX 30 days prior to the planned date of suspension by submitting a letter of application for suspension along with the minutes of the board of directors meeting, which will be forwarded by the TAIFEX to the competent authority.
      2. A futures proprietary merchant that applies for suspension itself may only engage in trading for the purpose of offsetting positions as of the first business day following the date of application; a futures proprietary merchant not applying for suspension itself may only engage in trading for the purpose of offsetting positions from the date of receipt of the disposition [ordering suspension].
      3. Except where otherwise provided or with approval from the competent authority after reporting legitimate reasons for same, a futures proprietary merchant shall close out all positions prior to the date of suspension. When necessary, the TAIFEX may designate a clearing member to close out positions on their behalf, with fees arising out of said procedure to be borne by the futures proprietary merchant undergoing suspension.
  2. Matters to be carried out by the successor FCM:
    1. The successor FCM shall set up temporary trading accounts for each of the futures traders belonging to the FCM making the transfers on the basis of the information provided on their accounts, and shall complete uploading of the traders' account opening information within the time period prescribed by the TAIFEX. The successor FCM shall with all due haste provide the transferring FCM with information in electronic form on the temporary trading accounts in order to facilitate handling of subsequent transfer matters.
    2. After completion of the transfers, the successor FCM may only accept trading orders through temporary trading accounts for closing out positions.
    3. Futures traders who have been transferred and have opened a trading account at the successor FCM may apply to adjust the positions in their temporary accounts to the newly opened trading accounts.
    4. Any gains, losses or fees from handling of out-trades or account number corrections by the successor FCM [on behalf of the FCM undergoing suspension] shall be borne by the FCM making the transfers.
    5. A refund of the outstanding margin of a futures trader who is transferred may only be made in accordance with the trader's application after the successor FCM has completed calculation of the margin in the given account or after a given trader has produced documentary evidence that is confirmed to be correct.
    6. The successor FCM shall differentiate materials arising out of transfer procedures it performs by adding the notation "transferred by _________ company" and shall place them in custody in accordance with the provisions of the Schedule of Periods of Custody of Forms and Receipts by Futures Commission Merchants and Clearing Members.
    7. The successor FCM shall, within one month of the transfer operations in the succession, report to the TAIFEX on the status of the transfer operations, and the report shall be forwarded by the TAIFEX to the competent authority.
    8. The successor FCM shall keep proper custody of materials delivered to it by the FCM undergoing suspension, and shall return those materials within three business days of resumption of operations by that FCM.
  3. Where an FCM has Taiwan Futures Exchange clearing member status, in addition to carrying out the matters set forth under "1." and "2." of this point, it shall also carry out the matters set forth under Point 6.
5     Handling of termination of FCM operations:
  1. Matters to be carried out by the FCM undergoing termination of operations:
    1. Matters to be carried out by the FCM undergoing termination of operations shall be determined by the mutatis mutandis application of the items listed in the provisions under Point 4 pertaining to matters to be carried out by the FCM undergoing suspension of operations. However, in the case of an application for termination of operations by a futures proprietary merchant that is a non-surviving entity of a merger or consolidation, the restrictions of Point 4(1)(B)(b) and (c) need not be applied.
    2. The FCM undergoing suspension of operations shall return the following documents to the TAIFEX:
      1. Contract for use of the centralized futures market.
      2. Contract for computer linkup to the centralized futures market.
      3. Contract for use of trading information.
    3. If an FCM's head office is merged or consolidated, its business is assigned, or its branch office undergoes termination of operations (including having its business permit voided), it shall submit the following documents to the competent authority through the TAIFEX to seek approval:
      1. Employee placement plan.
      2. Minutes of consultation meetings between the company and the corporate union or of labor-management meetings (applicable to FCMs without a corporate union).
      3. Other documents required by the competent authority.
  2. Matters to be carried out by the successor FCM:
    Matters to be carried out by the successor FCM shall be determined by the mutatis mutandis application of the items listed in the provisions under Point 4 pertaining to matters to be carried out by the successor FCM.
  3. Where the successor FCM has Taiwan Futures Exchange clearing member status, it shall, in addition to carrying out matters under "1." and "2." of this point, shall also carry out matters under Point 7.
6     Procedures for handling suspension of clearing and settlement business by a clearing member:
  1. Matters to be carried out by the clearing member undergoing suspension of clearing and settlement operations (below, "suspension"):
    1. A clearing member that applies for suspension itself shall apply to the TAIFEX 30 days prior to the planned date of suspension by submitting a letter of application for suspension along with the minutes of the board of directors meeting.
    2. Except for individual clearing members, the clearing member shall immediately notify the FCM engaged for clearing operations and shall assist it in carrying out related matters.
    3. A clearing member that applies for suspension of operations itself shall carry out transfer of positions, margins, and premiums on which it performs clearing to the successor clearing member after market close of the regular trading session on the business day prior to the date on which suspension takes place; a clearing member otherwise undergoing suspension shall carry out transfer of positions, margins, and premiums on which it performs clearing to the successor clearing member within a stipulated period of time.
    4. Prior to the time at which the clearing member performs transfers, an FCM for which the clearing member performs clearing may apply to the TAIFEX to transfer its positions, margins, and premiums to such other clearing member as it shall designate, provided that it shall do so in accordance with the TAIFEX's Points for Attention by Futures Commission Merchants Changing Consigned Clearing Members. The clearing member undergoing suspension shall assist in carrying out the transfers.
    5. When procedures have not been completed for settlement on an expiring futures position or where exercise of an option on a position is required, the clearing member shall complete settlement procedures and exercise of options prior to the suspension. When necessary, the TAIFEX may request another clearing member with which the clearing member has a contract for succession or another clearing member designated by the TAIFEX (below, "successor clearing member") to carry out the procedures on its behalf.
  2. Matters to be carried out by the successor clearing member:
    1. The successor clearing member shall immediately enter into consignment contracts for clearing and settlement operations with FCMs whose accounts have been transferred to it, and shall submit the clearing and settlement fund within the period specified by the TAIFEX.
    2. When necessary, the successor clearing member shall carry out the following at the instructions of the TAIFEX:
      1. Performing final settlement of the suspended clearing member's proprietary positions.
      2. Performing final settlement of the suspended clearing member's client positions.
      3. Any procedures not yet completed by the suspended clearing member in regard to settlement on an expiring futures position or where exercise of an option on a position is required.
      4. Other matters [as instructed by the TAIFEX].
    3. The successor clearing member shall keep proper custody of materials delivered to it by the clearing member undergoing suspension, and shall return those materials within three business days of resumption of operations by that clearing member.
7     Handling of termination of clearing and settlement operations by a clearing member:
  1. Matters to be undertaken by the clearing member terminating clearing and settlement operations (below, "termination of operations):
    1. A clearing member which applies for termination of operations itself shall apply to the TAIFEX for revocation of its clearing member status 30 days prior to the business day on which suspension of operations is planned by submitting the minutes of the board of directors meeting, an application for revocation of clearing member status, its clearing and settlement contract, and its certification of clearing member status. Those otherwise undergoing termination of operations shall return the clearing and settlement contract and the certification of clearing member status within a period of time as notified by the TAIFEX.
    2. Matters to be carried out by the clearing member undergoing termination of operations shall be determined by the mutatis mutandis application of the items under Point 6 with respect to matters to be carried out by a clearing member undergoing suspension.
    3. [Application for] return of the clearing and settlement fund:
      1. The clearing member must first wind up and settle clearing and settlement operations in connection with the TAIFEX's centralized trading market and perform final settlement of all account matters prior to application for refund.
      2. The clearing member shall immediately give public notice that any claims by futures creditors shall be made within 30 days. Where that period has passed without opposition, it may apply to the TAIFEX for refund by attaching an undertaking.
  2. Matters to be carried out by the successor clearing member:
    Matters to be carried out by the successor clearing member shall be determined by the mutatis mutandis application of the items under Point 6 with respect to matters to be carried out by a successor clearing member.
8     The foreign futures trades of an FCM that engages in trading of foreign futures while also trading on the TAIFEX's market shall be handled at the time of suspension or termination of its operations through the mutatis mutandis application of the provisions of Point 4 and Point 5, provided that where the competent authority or the foreign futures exchange separately provides for the handling of such trades, their provisions shall apply. The FCM shall provide timely notification to other FCMs involved with the rebrokering of its foreign futures trades and shall cooperate in carrying out transfer of the related positions, margins, and premiums and other related matters.
9     Procedures for handling suspension or termination of business operations of an FCM engaging in rebrokered foreign futures trades
An FCM engaging in rebrokered foreign futures trades ("rebrokering FCM") shall carry out the following matters when it undergoes suspension or termination of its operations, provided that where the competent authority or the foreign futures exchange separately provides for such an occurrence, their provisions shall apply:
  1. In cases of application for suspension or termination by the FCM itself:
    1. The content of the report of suspension or termination of operations and of notifications to the FCMs who have engaged it to handle foreign futures trades shall be determined by mutatis mutandis application of the relevant provisions of "I" and "II" under "a" ("in cases of application for suspension by the FCM itself") of the Point 4 provisions regarding matters to be carried out in suspension of futures brokerage merchant operations.
    2. A rebrokering FCM undergoing suspension or termination of its operations shall assist the FCMs who have engaged it to handle foreign futures trades with the transfer of positions, margins, and premiums, the liquidation of positions, or the withdrawal of margins or premiums.
    3. The rebrokering FCM shall transfer the positions, margins, and premiums of the FCMs who had engaged it to handle foreign futures trades, along with related information, to the successor FCM prior to the date of suspension or termination of operations. Risk management and control prior to transfer, settlement of futures positions at expiry, and exercise of options shall be handled by mutatis mutandis application of the provisions of "III" and "IV" under "a." ("in cases of application for suspension by the FCM itself") of the Point 4 provisions regarding matters to be carried out in suspension of futures brokerage merchant operations.
  2. In cases where the FCM receives a disposition requiring suspension or termination of operations:
    1. A rebrokering FCM that receives an order from the competent authority to suspend or terminate operations shall immediately notify the FCMs who had engaged it to carry out foreign futures trades. The content of the notifications shall be determined by mutatis mutandis application of the relevant provisions of "II" under "a." ("in cases of application for suspension by the FCM itself") of the Point 4 provisions regarding matters to be carried out in suspension of futures brokerage merchant operations.
    2. Except where otherwise instructed by the competent authority, the deadlines for the transfers to be made by the rebrokering FCM and provisions for other matters it is required to carry out shall be determined by mutatis mutandis application of the provisions of "B" and "C" under "1." ("in cases of application for suspension or termination by the FCM itself") of this Point 9.
    3. Matters to be carried out by the successor FCM:
      Following completion of transfer matters, the successor FCM shall engage in rebrokering of foreign futures trades in accordance with the rules and regulations of the competent authority and the relevant foreign futures exchanges.
10     These Procedures and any amendment thereto shall be publicly announced and implemented following submission to and approval for recordation by the competent authority.