| Article 1 |
(Legal Basis)
These Rules are established pursuant to Article 52 of the Taiwan Futures Exchange ("TAIFEX") OTC Derivative Clearing Operating Rules.
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| Article 2 |
(Roles and Responsibilities of Default Management Group)
The roles and responsibilities of the Default Management Group ("DMG") are as follows:
- To provide advices for defaulting clearing members' positions:
- Matters about hedging strategies for a defaulting clearing member's positions, selection of hedging counterparties, and terms and execution of transactions.
- Matters such as position composition of an auction portfolio, and auction rules, date, and time.
- Matters relating to default management and loss control procedures.
- To provide advices for TAIFEX's default management process.
- To participate in TAIFEX's default fire drills.
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| Article 3 |
(Appointment of DMG Members)
TAIFEX may establish DMG for each product class. Each DMG shall consists of six members appointed as described below with the approval of TAIFEX's board of directors.
- Five clearing member representatives are to be appointed by TAIFEX out of individuals with at least two years' experience in trading, hedging, and risk management for the relevant product.
- One TAIFEX representative to be proposed by the president and nominated by the chairman of the board of directors.
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| Article 4 |
(Term of Office for DMG Members and Vacancy Filling)
The DMG's term of service shall be one year, and may be eligible for re-appointment. Any vacancy in the DMG is to be filled by TAIFEX according to the preceding article. The term of the succeeding member shall be the remaining term of his/her predecessor.
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| Article 5 |
(DMG Meeting Convenors)
Each DMG shall have one convenor served by the TAIFEX representative.
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| Article 6 |
(Convening of DMG Meetings)
DMGs shall meet at least once a year. The convenor may convene the DMG anytime as needed.
When a convenor and DMG member is unable to exercise his/her duties, he/she shall designate one of the members in the same DMG to act on his/her behalf. Such designation shall be made in writing.
A convenor may invite the following individuals to meetings at his/her discretion:
- Representative of a defaulting member.
- Representative of a non-defaulting member.
- Experts and scholars.
- Other TAIFEX personnel.
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| Article 7 |
(DMG Votes and Resolutions)
A DMG resolution shall require the attendance of at least half of the members of the corresponding DMG and a majority vote from the attending members.
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| Article 8 |
(DMG Meeting Minutes)
Resolutions of routine DMG meetings shall be recorded in the minutes, affixed with the chairman's signature or seal before being submitted to TAIFEX's board of directors.
The minutes of the meeting shall record the date (year, month, day) and place of the meeting, the name of the chairman, and the names of the DMG members present, and shall give a summary of the essential points of the proceedings and state the results.
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| Article 9 |
(Handling of Conflict of Interest)
Regarding items on an agenda in which a DMG member or a clearing member represented by a DMG member has a conflict of interest, the DMG member shall explain key information on the conflict of interest, and must not participate in the vote or act as a voting proxy for any other member.
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| Article 10 |
(Duty of Confidentiality)
DMG members shall uphold impartiality, independence, and objectivity in their roles. Except in making inquiries conducted in accordance with laws and regulations, DMG members shall not externally disclose any information learned in the course of exercising their duties.
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| Article 11 |
(Reasons for Dismissal of DMG Members)
DMG members who are found in any of the circumstances below shall cease to perform their duties, and wait for TAIFEX to report them to the board of directors for dismissal.
- Violation of Article 9 or the preceding article.
- The clearing member represented by the DMG member terminates its clearing operation or defaults.
- Other event factually sufficient to deem the DMG member incompetent.
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| Article 12 |
(Supplementary Provisions)
These Rules shall be implemented after they are passed with a resolution of the TAIFEX's board of directors and approved by the competent authority. The same shall apply to any amendments hereto.
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