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Article 1     These Guidelines are adopted under Article 54, paragraph 3 and Article 93, paragraph 2 of the Operating Rules of the Taiwan Futures Exchange Corporation ("TAIFEX").
Article 2     A futures commission merchant ("FCM") or clearing member conducting operations in relation to the pledging of securities as margin collateral shall do so in accordance with these Guidelines as well as the Futures Trading Act and other relevant laws and regulations; matters not provided for herein shall be governed by relevant TAIFEX rules, regulations, public notices and circular letters.
Article 3     A clearing member conducting operations in relation to the pledging of securities as margin collateral shall be subject to the requirements of the competent authority relating to the type of eligible securities and the ratio of collateral securities to the total clearing margin requirement.
    An FCM conducting operations in relation to the pledging of securities as margin collateral shall be subject to the requirements of the competent authority relating to the type of eligible securities. The ratio of collateral securities to the total margin requirement (hereinafter, "collateral ratio") shall be determined by the TAIFEX and announced after submission to and approval by the competent authority.
    For the purposes of the collateral securities under the preceding two paragraphs, the type of eligible securities, the applicable haircut rate, the valuation method, the maximum amount in which any single kind of securities is allowed to be pledged toward margin collateral, and any other relevant matters shall be determined by the TAIFEX taking account of factors such as the volatility and risk of the particular securities on the market and announced after submission to and approval by the competent authority; the same shall also apply to any adjustment thereto.
Article 4     An FCM conducting operations in relation to the pledging of securities as margin collateral by futures traders shall enter into a brokerage contract or agreement with each futures trader specifying therein information at least in the following respects:
  1. The futures trader shall be entitled to any interest, dividends or other benefits, and shall pay any taxes and other relevant fees and expenses arising from the collateral securities.
  2. A statement that no collateral securities may be used other than to cover any margin requirement for the futures trader's open positions or new trades, or, with the written consent from the futures trader agreeing to the use of collateral securities by the FCM or clearing member, to cover any margin requirement for the clearing member's positions, and in the latter case a further statement that the futures trader agrees to any action taken by the TAIFEX to dispose of the collateral securities upon default by the clearing member.
  3. Delivery and withdrawal of collateral securities pursuant to Article 6, paragraph 1, and Article 11.
  4. For any securities used under Article 6, paragraph 2, subparagraph 3 or 5, the FCM shall be responsible for delivering securities of the same type when the futures trader makes a withdrawal request under Article 11.
  5. Withdrawal and disposal under Article 14.
    Where the futures trader agrees to the use of securities by the FCM or clearing member to cover any margin requirement for the clearing member's positions, as provided in subparagraph 2 of the preceding paragraph, the FCM shall give a prompt notice by electronic means to the TAIFEX and further submit a required filing to the TAIFEX disclosing the full content of the brokerage contract or agreement, together with a copy to the appointed clearing member.
Article 5     When an FCM conducts operations in relation to the pledging of securities as margin collateral by futures traders, if a futures trader agrees to the use of securities by the FCM or by a clearing member to cover any margin requirement for the clearing member's positions, the FCM shall open and maintain a margin account, to be specifically identified as a securities margin collateral account (hereinafter, "margin collateral account"), with a central securities depository ("CSD") or a clearing bank designated by the competent authority, so that any receipt, delivery, and custody of securities may be carried out through the margin collateral account for such purposes.
    The FCM shall, in accordance with Article14, paragraph 1, subparagraph 3 of the TAIFEX Operating Rules, file a notice with the TAIFEX advising of the margin collateral account it opens and maintains under the preceding paragraph and shall, in the margin collateral account opening agreement signed with the clearing bank designated by the competent authority, as described in the preceding paragraph, include a consent statement that the clearing bank may provide relevant information on the margin collateral account as required by the TAIFEX, or that when any of the circumstances under Article 75, paragraph 1 of the Futures Trading Act applies to the FCM, the TAIFEX may notify the designated clearing bank under the preceding paragraph to suspend withdrawal of securities by the FCM from the margin collateral account and further, as per instruction given by the TAIFEX, to transfer securities from the margin collateral account to an account designated by the TAIFEX.
Article 6     When an FCM conducts operations in relation to the pledging of securities as margin collateral by futures traders, if a futures trader, as under Article 4, paragraph 1, subparagraph 2 hereof, specifies that collateral securities may be used only to cover any margin requirement for its own open positions or new trades, the FCM shall transfer the collateral securities to the margin collateral account of the TAIFEX, or if the futures trader agrees to the use of such securities by the FCM or clearing member to cover any margin requirement for the clearing member's positions, the FCM shall transfer the collateral securities to the margin collateral account of the FCM and subsequently, when the clearing member pledges such securities with the TAIFEX to cover its clearing margin requirement, from the margin collateral account of the FCM to the margin collateral account of the TAIFEX.
    When the FCM receives a request from a futures trader to pledge securities as margin collateral, it shall instruct the futures trader to transfer securities into the margin collateral account of the FCM or of the TAIFEX in accordance with Article 53 of the TAIFEX Operating Rules and shall verify the transfer of securities into that account, and the collateral securities may not used for purposes other than any of the following, as may be specified or instructed by the futures trader:
  1. Use by the FCM to cover any margin requirement for the futures trader's open positions.
  2. Use by the FCM to cover any margin requirement when receiving any request from the futures trader to execute a new trade.
  3. Use by the FCM or clearing member to cover any margin requirement for the clearing member's positions, if so agreed by the futures trader.
  4. Use for physical delivery to settle a futures trading contract at maturity.
  5. Use by the FCM or clearing member for such other purposes as approved by the competent authority, if so agreed by the futures trader.
    If the FCM or clearing member makes use of securities under subparagraph 3 or 5 of the preceding paragraph, the FCM shall be responsible for delivering securities of the same type when the futures trader requests to withdraw securities.
Article 7     An FCM or clearing member shall maintain separate accounting records for the pledge of securities as margin collateral for its proprietary positions and for the conduct of operations in relation to the pledging of securities as margin collateral by futures traders
    An FCM pledging securities as margin collateral to cover its proprietary positions shall cause the securities to be transferred from its account to the margin collateral account of the TAIFEX.
Article 8     An FCM conducting operations in relation to the pledging of securities as margin collateral by futures traders shall execute the transfer of securities as follows:
  1. The FCM receiving a request to pledge securities as margin collateral shall notify the futures trader to transfer the securities into the margin collateral account of the FCM or of the TAIFEX pursuant to Article 6, paragraph 1 hereof and during the service hours in which the relevant CSD participant or clearing bank processes securities transfer requests.
  2. If a futures trader agrees to the use of securities by the FCM or clearing member to cover any margin requirement for the clearing member's positions, the FCM shall for such purposes transfer the securities into the margin collateral account of the TAIFEX during the service hours in which the relevant CSD participant or clearing bank processes securities transfer requests.
    The futures trader executing a transfer of securities under the preceding paragraph shall execute the transfer in accordance with the rules of the CSD, provided that stocks may be transferred only in thousands of shares, and that beneficial certificates s may be transferred only in the units prescribed as one trading unit by the TAIFEX or GTSM.br />     When the securities of a futures trader are delivered to the margin collateral account of the TAIFEX, if the TAIFEX settlement system receives confirmation of the transfer by 3:30 pm, the accounting date for the transfer shall be the current day, or if after 3:30 pm, the next day.
Article 9     The following provisions related to account reconciliation and regulatory filing operations shall apply to an FCM or clearing member conducting operations in relation to the pledging of securities as margin collateral by futures traders:
  1. If the collateral securities of a futures trader are transferred directly into the margin collateral account of the TAIFEX, the securities deposit information shall be transmitted by electronic means by the TAIFEX to the FCM or clearing member, and the FCM or clearing member may retrieve an electronic statement on the collateral securities on deposit with the TAIFEX, and print it out for future reference.
  2. If the FCM opens and maintains a margin account with a CSD or a clearing bank exclusively for the conduct of operations in relation to the pledging of securities as margin collateral, it shall establish and maintain a special ledger for the management of and detailed accounting for such operations, and shall reconcile accounts with the CSD, the clearing bank, and the TAIFEX respectively on a daily basis.
  3. The FCM or clearing member conducting operations in relation to the pledging of securities as margin collateral shall duly submit a filing to the TAIFEX reporting any accrued interest or monies account with respect to futures traders or to the FCM and any applicable withholding tax and other relevant information.
  4. If the collateral securities of a futures trader are transferred from the margin collateral account of the FCM to the margin collateral account of the TAIFEX, the FCM shall duly withhold any taxes attributable to the futures trader for any interest paid by the FCM to the futures trader on the collateral securities, and for any disposal of collateral securities by the FCM under Article14.
Article 10     An FCM conducting operations in relation to the pledging of securities as margin collateral by futures traders shall, with respect to a particular futures trader, use the daily marked-to-market value of the collateral securities or the margin required for the futures trader' open positions discounted by the collateral ratio, whichever is the smaller, as the collateral value of the collateral securities and then attribute the collateral value to the customer margin account equity amount with respect to the futures trader or the FCM.
    An FCM receiving a request from a futures trader to execute a new trade shall first, by the method under the preceding paragraph, conduct a preliminary calculation to obtain the sum of the collateral value of the futures trader's remaining securities not yet pledged as margin collateral and the futures trader's excess cash margin, and may accept the futures trader's request to pledge securities to cover the margin requirement for the new trade only when the sum thus obtained exceeds the margin requirement for the new position to be created.
    For a clearing member that conducts operations in relation to the pledging of securities as margin collateral, the equity amount of its clearing margin account shall be calculated as follows:
  1. If the collateral securities of a futures trader may only be used to cover any margin requirement for the futures trader's own open position or new trades, a calculation shall be made pursuant to the preceding two paragraphs based on the open positions of the futures trader.
  2. If a futures trader agrees to the use of securities by the FCM or clearing member to cover any margin requirement for the clearing member's positions, a calculation shall be made pursuant to the preceding two paragraphs based on the open positions of the clearing member after deduction of the open positions described in the preceding subparagraph.
    The marked-to-market value of the remaining securities of a futures trader that have been transferred into the margin collateral account of the FCM or of the TAIFEX and not yet pledged as margin collateral may not be attributed to the customer margin account equity amount with respect to the futures trader or the FCM.
    The marked-to-market value of the remaining securities of a futures trader that have been transferred into the margin collateral account of the TAIFEX and not yet pledged as margin collateral may not be attributed to the clearing margin account equity amount of the clearing member.
Article 11     The following shall apply with respect to an FCM handling requests from futures traders to withdraw collateral securities:
  1. A futures trader shall by 2 pm on any given business day submit a request to an FCM to withdraw any deposited collateral securities, and the FCM may accept the request only when it is satisfied that the equity amount of the customer margin account exceeds the required margin level with respect to that futures trader.
  2. An FCM shall, with the consent of the clearing member, by 2 pm on any given business day submit a request to the TAIFEX by electronic means, and the TAIFEX may accept the request only when it is satisfied that the clearing margin equity amount exceeds the required margin level with respect to the clearing member.
  3. If the requested securities of the futures trader have been directly transferred into the margin collateral account of the TAIFEX in accordance with the forepart of Article 6, paragraph 1 hereof, the TAIFEX shall at 9 am, 11 am, or 2 pm on the given business day, the time when all other requests of the same type are executed, transfer the requested securities to the account specified by the futures trader; if the requested securities of the futures trader have been transferred into the margin collateral account of the TAIFEX in accordance with the latter part of Article 6, paragraph 1, the TAIFEX shall at 9 am, 11 am, or 2 pm on the given business day, the time when all other requests of the same type are executed, transfer the requested securities to the margin collateral account of the FCM, and the FCM shall promptly transfer the securities to the account specified by the futures trader.
Article 12     When an FCM or clearing member conducts operations in relation to the pledging of securities as margin collateral, in the case of a stock where the issuer conducts a book closure as a result of capital reduction or statutory consolidation, the FCM or clearing member shall, beginning from the fifth business day before (counting inclusively of) the book closure date, provide margin collateral either in cash or with other securities, and the FCM shall notify all futures traders involved to make replacement or withdrawal, and may not accept any new request to pledge the stock to cover any margin requirement for open positions or new trades.
    When an FCM or clearing member conducts operations in relation to the pledging of securities as margin collateral by futures traders, in the case of a bond for which the maturity date or a principal installment payment date draws near, the FCM or clearing member shall, beginning from fifth business day before (counting inclusively of) the maturity date or principal installment payment date, provide margin collateral either in cash or with other securities, and the FCM shall notify all futures traders involved to make replacement or withdrawal, and may not accept any new request to pledge the bond to cover any margin requirement for open positions or new trades; notwithstanding, if the bond is not at maturity but only involves an installment payment of principal, the bond may still be used to cover margin requirements beginning from the next business day after the principal installment payment date.
    When a futures trader fails to make the withdrawal under the preceding paragraph, if the futures trader has a sufficient amount of cash margin, the TAIFEX or the FCM shall on the prior business day transfer the required amount into the futures trader's account, or if the futures trader does not have a sufficient amount of cash margin, the TAIFEX or the FCM shall use such money in the account as arises from the maturity of the bond or the installment payment of the principal portion of the bond, as the case may be, as cash margin as if such were deposited by the futures trader for that purpose.
    When an FCM or clearing member conducts operations in relation to pledge securities as margin collateral, if any securities are deposited that are not qualified securities, the FCM or clearing member shall execute the replacement and withdrawal operations under paragraph 1 or 2, as the case may be.
Article 13     When a futures trader settles a futures trading contract at maturity by physical delivery using any collateral securities on deposit in the margin collateral account of the TAIFEX, the FCM and the TAIFEX shall respectively verify the sufficiency of the equity amount in accordance with Article 11, subparagraphs 1 and 2 before they may process the delivery at maturity.
    An FCM or clearing member that deals with delivery at maturity under the preceding paragraph shall, within the required timeframe for the filing of account information with respect to the settlement of the futures trading contract at maturity, as determined under the TAIFEX Operational Key Points of Clearing and Settlement for Futures Commission Merchants and Clearing Members, submit an electronic filing to the TAIFEX indicating that the contract is to be exercised and settled with collateral securities on deposit in the margin collateral account of the TAIFEX as the underlying, and the TAIFEX shall thereupon transfer the underlying securities into the delivery account of the TAIFEX.
Article 14     If the equity amount of a futures trader's margin account is negative when the FCM closes out all of its futures trading contracts in accordance with the terms and conditions of the brokerage agreement between it and the FCM, and if the futures trader, upon receipt of a margin call from the FCM, fails to cover the shortfall in cash within three business days, the FCM may submit a request to the TAIFEX to withdraw the futures trader's securities, if on deposit in the margin collateral account of the TAIFEX, and transfer the same into the disposal account of the FCM, or the FCM may, if the futures trader's securities are on deposit in the margin collateral account of the FCM, directly transfer such securities into the disposal account of the FCM.
    The FCM submitting a request to the TAIFEX to withdraw securities under the preceding paragraph shall for that purpose duly submit a completed request form, together with relevant supporting documents. Notwithstanding, if the futures trader has agreed to the use of securities by the FCM or clearing member to cover any margin requirement for the clearing member's positions, the FCM shall obtain the consent of the clearing member.
    The FCM submitting a request to the TAIFEX to withdraw securities or directly transferring securities into its disposal account shall do so only for such a quantity and in such an amount as necessary for covering the negative balance of the equity amount of the futures trader's margin account.
    The FCM shall have a disposal account at a securities firm or a clearing bank in compliance with any relevant requirement, and shall complete the disposal of securities within three business days beginning from the day on which the securities are transferred into the disposal account. The disposal proceeds shall be attributed to the futures trader's margin account equity amount; if the equity amount of the futures trader's margin account remains negative after such disposal, or if the securities cannot be disposed of, an event-of-default report shall be filed immediately in accordance with Point 2 of the TAIFEX Rules for Futures Commission Merchants in Reporting Default by Principals.
Article 15     An FCM or clearing member conducting operations in relation to the pledging of securities as margin collateral shall pay such fees as fixed by the TAIFEX in its administration fee schedule.
    The schedule of administration fees under the preceding paragraph shall be adopted by the TAIFEX and submitted to the competent authority for approval.
Article 16     These Guidelines, and any amendments hereto, shall enter into force following the approval of the competent authority.