Lim­its on mar­gin trad­ing, short sales eased from June 29

The China Post - - TAIWAN BUSINESS -

To cre­ate a more ef­fi­cient mar­ket and in ac­cor­dance with the eas­ing of lim­its on mar­gin trad­ing and short sales an­nounced by the Fi­nan­cial Su­per­vi­sory Com­mis­sion (FSC, ), start­ing from June 29, the amount lim­its of NT$80 mil­lion and NT$60 mil­lion on mar­gin pur­chases and short sales, re­spec­tively, from only one se­cu­ri­ties firm for an in­vestor are to be lifted, ac­cord­ing to a press re­lease from the Tai­wan Stock Ex­change Cor­po­ra­tion ( TWSE, ) yesterday. The amount lim­its of NT$30 mil­lion and NT$20 mil­lion on one sin­gle TWSE or TPEx-listed se­cu­ri­ties for an in­vestor are also eased. The mea­sure not only meets an in­vestor’s de­mand for amount lim­its and in­creases the con­ve­nience of oper­a­tions, but also helps se­cu­ri­ties firms ex­pand their busi­ness de­vel­op­ment, said the TWSE.

The FSC has im­ple­mented a num­ber of sig­nif­i­cant mea­sures to ease re­stric­tions on mar­gin trad­ing to im­prove the trad­ing mech­a­nism and in­crease the op­er­at­ing flex­i­bil­ity of in­vestors.

Af­ter eas­ing lim­its on mar­gin trad­ing and short sales, the max­i­mum lim­its on mar­gin trad­ing and short sales for an in­di­vid­ual cus­tomer will be taken back into the se­cu­ri­ties firms’ own con­trol so that the bal­ance be­tween risk man­age­ment and cus­tomer needs can be achieved, the TWSE stated.

Sup­port­ing Mea­sures and

Reg­u­la­tions

The TWSE also an­nounced sup­port­ing mea­sures and reg­u­la­tions on June 15, in­clud­ing up­dates of con­di­tions on the credit lim­its summed up to the same owner for an in­vestor to open a mar­gin trad­ing ac­count and con­tents that se­cu­ri­ties firms should pre­pare their own op­er­at­ing pro­ce­dures gov­ern­ing cus­tomer line man­age­ment.

Ac­cord­ing to the ex­ist­ing reg­u­la­tions, when an in­vestor opens five or more mar­gin trad­ing ac­counts, se­cu­ri­ties firms shall sum up the lim­its on mar­gin pur­chases in the whole mar­ket for the in­vestor to re­view his/her fi­nan­cial state­ment and cu­mu­la­tive trade amount. Af­ter the new sys­tem is on the road, in ad­di­tion to the num­ber of ac­counts reach­ing five or more that should be summed up to the same owner, be­gin­ning from the sec­ond mar­gin trad­ing ac­count opened by an in­vestor, once the ap­plied lim­its on mar­gin pur­chases for mar­gin trad­ing plus the ap­proved lim­its on mar­gin pur­chases for credit ac­counts pre­vi­ously opened reaches more than NT$300 mil­lion, se­cu­ri­ties firms shall ex­e­cute the mech­a­nism to sum up the lim­its on mar­gin pur­chases to re­view the cus­tomer’s fi­nan­cial state­ment and cu­mu­la­tive trade amount, said the TWSE.

The op­er­at­ing pro­ce­dures gov­ern­ing cus­tomer line man­age­ment that se­cu­ri­ties firms should pre­pare their own in­clude: first, the method to eval­u­ate the max­i­mum lim­its on mar­gin trad­ing and short sales for an in­di­vid­ual cus­tomer. The eval­u­a­tion should take the ap­proved lim­its of cus­tomers in other credit busi­nesses into con­sid­er­a­tion and de­fine the to­tal amount of mar­gin trad­ing in funds or se­cu­ri­ties for an in­di­vid­ual cus­tomer in over­all credit busi­nesses, which should not ex­ceed a cer­tain per­cent­age of the net value, re­spec­tively. As to lim­its on mar­gin trad­ing and short sales for an in­di­vid­ual cus­tomer reach­ing to NT$300 mil­lion or 1 per­cent of the net value of the se­cu­ri­ties firm, which­ever is greater, should be ap­proved by the Board of Di­rec­tors.

Se­condly, the method to eval­u­ate the max­i­mum lim­its on mar­gin trad­ing and short sales of one sin­gle listed se­cu­ri­ties held by for an in­di­vid­ual cus­tomer. The eval­u­a­tion should take the ap­proved lim­its of cus­tomers in other credit busi­nesses into con­sid­er­a­tion.

Thirdly, the way to iden­tify high-risk se­cu­ri­ties or cus­tomers: For lim­its on mar­gin trad­ing and short sales of high-risk se­cu­ri­ties or cus­tomers, spe­cial pro­ce­dures for mon­i­tor­ing and ap­proval should be set up.

To es­tab­lish a method for cus­tomers to ob­tain source lim­its of short sales in prin­ci­ples of fair­ness and rea­son­able­ness, and avoid con­cen­trat­ing use by one sin­gle cus­tomer. Spe­cial at­ten­tion should ap­ply for se­cu­ri­ties whose lim­its are al­lo­cated by TWSE or Taipei Ex­change.

Risk Con­trol

To en­hance the risk con­trol, se­cu­ri­ties firms shall also strengthen the con­trol on credit lim­its of as­so­ci­ated cus­tomers. The Tai­wan Stock Ex­change re­minded in­vestors who have the need to in­crease lim­its on mar­gin trad­ing and short sales that they may re­quest lim­its ad­just­ment from their se­cu­ri­ties firms. For more in­for­ma­tion, cus­tomers are rec­om­mended to visit the of­fi­cial web­site of the Tai­wan Stock Ex­change (www.twse.com. tw ) and link to the “Ease lim­its on mar­gin trad­ing and short sales” un­der the Im­por­tant Top­ics on the home­page only un­der the Chi­nese edi­tion, or ask for more in­for­ma­tion, said the TWSE.

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