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Title: Taiwan Futures Exchange OTC Derivative Clearing Operating Rules
Date: 2020.10.21 ( Amended )

Article Content

 
Chapter 1 General
Article 1     (Legal basis)
    These Rules are prescribed in accordance with Article 47 of the Futures Trading Act.
Article 2     (Regulatory compliance)
    In addition to relevant laws and regulations and the Articles of Incorporation, TAIFEX's over-the-counter (OTC) derivatives clearing must be conducted in accordance with these Rules.
Article 3     (Competent Authority)
    The Competent Authority referred to in these Rules shall be the Financial Supervisory Commission.
Article 4     (Definitions)
    The following terms used in these Rules are defined as follows:
  1. OTC Derivatives: Refers to transactions types defined in article 3, Paragraph 1 of the Futures Trading Act and are not traded on the futures exchange.
  2. Transactions: Refers to OTC derivatives transactions that comply with TAIFEX's rules and may be cleared at TAIFEX in line with the eligibility criteria defined in TAIFEX's procedures.
  3. Cleared Transaction: Refers to a trading transaction that was submitted to TAIFEX and accepted for clearing.
  4. Position: Refers to the cleared transaction in each clearing account of a clearing member and client of clearing member.
  5. Clearing Member: Refers to Financial institutions that signed a clearing agreement with TAIFEX to participate in clearing operations.
  6. Client: Refers to an entity that has signed a client clearing agreement with a clearing member to entrust the clearing of their transactions at TAIFEX.
  7. Clearing Operation: Refers to the clearing of OTC derivatives between TAIFEX and clearing members, including submitting transactions for clearing, netting, compression, settlement amount payment, mark-to-market, margin calculation & payment, and default management.
  8. Business Day: Refers to a business day of domestic banks.
  9. Clearing Agreement: Refers to an agreement signed between a clearing member and TAIFEX to participate in clearing operations.
  10. Client Clearing Agreement: Refers to the agreement signed between a clearing member and its client to provide client clearing services.
  11. OTC Derivatives Default Fund: Refers to the fund contributed to by clearing member to fulfill settlement obligation for conducting clearing operation at TAIFEX.
  12. Proprietary Account: Refers to the account for positions and margins of a clearing member.
  13. Individual Client Account: Refers to the account for positions and margins of a clearing member's client.
  14. Daily Settlement Type: Refers to TAIFEX calculates changes in the net present value of cleared transactions each day, and divides cleared transactions into the following types:
    1. Collateralized-To-Market (CTM): Refers to the same amount of variation margin as losses from valuation each business day for this type of transactions is transferred as collateral for the obligation to pay losses.
    2. Settled-To-Market (STM): Refers to an amount corresponding to the mark-to market resulting from valuation of this type of transaction is collected each business day to settle the exposure, and the net present value payable each day is reset to zero
  15. Approved Trade Affirmation Platform: Refers to the market infrastructure systems approved by TAIFEX and listed in TAIFEX's procedures.
  16. ISDA: Refers to International Swaps and Derivatives Association,Inc.
  17. ISDA Master Agreement: Refers to the 1992 ISDA Master Agreement (including Schedule), 2002 ISDA Master Agreement (including Schedule), 1987 ISDA Interest Rate Swap Agreement (including Schedule) or 1987 ISDA Interest Rate and Currency Exchange Agreement (including Schedule) and other agreements prescribed by TAIFEX.
  18. ISDA Definitions: For interest rate transactions, this refers to the 2000 ISDA Definitions, 2006 ISDA Definitions, or ISDA 2008 Inflation Definitions. For foreign exchange transactions, this refers to the 1998 FX and Currency Option Definitions and other agreements prescribed by TAIFEX.
  19. EMTA Template: Refers to the currency transaction template issued by the Emerging Markets Trading and Investment community.
  20. Backload Transaction: Refers to a transaction that is submitted to TAIFEX for clearing more than one business day after the trade date.
  21. Termination: Refers to the cleared transaction being terminated before maturity.
  22. Netting: Refers to the offsetting of multiple cleared transactions with the same economic terms, in order to reduce the number of transactions or the transaction's notional amount.
  23. Compression: Refers to the termination of some or all cleared transactions and simultaneously generating a cleared transaction with the same net future cash flow to reduce the number of transactions or notional amount.
  24. Clearing Margin: Refers to the margin deposited by a clearing member at TAIFEX to fulfill their settlement obligations.
  25. Client Margin: Refers to the margin deposited by client at a clearing member to fulfill settlement obligation.
  26. Required Clearing Margin: Refers to the margin required by TAIFEX to be deposited by clearing members, including initial margin and additional margin.
  27. Initial Margin: Refers to the margin required by TAIFEX to cover the potential future exposure of positions in the proprietary accounts' or individual client accounts of clearing members.
  28. Additional Margin: Refers to TAIFEX may require margin from clearing members based on the market situation or the clearing member's position(s) or credit status and other situations deemed necessary by TAIFEX. Clearing members may require margin from clients based on clients' credit status and nature of transaction.
  29. Variation Margin: Refers to the collateral exchanged between TAIFEX and clearing members or between clearing members and clients to meet payment obligations relating to changes in the net present value of CTM cleared transactions resulting from daily valuations.
  30. Mark-To-Market Difference: Refers to the amount payable to or receivable by TAIFEX and clearing members or between clearing members and clients to settle changes in the net present value of STM cleared transaction each day.
  31. Price Alignment Interest (PAI): Refers to the interest amount calculated each day for CTM cleared transaction on the cumulative variation margin at the end of the day.
  32. Price Alignment Amount (PAA): Refers to the interest amount calculated each day for STM cleared transaction on the cumulative mark-to-market difference at the end of the day.
  33. Valuation Curve: Refers to any of the following: forward rate curve, discount rate curve, and forward exchange rate curve calculated by TAIFEX.
  34. Intra-day: Refers to the time period between start and end of day that TAIFEX accepts OTC derivatives for clearing each business day.
  35. End Of Day: Refers to the time that TAIFEX no longer accepts OTC derivatives for clearing each business day.
  36. Settlement Amount: Refers to the amounts payable or receivable between TAIFEX and clearing members according to the cleared transaction and TAIFEX rules, such as coupon settlement of interest rate swaps, mark-to-market difference, PAA, variation margin, PAI, and other receivables relating to cleared transactions.
Chapter 2 Clearing member
Article 5     (Agreement signing by clearing member)
    Participants in clearing operations of the TAIFEX shall enter into a clearing agreement with the TAIFEX and obtain clearing member qualification.
Article 6     (Types and qualifications of clearing member, and procedures for application, membership conversion, and cancellation)
    Clearing members of TAIFEX are limited to financial institutions, which can elect to be one of the following two types based on the scope of their clearing activities:
  1. Individual Clearing Member: Handles the clearing of proprietary OTC derivatives.
  2. General Clearing Member: Handles the clearing of proprietary and client OTC derivatives.
    The qualifications of clearing members and the procedures for application, membership conversion, and cancellation in the preceding paragraph shall be prescribed by TAIFEX, and membership criteria shall be submitted to the Competent Authority for approval.
Article 7     (Clearing member is required to contribute to the OTC derivatives default fund prior to engaging in clearing services)
    Clearing members must contribute to the OTC derivatives default fund before their membership becomes effective, and will only qualify as a clearing member after both TAIFEX and the clearing member have signed the clearing agreement.
Article 8     (Obligations of clearing member)
    Clearing members must comply with the following:
  1. The Clearing agreement, and other regulations and announcements. The same applies to any future amendment(s).
  2. Clearing members must perform their clearing, settlement and related obligations.
  3. Pay clearing processing fees, contribute to the OTC derivatives default fund, and pay other fees before the deadline prescribed by TAIFEX.
  4. Properly preserve daily clearing and settlement records for all proprietary and client positions, and prepare financial statements and other reports according to TAIFEX's published procedures.
  5. Continue to meet the clearing membership criteria prescribed by TAIFEX.
  6. Clearing members must keep entrusted information confidential and secure unless required by the law or required by TAIFEX in accordance with the rules.
  7. Pursuant to the rules and regulations of clearing operations prescribed by the Competent Authority and TAIFEX, clearing members shall have internal control system in place and will execute it accordingly.
  8. Other matters as required by TAIFEX.
Article 9     (Conditions for termination of the clearing agreement)
    If any of the following circumstances exist with respect to a clearing member, TAIFEX may terminate its clearing agreement, and handle the matter according to Article 54 of the Futures Trading Act:
  1. A relevant authority has revoked the clearing member's company registration or dissolved the clearing member.
  2. The Competent Authority has issued an instruction revoking the clearing member's operation license.
  3. The clearing member has been pronounced bankrupt by a final court ruling.
  4. The clearing member fails to perform clearing and settlement obligations.
  5. The clearing member violates a law or regulation or continues to fail to comply following imposition of an administrative instruction by the Competent Authority based on a law or regulation.
  6. The clearing member violates the Articles of Incorporation or Operating Rules of TAIFEX, or other rules or regulations, where the circumstances are deemed severe by TAIFEX.
  7. The clearing member's clearing or settlement practices violate good faith and integrity in a manner sufficient to harm others.
  8. The clearing member is unable to maintain compliance with TAIFEX's membership criteria and, following an inquiry by TAIFEX and the setting of a deadline for improvement, the clearing member fails to implement improvements or continues to fall short of criteria after implementing improvements.
Article 10     (Clearing members are required to meet all their client obligations and to report any client failures that could or have led to a default of their client)
    If a client does not fulfill its settlement obligations to the clearing member, the clearing member is required to fulfill its settlement obligations to TAIFEX.
    Clearing members must immediately report client default to TAIFEX if a client fails to fulfill its settlement obligations. TAIFEX may require the clearing member to provide related documents detailing the client default.
    Clearing members may take the following relevant measures in the event its client fails to fulfill its settlement obligations:
  1. Suspend the client from submitting its transactions for clearing.
  2. Suspend the client from withdrawing cash or securities.
  3. Apply to TAIFEX for position transfer of the client's cleared transactions to its proprietary account.
  4. Other relevant measures agreed in the client clearing agreement.
Article 11     (Matters to be reported by clearing members)
    Clearing member must report the following conditions to TAIFEX:
  1. Suspending, resuming, or terminating operations.
  2. Commencing, adding, changing, or terminating clearing operations.
  3. Opening, changing, or terminating client's clearing margin account.
  4. If the clearing member or its board members, supervisor(s), manager(s), associated person(s), or other employees become involved in litigation or arbitration relating to clearing operations, become the debtor in compulsory enforcement, or the clearing member becomes bankrupt, has dishonored checks or another bank has refused to do business with it.
  5. The clearing member's board members, supervisor(s), manager(s), or associated person(s)have any conditions specified in Article 28 of the Futures Trading Act.
  6. There is factual evidence that the board member(s), supervisor(s), manager(s), or associated person(s) had engaged in or been involved in other dishonest or improper activities, and is unsuitable for engaging in OTC derivatives clearing.
  7. The clearing member's board members, supervisor(s), manager(s), associated person(s), or other employees violate the Futures Trading Act or orders issued by the Competent Authority in accordance with the Futures Trading Act.
  8. Changes in shares held by the clearing member's board members, supervisor(s), manager(s), or shareholder(s) with more than 10% shares.
  9. Changes in financial ratios or other material events that affect the clearing member's financial structure and must be reported to the local competent authority or other authorities in accordance with foreign laws.
  10. Other matters to be reported as required by TAIFEX.
    Clearing members must report the matters specified in subparagraphs 1 and 2 of the preceding paragraph in advance. Clearing members must report the matters specified in subparagraphs 3-7 within 5 business days from the day they become aware or the day of occurrence. Clearing members must prepare a report on the matters specified in subparagraph 8 and submit the report before the 15th of the following month. For the matter specified in subparagraph 9, clearing members must also inform TAIFEX when they are notifying the foreign clearing houses and relevant competent authorities in any jurisdiction.
Article 12     (Clearing member accounting books preparation, maintenance, and inspection)
    Clearing members must make available the certificates, invoices, accounting books, books of forms, records, transactions, and related documentary proof related to clearing at its business premises.
    TAIFEX may engage onsite inspection or inquire about the certificates, invoices, accounting books, books of forms, records, transactions, and related documentary proof in the preceding paragraph, and clearing members may not evade or refuse the inspection or inquiry.
    Unless otherwise stipulated by the Business Entity Accounting Act, the retention period for certificates, invoices, accounting books, books of forms, records, transactions, and related documentary proof in the preceding paragraph shall be prescribed by TAIFEX.
    When necessary, TAIFEX may request clearing members to provide financial and business information related to clearing operations and publicly disclose the information.
Article 13     (Prohibition of false statements)
    Clearing members are prohibited from making false statements to TAIFEX.
Chapter 3 Account segregation and client clearing operations
Article 14     (TAIFEX offers separate accounts for clearing members and clients)
    TAIFEX will record the following items each day in the proprietary and individual client accounts of clearing members, in order to document the positions and margins of clearing members:
  1. The quantity and specifications of cleared transactions.
  2. Calculation and payment of fixed/floating rate interest agreed in cleared transactions.
  3. Calculation and payment of clearing margin.
  4. Calculation and payment of variation margin, mark-to-market difference, PAI, and PAA of cleared transaction.
  5. Balance of clearing margin.
  6. Margin call or withdrawal.
  7. Other payments that are part of the cleared transaction or required by TAIFEX.
    Each of the preceding account types must be designated with a daily settlement type. Separate accounts must be kept to distinguish proprietary and individual client accounts, and record whether the clearing member and its client agree to deposit all margin to TAIFEX. Unless otherwise stipulated by Rules, margins and funds are segregated between proprietary and individual client accounts.
    Clearing members may only use an account to submit a transaction to TAIFEX for clearing from one business day after an account is opened.
Article 15     (Client accounts opened by clearing member)
    Clearing members must separately open proprietary and individual client accounts and record the positions and margins described in the preceding article each day.
    When clearing members open or amend any details relating to proprietary or individual client accounts, they must report it to TAIFEX in accordance with TAIFEX's rules.
    Unless otherwise stipulated by TAIFEX, clearing members may only change the daily settlement type of clearing accounts from CTM to STM in accordance with instructions prescribed by TAIFEX.
Article 16     (Segregation of TAIFEX Assets and margins of clearing member)
    For the deposit, payment, and disposal of funds and securities between TAIFEX and clearing members, TAIFEX may open dedicated accounts for margins at settlement banks or other institutions, in order to separate deposit margins of clearing member and assets of TAIFEX.
    With regard to the dedicated accounts for margins in the preceding paragraph, TAIFEX will separately record the amount or type and quantity of margins in proprietary and client accounts of clearing members each day, so that clearing members may check their balance.
Article 17     (Segregation of Clearing member margins in proprietary and client accounts)
    For the delivery of funds and securities with TAIFEX, clearing members shall open an "OTC derivatives proprietary clearing margin account" and "OTC derivatives client clearing margin account" at the settlement bank or other institution designated by TAIFEX, to segregate proprietary margins and client margins and make payments.
    Clearing members may not overdraw, apply a guarantee, or exercise other rights over the deposits or securities in the OTC derivatives client clearing margin account, and may not divert the funds to cover the margins, clearing fees, commission, processing fees, or shortfall of other clients or the clearing members proprietary account.
Article 18     (Segregation of Clearing member Assets from client assets)
    For the deposit, payment, and disposal of funds and securities with clients, clearing members shall open "OTC derivatives client margin accounts" at the institution designated by the Competent Authority to deposit client margins and segregate the margins from their assets.
    Clearing members must manage the deposits or securities in OTC derivatives client margin accounts in accordance with Paragraph 2 of the preceding Article.
Article 19     (Clearing member covers with its own funds any shortfall in its client's margin obligation)
    If the margin in an individual client account is less than the requirement prescribed by TAIFEX and the client has not provided the clearing member with funds within the specified period, the clearing member shall deposit its own funds at TAIFEX to meet the margin requirement.
    The period for making deposits in the preceding paragraph shall be separately prescribed by TAIFEX.
Article 20     (Client Clearing Agreements reporting and matters to be specified on agreements)
    Clearing member must comply with the following provisions when engaging in client clearing operations:
  1. Sign a client clearing agreement with the client.
  2. Obtain a written statement from the client stating that the client fully understands clearing related matters, and will comply with the client clearing agreement and relevant TAIFEX's rules.
    Clearing members must not violate the client clearing agreement when engaging in clearing operations.
    The client clearing agreement in Subparagraph 1 of Paragraph 1 must cover the following matters:
  1. The name of the clearing member and client.
  2. The transactions eligible for clearing.
  3. Clearing and settlement of cleared transaction.
  4. Client margin deposit, withdrawal, margin call and whether or not all margin is deposited to TAIFEX.
  5. When a client violates the client clearing agreement, limitations on clearing and settlement and disposal of the client's margin and cleared transaction.
  6. When a clearing member is declared bankrupt or is liquidated or TAIFEX suspends that member's clearing operations or terminates the clearing agreement, disposal of client margins in TAIFEX clearing accounts and cleared transactions.
  7. Termination of the client clearing agreement and disposal of client margins and cleared transaction.
  8. Clearing related fees.
  9. Other matters to be recorded as required by TAIFEX.
    The clearing members must deliver the written statement in Subparagraph 2 of Paragraph 1 to TAIFEX within three business days after signing the client clearing agreement with the client.
Article 21     (Matters to be handled before the clearing agreement between a clearing member and TAIFEX is terminated)
    Before the clearing agreement between a General Clearing Member and TAIFEX is terminated, the clearing member must first handle client margins and cleared transactions in accordance with client clearing agreements and TAIFEX rules, and terminate executed client clearing agreements.
Article 22     (Reporting the termination of client agreements)
    When a clearing member and client agree to terminate their client clearing agreement, unless otherwise stipulated by TAIFEX, the clearing member must notify TAIFEX in writing 10 business days before the agreement is scheduled to be terminated.
Chapter 4 Cleared transaction(s)
Article 23     (Proprietary and client transactions must be submitted for clearing on the approved affirmation platforms)
    Transactions accepted for clearing by TAIFEX are one of the following two types:
  1. Proprietary transactions of clearing member
  2. Client transactions of clearing member
    Unless otherwise stipulated by TAIFEX, transactions in the preceding paragraph must be submitted for clearing through the approved trade affirmation platforms within the specified period.
    The approved trade affirmation platforms, operating procedures and the specified period for submitting transactions for clearing shall be separately prescribed by TAIFEX.
Article 24     (Transactions must comply with ISDA's IRS and NDF definitions.)
    Unless otherwise stipulated, transactions cleared by TAIFEX must be:
  1. Interest rate swaps (IRS) that comply with ISDA Definitions and TAIFEX's transaction specifications.
  2. Non-deliverable forwards (NDF) that comply with ISDA Definitions, EMTA templates and TAIFEX's transaction specifications.
    Changes to ISDA Definitions or EMTA templates in the preceding paragraph must become applicable after being announced by TAIFEX.
    Transaction specifications in Paragraph 1 shall be separately prescribed by TAIFEX.
Article 25     (Time for submitting transactions for clearing and cancellation before a transaction is accepted by TAIFEX)
    Unless otherwise stipulated, the hours that transactions are accepted by TAIFEX for clearing is from 9:00 to 17:00 during business days.
    An application to cancel or change transactions may be submitted to TAIFEX before clearing.
    TAIFEX may change the hours in Paragraph 1 when TAIFEX deems necessary.
Article 26     (Transactions must comply with transaction specifications)
    Transactions must comply with the following rules before being accepted by TAIFEX for clearing:
  1. The transaction must comply with Article 24.
  2. Clearing members verify that it accepted the clearing transaction and deposited a margin in accordance with Article 31.
  3. TAIFEX makes a margin call and the clearing member deposits the amount within the specified period.
  4. The submission date or the following business day must not be a payment date.
    TAIFEX may suspend or reject the transaction that meets the conditions in the preceding paragraph when it deems necessary.
    After a transaction submitted for clearing is checked by TAIFEX according to Paragraph 1, TAIFEX will notify the clearing member if the clearing transaction was accepted or rejected.
Article 27     (Novation procedures for transactions)
    After TAIFEX accepts a transaction for clearing, the clearing member that is a party to the transaction will enter into a cleared transaction with TAIFEX, and the economic terms of the cleared transaction will be the same as the transaction.
    After TAIFEX accepts a transaction which is client transactions of clearing member for clearing, the clearing member that is a party to the transaction will enter into a cleared transaction with its client in accordance with the agreement of the client clearing contract and the economic terms of the cleared transaction will be the same as the transaction.
    When the cleared transaction in the preceding paragraph is novated, the original transaction is deemed to be terminated. These Rules, other regulations, announcements, notices, the ISDA Master Agreement, ISDA Definitions, and EMTA templates are applicable to the economic terms of the cleared transaction.
    Changes to the ISDA Master Agreement, ISDA Definitions or EMTA templates in Paragraph 3 shall become applicable after being announced by TAIFEX.
    Where these Rules, other regulations, announcements, or notices contradict the ISDA Master Agreement, ISDA Definitions, or EMTA templates, these Rules, other regulations, announcements, or notices must prevail.
Article 28     (Backload)
    A backload transaction means that the date a transaction is submitted to TAIFEX for clearing is one or more business day(s) greater than the trade date.
    A backload transaction must be submitted to TAIFEX via an approved affirmation platform within the hours specified in Article 25, Paragraph 1, and operating procedures shall be separately prescribed by TAIFEX.
Article 29     (Unless otherwise stipulated by TAIFEX, the contents of a cleared transaction may not be changed and cleared transactions may not be terminated)
    Change or termination of a cleared transaction is only allowed under any one of the following circumstances:
  1. Position transfer.
  2. Netting.
  3. Compression.
  4. Default Management.
  5. Other situations that comply with TAIFEX's rules.
    Unless otherwise stipulated by TAIFEX, position transfer in the preceding paragraph must be limited to the following:
  1. Transfer between different individual client accounts belonging to the same client at the same clearing member.
  2. Transfer between different individual client accounts belonging to the same client at different clearing members.
  3. Transfer between the proprietary account of a clearing member and the individual client account opened in the name of the clearing member at another clearing member.
  4. When a client defaults, positions in the individual client account transferred to the clearing member's proprietary account.
  5. Other circumstances approved by TAIFEX.
    Unless otherwise stipulated by TAIFEX, netting in Paragraph 1 must be limited to the proprietary account of the same clearing member or the same individual client account of the same clearing member.
    The operating method in Subparagraphs 1-4 of Paragraph 1 shall be separately prescribed by TAIFEX.
Chapter 5 Margin
Article 30     (Margin classifications and deposit methods)
    A margin deposited by a clearing member at TAIFEX for clearing is a clearing margin. A margin deposited by a client at a clearing member for clearing is a client margin.
    The clearing margin and client margin in the preceding paragraph may be deposited in cash or securities approved by the Competent Authority.
    Operations for making deposits in cash or securities in Paragraph 2 shall be separately prescribed by TAIFEX.
Article 31     (Pre-margin)
    Before submitting a proprietary transaction or client transaction to TAIFEX for clearing, the clearing margin deposited by the clearing member must not be lower than the amount required by TAIFEX. The calculation method of the amount shall be separately prescribed by TAIFEX.
Article 32     (Required clearing margin and client margin)
    The margin collected by TAIFEX from clearing members for clearing is the required clearing margin.
    During and at the end of each business day, TAIFEX will calculate the initial margin requirement with consideration to the market risk and liquidity risk of the cleared transactions, business cycle, and other possible factors, and collect the amount from the clearing member.
    The margin calculation method, standard, and discount rate of securities deposited as margin collateral in the preceding paragraph shall be prescribed by TAIFEX and submitted to the Competent Authority for approval.
    The required client margin collected by clearing member from its client must not be lower than the clearing margin required by TAIFEX for clearing member's client account.
Article 33     (Collection of additional margin)
    TAIFEX may collect an additional margin from the clearing member based on the market situation or the clearing member's position or credit status and other situations deemed necessary by TAIFEX. The calculation and collection method shall be separately prescribed by TAIFEX.
    Clearing members may collect an additional margin from clients based on clients' credit status and nature of transaction.
Article 34     (Variation margin and PAI)
    TAIFEX calculates clearing members' CTM transactions intra-day and end of day variation margin for each business day based on changes of the net present value of previous end of day of clearing member's CTM transactions, respectively and calculates PAI based on cumulative end of day variation margin. The calculation method of variation margin and PAI shall be separately prescribed by TAIFEX.
    The end of day variation margin and PAI in the preceding paragraph must be in the currency of the cleared transaction and paid/received in cash by clearing members. Intra-day variation margin may be deposited in cash or securities approved by Competent Authority.
    Clearing members must collect the variation margin and PAI for CTM transactions, which are calculated by TAIFEX, from clients according to the client clearing agreement.
    The end of day variation margin and PAI in Paragraph 1 shall be in the currency of the cleared transaction and paid/received in cash by client to clearing member. Intra-day variation margin may be deposited by clients in cash or a security approved by the Competent Authority.
Article 35     (Mark-to-market difference and PAA)
    TAIFEX calculates clearing member's STM transactions intra-day and end of day mark-to-market difference for each business day based on changes of the net present value of previous end of day of clearing member's STM transactions, respectively and calculates PAA based on cumulative end of day mark-to-market difference. The calculation method of variation margin and PAA shall be separately prescribed by TAIFEX.
    The net present value payable/receivable for STM transactions are reset to zero after end of day calculations.
    The end of day mark-to-market difference and PAA in Paragraph 1 must be in the currency of the cleared transaction and paid/received in cash by clearing members. Intra-day mark-to-market difference may be deposited in cash or securities approved by Competent Authority.
    Clearing members must collect the mark-to-market difference and PAA for STM transactions, which are calculated by TAIFEX, from clients according to the client clearing agreement.
    The end of day mark-to-market difference and PAA in Paragraph 1 shall be in the currency of the cleared transaction and paid/received in cash by clients to their clearing members. Intra-day mark-to-market difference may be deposited by clients in cash or securities approved by Competent Authority.
Article 36     (Exercise of rights and obligations over CTM and STM transactions)
    When a CTM transaction is changed to an STM transaction or terminated, TAIFEX or clearing members has the right to request the variation margin to be returned and either party is obligated to return the variation margin.
    When a CTM transaction is changed to a STM transaction, TAIFEX will automatically offset the variation margin paid/received amount in the preceding paragraph and the mark-to-market difference paid/received amount.
    When a CTM transaction is terminated, TAIFEX will automatically net the variation margin paid/received amount in Paragraph 1 and the termination value.
    The method for determining the variation margin paid/received amount, mark-to-market difference paid/received amount and the termination value in Paragraph 2 and Paragraph 3 shall be separately prescribed by TAIFEX.
    STM transactions between TAIFEX and clearing members are settled on a daily basis. As a result, there are no rights and obligations for the return of mark-to-market difference.
Article 37     (Valuation curve)
    TAIFEX builds a valuation curve each business day to calculate the net present value of cleared transactions, and uses it as the basis for calculating the initial margin, variation margin, and mark-to-market difference.
    The method for building the valuation curve and sampling data in the preceding paragraph shall be separately prescribed by TAIFEX.
Article 38     (Margin calls)
    When the balance of clearing margin of a account of clearing member is lower than the required clearing margin of the account, TAIFEX shall make margin calls for the shortfall. Calculation of the amount and margin call procedures shall be separately prescribed by TAIFEX.
    A margin call must be made by the clearing members to its client when the client margin in the client's account is lower than the required client margin. The calculation of amount and operation for margin call should be specified and carried out in accordance with the client clearing agreement between the clearing members and clients.
Article 39     (Margin withdrawal)
    When the balance of clearing margin of a account of clearing member is higher than the required clearing margin of the account, the clearing member may submit an application to withdraw the margin from TAIFEX. The calculation of the amount and withdrawal procedures shall be separately prescribed by TAIFEX.
    When the balance of client margin of a account of clearing member is higher than the required client margin of the account, the client may submit an application to withdraw the margin from the clearing member. Calculation of the amount and withdrawal procedures must be in accordance with the client clearing agreement between the client and clearing member.
Article 40     (Margin account and interest)
    For funds deposited in the "OTC derivatives clearing margin account" by clearing member, TAIFEX calculates interest on a daily basis, and makes interest payments semiannually after deducting necessary expenses and taxes.
    The standard for interest calculation in the preceding paragraph shall be separately prescribed by TAIFEX.
Chapter 6 Clearing and settlement
Article 41     (Settlement amount which must be in cash in the contractual currency of the cleared transaction)
    Unless otherwise stipulated, settlement of cleared transactions in the clearing accounts of clearing member must be in cash and in the currency of the cleared transaction:
  1. End of day mark-to-market difference and PAA.
  2. End of day variation margin and PAI.
  3. Coupon amount of fixed/floating rate interest
  4. Other payables specified for the cleared transaction.
    Payment procedures and the period for making deposits in the preceding paragraph shall be separately prescribed by TAIFEX.
Article 42     (Payment between TAIFEX and clearing member)
    Payments between TAIFEX and clearing members are separately settled for the proprietary accounts and individual client accounts of clearing member, and managed according to the following method:
  1. When a clearing member has net payables, it must transfer funds into the clearing margin account opened by TAIFEX at the settlement bank within the specified period.
  2. When a clearing member has net receivables, it may apply to TAIFEX for withdrawal, and TAIFEX will instruct the settlement bank to transfer funds from TAIFEX's clearing margin account into the clearing member's designated OTC derivatives proprietary clearing margin account or OTC derivatives client clearing margin account.
Article 43     (Reconciliation between TAIFEX and clearing member)
    TAIFEX shall provide clearing members with reconciliation reports containing the details of clearing margin balance, positions, settlement amounts, margins, and payments of the cleared transactions or by TAIFEX rules for each clearing account of the clearing member on a daily basis.
Chapter 7 Position Surveillance
Article 44     (Surveillance on clearing member's positions)
    TAIFEX may establish a position concentration limit based on the positions of clearing members.
    The position concentration limit in the preceding paragraph shall be prescribed by TAIFEX and submitted to the Competent Authority for approval.
Article 45     (Measures on clearing members violating the position surveillance rules)
    If a clearing member reaches the position concentration limit, TAIFEX may adopt the following measures:
  1. Notify the clearing member that the position concentration limit has been reached or exceeded.
  2. Impose additional margin.
  3. Other necessary measures to maintain market integrity or the soundness of the OTC derivatives market.
Chapter 8 Default Fund
Article 46     (Clearing members must contribute to the OTC derivatives default fund)
    Clearing members must contribute to the OTC derivatives default fund in accordance with TAIFEX rules. Unless otherwise stipulated, the contribution must be in cash.
Article 47     (Utilization of the OTC derivatives default fund)
    TAIFEX shall open a dedicated account for the OTC derivatives default fund. Investments for this fund will be limited to the following:
  1. Bank deposits;
  2. Treasury bills and government bonds;
  3. Other uses approved by the Competent Authority.
    The OTC derivatives default fund held in instruments described in Subparagraph 2 of the previous paragraph are subject to a maximum of 50% of the fund's balance.
    Time deposit certificates, treasury bills and government bonds acquired by TAIFEX must be held in the custody of a bank, with a custodian agreement in place to govern the ownership.
    Interest generated from the OTC derivatives default fund will be will be calculated by TAIFEX semiannually and paid to clearing members after deducting necessary taxes and expenses.
Article 48     (Calculation of the OTC derivatives default fund)
    TAIFEX shall calculate the required amount of the OTC derivatives default fund and contributions to be made by clearing members. The calculation method and contribution procedures shall be separately prescribed by TAIFEX.
Article 49     (Additional contribution to the OTC derivatives default fund)
    If a clearing member is in any one of the following situations, it must make an additional contribution to the OTC derivatives default fund within the period specified by TAIFEX:
  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. Likelihood of an increase in market risk under the provisions of the internal control system of clearing operation of a clearing member or inability to practically implement provisions of its internal control system of clearing operation.
  4. Material violations of laws or regulations or clearing-related regulations of TAIFEX, resulting in instances of sanctions being imposed by the Competent Authority or TAIFEX without necessary improvement.
  5. When the OTC derivatives default fund is insufficient to cope with perceived market risk, TAIFEX may adjust the OTC derivatives default fund requirements for all clearing members.
  6. Other severe unforeseen incidents or upon instructions of the Competent Authority.
    The amount of additional contribution required as a result of the events described in the preceding paragraph will be recommended by the TAIFEX OTC Derivatives Clearing and Risk Management Committee, and implemented after being approved by the Board of Directors. A Board meeting may be convened whenever necessary for additional contributions, which shall be implemented after approval.
Article 50     (Compulsory execution of the OTC derivatives default fund by the court)
    If the OTC derivatives default fund contributed to by clearing members is subject to compulsory enforcement by the court, clearing members must immediately make up the shortfall.
Article 51     (Return of OTC derivatives default fund)
    After the termination of a clearing agreement, the clearing member must settle all liabilities and cease all clearing operations at TAIFEX before it may apply for it's OTC derivatives default fund contribution to be returned.
Chapter 9 Default Management
Article 52     (Establish Default Management Group)
    TAIFEX will establish a Default Management Group (DMG). Members will include clearing member representatives with expertise in cleared transaction risk management, trading and/or hedging and TAIFEX personnel. The DMG must serve as an advisory unit for TAIFEX to manage clearing member defaults, conduct default fire drills, and provide recommendations for the following matters:
  1. Hedging strategy for the defaulting clearing member's positions.
  2. Auction method for the defaulting clearing member's positions.
  3. Other matters relating to default management.
    The composition, responsibilities and rules of procedure of the DMG in the preceding paragraph shall be separately prescribed by TAIFEX.
Article 53     (Default Event of clearing member)
    TAIFEX shall deem a clearing member as being in default on the occurrence of any of the following situations:
  1. Failure to pay the clearing margin within the deadlines specified by Rules.
  2. Failure to fulfill settlement obligations within the specified period.
  3. Violation of provisions of the clearing agreement.
    If a clearing member is in default, TAIFEX will resolve the situation according to the Rules and may impose necessary measures according to the terms of the clearing agreement.
    If a clearing member is likely to become unable to fulfill its clearing and settlement obligations, it must immediately notify TAIFEX.
Article 54     (Failure to deposit the clearing margin or fulfill settlement obligations within the specified period)
    If a clearing member fails to deposit the clearing margin or fulfill settlement obligations within the period specified by TAIFEX, it must immediately submit an explanation to TAIFEX and provide documents proving that failure to make payment was not due to circumstances within the clearing members control and not for financial reasons. After TAIFEX approves the explanation and sets an extended deadline, the clearing member must complete the payment within the extended deadline, and submit a written report on the business day immediately following the deadline. The clearing member must provide all relevant documents explaining the cause of the incident and what steps have been taken to ensure that similar events are not repeated.
    In the event the situation in the preceding paragraph occurs to a clearing member, TAIFEX shall manage the situation according to the following method:
  1. Levy a fine of up to NT$300,000.
  2. Submit the incident investigation report to the Disciplinary Committee for future reference.
  3. Submit a report to the Competent Authority for future reference.
    In the event the situation in Paragraph 1 occurs to a clearing member, TAIFEX may take the following measures when necessary:
  1. Suspend a part or all of the clearing member's clearing operations.
  2. Suspend withdrawal of the clearing member's margin.
  3. Either freeze or transfer funds and securities in the defaulting clearing member's OTC derivatives clearing margin account.
  4. The cash or funds from the disposal of securities of the clearing member's clearing account will be utilized to meet payment obligations within the same clearing account.
    When the cash or funds from disposal of securities in the individual client accounts of the clearing member in Subparagraph 4 of the preceding paragraph is insufficient to cover all liabilities, TAIFEX may use cash or funds from disposal of securities in the defaulting clearing member's proprietary account to cover the shortfall.
    In the event the clearing member fails to complete payment within the extended period specified by TAIFEX in Paragraph 1, TAIFEX will declare the clearing member in default.
    TAIFEX may seek compensation from defaulting clearing member for costs, expenses, and losses resulting from Paragraph 3.
Article 55     (Measures taken on defaulting clearing member in relation to financial factors)
    In the event a clearing member is in default due to financial factors, TAIFEX may take the following measures:
  1. Suspend the defaulting clearing member's clearing operations and report the matter in writing to the Competent Authority.
  2. Suspend the defaulting clearing member's withdrawal of margin.
  3. Notify clearing members and make an announcement to the market.
  4. Check the defaulting clearing member's margin balance, bank account balance, operating bond, OTC derivatives default fund, and other assets and immediately pursue protective measures in respect of Taifex's statutory rights.
  5. Convene the Default Management Group to handle cleared transactions and margins of the defaulting clearing member.
  6. Conduct an audit of the defaulting clearing member and an investigation and analysis of the incident.
    To conduct the audit in Subparagraph 6 of the preceding paragraph, TAIFEX may retrieve information or seek explanations from the defaulting clearing member, and the clearing member may not evade or reject the request.
    The defaulting clearing member must immediately notify its clients after TAIFEX takes the action specified in Paragraph 1.
Article 56     (Measures taken on defaulting clearing member's positions and margins)
    In the event that a clearing member defaults due to financial reasons, TAIFEX may take the following actions and dispose of the clearing member's cleared transactions and margin in the following manner:
  1. Suspension of a defaulting clearing member's ability to submit new transactions.
  2. Either freeze or transfer funds and securities in the defaulting clearing member's OTC derivatives clearing margin account.The cash or funds from the disposal of securities of the defaulting clearing member's clearing account will be utilized to meet payment obligations within the same clearing account.
  3. Port non-defaulting client's cleared transactions and margins from defaulting clearing member to another clearing member selected by the non-defaulting client, or the succeeding clearing member with an agreement with the defaulting clearing member.
  4. Hedge cleared transactions in the defaulting clearing member's proprietary account and individual client accounts that were not ported.
  5. Auction cleared transactions in the defaulting clearing member's proprietary account, individual client accounts that were not ported, and hedging transactions in Subparagraph 5.
    When the cash or funds from the disposal of securities in individual client accounts in Subparagraph 3 of the preceding paragraph is insufficient to cover liabilities, TAIFEX may use cash or funds from the disposal of securities in the defaulting clearing member's proprietary account to cover liabilities.
    Clearing member that meets the criteria set forth by TAIFEX shall participate in the auction in Subparagraph 6 of Paragraph 1.
    The operating method in Paragraph 1 and criteria in Paragraph 3 shall be separately prescribed by TAIFEX.
Article 57     (Auction)
    When TAIFEX conducts auctions for cleared transactions of a defaulting clearing member according to Subparagraph 6 of paragraph 1 of the preceding article, the following measures shall be taken in the absence of bids or in the situation where TAIFEX rejects bids:
  1. Announce auction failure and re-auction a part or all of the defaulting clearing member's cleared transactions.
  2. Invite non-defaulting clearing members to agree the loss allocation method for defaulting cleared transaction(s).
    If TAIFEX determines that cleared transaction(s) of the defaulting clearing member cannot be managed via auction, or an agreement (as described in Subparagraph 2 of the preceding paragraph) could not be reached between clearing members and TAIFEX, TAIFEX may escalate the situation to the DMG and invoke the contract termination process in relation to cleared transaction designated by TAIFEX.
    Cleared transactions referred to the preceding paragraph include the following:
  1. Cleared transactions of defaulting clearing member that failed to be auctioned.
  2. Cleared transactions held by the non-defaulting clearing member which have equal but opposite terms to the cleared transactions in the preceding subparagraph.
  3. Cleared transactions executed between the non-defaulting clearing member and TAIFEX for the purpose of hedging the cleared transactions in subparagraph 1.
  4. Other cleared transactions TAIFEX deems necessary to be designated.
    Matters relating to rejection of the bids by TAIFEX in Paragraph 1 shall be prescribed by TAIFEX.
    The operating method and specified period of receipt and payment for the net-sum amount from cleared transaction termination process in paragraph 2 shall be prescribed by TAIFEX.
Article 58     (Default fund juniorization and the cap of Member Assessment shared by clearing member)
    TAIFEX may use the following resources in the order below when a clearing member fails to fulfill its clearing and settlement obligation:
  1. The defaulting clearing member's clearing margin.
  2. The defaulting clearing member's OTC derivatives default fund.
  3. TAIFEX's OTC Derivatives Compensation Reserve Fund.
  4. Other clearing members' contributions to the OTC derivatives default fund.
  5. The pro rata ratio and pro rata amount cap of additional contribution on other clearing member shall be prescribed by TAIFEX.
    The apportioned method in Subparagraph 5 of the preceding paragraph shall be separately prescribed by TAIFEX.
    The pro rata amount cap referred to in subparagraph 5 paragraph 1 shall be determined as follows:
  1. When a single clearing member defaults during the cooling-off period, the cap shall be 150% of the non-defaulting clearing member's respective required contributions to the required OTC derivatives default fund contribution amount on the business day immediately preceding the first day of the cooling-off period.
  2. When multiple clearing members default during the cooling-off period, the cap shall be 300% of the non-defaulting clearing members' respective required contributions to the required OTC derivatives default fund contribution amount on the business day immediately preceding the first day of the cooling-off period.
    "Cooling-off period" in the preceding paragraph means the period of 20 trading days beginning from the date on which a default by a single clearing member occurs. If any other clearing member default before the end of that cooling-off period, the termination date of the cooling-off period shall be 20 trading days after the date of the last-occurring default by a clearing member.
    Unless otherwise stipulated, TAIFEX may specify the utilization order of clearing member contribution prescribed in Subparagraphs 4 and 5 of Paragraph 1 based on the result of Auction participation.
Article 59     (The calculation basis of OTC derivatives default fund contribution amount by non-defaulting clearing member)
    The amount that the non-defaulting clearing member contributes to the OTC derivatives default fund to compensate the default loss according to subparagraph 4 of paragraph 1 of the preceding article shall be the amount that is equivalent to the required OTC derivatives default fund contribution amount on the business day immediately preceding the first day of the cooling-off period. The loss pro rata ratio shall be separately prescribed by TAIFEX.
Article 60     (Replenishments of OTC derivatives default fund)
    TAIFEX shall calculate the total required amount of the OTC derivatives default fund and contributions to be made by clearing members on the last day of the cooling-off period.
    After the OTC derivatives default fund is utilized during a cooling-off period in accordance with Article 58, Paragraph 1, Subparagraph 4, clearing members must replenish the contribution amount notified by TAIFEX within the specified period.
Article 61     (Using non-defaulting clearing members' net cash receivables to cover default losses)
    When the resources prescribed in Article 58, Paragraph 1, Subparagraphs 1 to 5, are insufficient to cover default losses, further default losses may be covered by the positive net amount of cash receivables from each clearing account for a specified period.
    The net amount of cash receivables to be applied in the preceding paragraph is the amount of cash receivables less cash payables for each clearing account of the non-defaulting clearing member for the specified period, if the net amount is positive, it is then multiplied by a ratio specified by TAIFEX.
    The ratio, calculation period, payment deadline, and related matters in Paragraph 2 shall be separately prescribed by TAIFEX.
Article 62     (Voluntary Contributions from clearing member to cover default losses)
    When the sum of resources prescribed in Article 58, Paragraph 1, Subparagraphs 1 to 5 and the net amount of cash receivables of clearing accounts in the preceding article are still insufficient to cover default losses, TAIFEX can notify clearing member to provide additional funds to cover the losses (hereinafter referred to "Voluntary Contributions").
    After clearing members receive the notification, clearing members may voluntarily deposit the amount specified in the notice. If a clearing member decides to deposit the amount, the deposit must be completed within the period specified by TAIFEX and the clearing member may not request reimbursement.
    The Voluntary Contributions made by the non-defualting clearing member shall be treated as its contribution to the OTC derivatives default fund.
Article 63     (Default losses covered by TAIFEX)
    TAIFEX must make up the shortfall after utilizing funds in Article 58, Article 61, and Article 62.
Article 64     (Recovery order)
    TAIFEX will seek compensation from defaulting clearing members for funds, interest and necessary overheads used to cover losses in accordance with these Rules.
    Amounts recovered from the defaulting clearing member minus expenses must be used to make repayments in following order:
  1. The amount paid by TAIFEX in accordance with Article 63.
  2. The amount paid by clearing members in accordance with Article 62.
  3. The amount paid by clearing members in accordance with Article 61.
  4. The amount shared by clearing members in accordance with Article 58, Paragraph 1, Subparagraph 5, recovered in reverse order.
  5. The amount of clearing member's OTC derivatives default fund used in accordance with Article 58, Paragraph 1, Subparagraph 4, recovered in reverse order of the utilization order.
  6. The amount of TAIFEX's OTC Derivatives Compensation Reserve Fund used in accordance with Article 58, Paragraph 1, Subparagraph 3.
Article 65     (Close-Out Netting)
    In the event TAIFEX defaults in payment or becomes insolvent and must cease its clearing operations, it must terminate all clearing members cleared transactions via close-out netting.
    TAIFEX shall separately calculate the termination value of cleared transactions in the individual client accounts and proprietary accounts of each clearing member. For the individual client accounts and proprietary accounts of clearing members, TAIFEX only needs to collect the net amount of payables and receivables in each clearing account.
    The method for calculating the termination value of cleared transactions in the preceding paragraph shall be separately prescribed by TAIFEX.
    Payment default in Paragraph 1 refers to all of the following situations that occur at TAIFEX. However, failure to make payment within the specified period due to reasons not attributable to TAIFEX is not classified as payment default:
  1. TAIFEX fails to complete payment of clearing margins, OTC derivatives default fund, or other receivables that clearing member applies to withdraw within the specified period.
  2. TAIFEX fails to complete payment within 10 business days after a written notice is delivered by a clearing member.
  3. TAIFEX fails to complete payment within the specified period in the preceding subparagraph, and still fails to complete payment within 10 business days after another written notice is delivered by the clearing member.
    Insolvency in Paragraph 1 means that assets of TAIFEX are insufficient to meet the repayment requirement or TAIFEX is declared bankrupt.
    If TAIFEX defaults or becomes insolvent in Paragraph 1, clearing members may submit a written application for close-out netting, and TAIFEX must immediately carry out the close-out netting procedure after receiving the application.
Chapter 10 Emergency response measures
Article 66     (Emergencies)
    In the event of any one of the following situations, TAIFEX shall immediately take measures to maintain clearing operations:
  1. Failure of clearing or related payment system issues that affect the fulfillment of cleared transaction settlement obligations.
  2. Measures of the government of Taiwan, governments of other countries, other futures exchanges, or other clearing houses that may affect clearing operations of TAIFEX.
  3. Interruption or failure of power supply, computer systems, or communication equipment; natural disasters, riots, or war; or other force majeure that affect the normal operation of TAIFEX.
  4. Major default in the futures market or related spot markets.
  5. Clearing member violates regulations of the Taiwan futures market or related spot markets or foreign exchanges or clearing houses; major default or membership suspended or revoked in the Taiwan futures market or related spot markets or foreign exchanges or clearing houses.
  6. Clearing member files for bankruptcy or may become unable to fulfill clearing and settlement obligations.
  7. Severe violation of related laws and regulations by clearing member or their clients that may affect clearing operations of TAIFEX.
  8. Other situations that may cause clearing members to become unable to fulfill their settlement obligations or will have a material impact on normal clearing operations.
    Measures for handling the interruption or failure of power supply, computer systems, or communication equipment in the preceding paragraph shall be separately prescribed by TAIFEX.
Article 67     (Emergency response measures)
    TAIFEX may take the following measures in response to situations in the preceding article:
  1. Adjust the margin requirement or payment period.
  2. Adjust the financial standards for clearing members.
  3. Limit the positions of clearing members or their clients.
  4. Suspend or terminate the clearing of a part or all OTC derivatives.
  5. Terminate a part or all cleared transactions of the clearing member or its clients in advance.
  6. Change or limit the hours for clearing.
  7. Alter or limit the settlement conditions of the cleared transactions.
  8. Suspend a part or all of the clearing member's clearing operations.
  9. Terminate the clearing member's clearing agreement.
  10. Other necessary measures.
Chapter 11 Clearing service fees
Article 68     (Clearing service fees)
    The type, rate, or amount of fees collected by TAIFEX from clearing member shall be prescribed by TAIFEX and submitted to the Competent Authority for approval.
Article 69     (Payment of clearing service fees)
    Clearing members must pay the fees specified in the preceding article within the period specified by TAIFEX.
Chapter 12 Arbitration
Article 70     (Arbitration between clearing member and clients)
    Disputes between clearing members and their clients arising from OTC derivatives clearing may be submitted for arbitration.
    For the arbitration agreement in the preceding paragraph, the client clearing agreement between the clearing member and client must be the arbitration agreement specified in the Arbitration Law of R.O.C.
Article 71     (Arbitration of disputes)
    Disputes between clearing members arising from OTC derivatives clearing may be submitted for arbitration according to procedures set forth in the Arbitration Law of R.O.C.
    The dispute in the preceding paragraph may be mediated or settled by TAIFEX before arbitration.
Article 72     (Arbitration notice)
    Where a clearing member is a party to arbitration specified herein, it must notify TAIFEX according to arbitration procedures and submit to TAIFEX copies of relevant documents.
Article 73     (Arbitration related documents)
    Where parties to a dispute engage in arbitration according to these Rules, the arbitrator may submit a written request to TAIFEX to provide related documents, if necessary.
Article 74     (Arbitration between TAIFEX and clearing member)
    Disputes between clearing members and TAIFEX arising from the clearing agreement may be submitted for arbitration.
Article 75     (Arbitration procedures)
    Application procedures for arbitration in this chapter, assigning of an arbitrator, and other procedures must be handled in accordance with the Futures Trading Act and Arbitration Law of R.O.C.
Chapter 13 Penal provisions
Article 76     (Correction within a specified period)
    Unless otherwise stipulated by TAIFEX, clearing members with any one of the following circumstances may be requested to make corrections or improvements within a specified time period:
  1. The clearing member is found in violation of Articles 11 and 22.
  2. The clearing member is found in violation of these Rules, other regulations announcements, or notices.
Article 77     (Fine of NT$10,000-NT$50,000)
    If a clearing member is found in violation of Paragraphs 1 and 3 of Article 12, Article 13, Paragraph 1 of Article 19, Article 20, or Article 21, TAIFEX may impose a fine of no less than NT$10,000 and up to NT$50,000 and/or take other necessary measures. If the clearing member fails to make corrections or improvements within the specified period, an additional fine of NT$10,000 will be imposed daily until the clearing member makes corrections or improvements.
Article 78     (Fine of NT$100,000-NT$300,000)
    In any of the following circumstances, TAIFEX may impose a fine on the clearing member of no less than NT$100,000 and up to NT$300,000 and take other necessary measures. If the clearing member fails to make corrections or improvements within the specified period, an additional fine of NT$30,000 will be imposed daily until it makes corrections or improvements:
  1. The clearing member is found in violation of Subparagraph 6 of Paragraph 1 of Article 8, Paragraph 1 of Article 15, Article 17, Article 18, and Paragraph 2 of Article 38.
  2. The clearing member fails to make corrections or improvements within the period specified in Article 76.
    If any violation under any subparagraph of the preceding paragraph has occurred again with respect to a clearing member within the past half a year, TAIFEX may impose a fine of NT$500,000 to such clearing member. If a clearing member is found by TAIFEX with circumstances specified in Paragraph 1 or the preceding paragraph and gives a false report or explanation to TAIFEX during the inspection process, TAIFEX may levy a fine of up to NT$600,000.
Article 79     (Suspension of operations and notifying the Competent Authority)
    If any one of the following circumstances occurs to a clearing member, TAIFEX may suspend part of or the entire clearing operation of that clearing member and notify the Competent Authority:
  1. Violating Paragraph 2 of Article 12 and evading or refusing the inspection or inquiry from TAIFEX.
  2. The clearing member fails to pay the fine in accordance with Articles 77 and 78.
  3. Other violations of these Rules, regulations, or announcements that may affect the soundness of clearing and settlement order.
    After the situations stated in subparagraphs of the preceding paragraph are corrected, TAIFEX may restore the clearing member's clearing operations.
Article 80     (Suspension or termination of clearing agreement)
    If any one of the following circumstances occurs to a clearing member, TAIFEX may suspend such clearing member's clearing operation or terminate the clearing agreement between the clearing member and TAIFEX:
  1. Violated Article 13 and made a false report to TAIFEX that is sufficient to cause TAIFEX or others to sustain damages.
  2. In the event the situation in Paragraph 1 of Article 53 occurs to a clearing member.
  3. The clearing member does not fulfill its obligation to share the amount specified in Article 58, Paragraph 1, Subparagraph 5.
  4. Violation of provisions of the clearing agreement.
Article 81     (Notifying the Competent Authority)
    TAIFEX shall notify Competent Authority with respect to any clearing member's violation(s) of the Futures Trading Act.
Article 82     (Employees found in violation of these Rules)
    In the event an employee of a clearing member violates these Rules, other regulations or announcements, TAIFEX may directly notify the clearing member to issue a warning or suspend the employee for no less than 1 month and up to six months depending on the severity of the violation.
    In the event the employee in the preceding paragraph violated the Futures Trading Act, TAIFEX shall notify Competent Authority.
Article 83     (When penalties take effect)
    Dispositions made under these Rules shall take effect upon delivery of the notification to the futures commission merchant or clearing member.
Chapter 14 Supplemental provisions
Article 84     (Supplemental provisions)
    These Rules shall take effect after having been submitted to and approved by the Competent Authority and publicly announced. The same applies to any amendments to these rules.