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These Directions are adopted pursuant to Article 69, paragraph 3 of the Rules Governing Securities Trading on the TPEx.
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Procedures for reporting out-trades and account number corrections:
Securities brokers shall report out-trades and account number corrections in accordance with the following rules:
- Reporting through computer:
- Period for entering information:
For brokerage trading orders placed through the TPEx's automated trade matching system, any out-trades or changes of account number must be keyed into the TPEx's designated system by the securities broker, following the instructions prompted on-screen. The data entry must be made no later than 10 a.m. on the second business day after the trade date. However, for transactions for which the securities broker is on record as having already made a settlement postponement report, the data entry shall be made no later than 6 p.m. on the third business day after the trade date.
- Handling of breakdowns:
When accidental breakdowns prevent transmission of information over the computer transmission lines, the securities broker shall first report the breakdown to the TPEx by telephone, and then re-enter the information after elimination of the problem.
- Reporting mechanism:
Where out-trades of a single type of securities by a securities broker reach NT$100 million or more, if the broker handles the out-trades by repurchase or resale, the broker shall notify the TPEx's Trading Department by 2 p.m. on the date of handling. If a reversal trade is not required, the notification shall be made to the TPEx's Trading Department at the time the out-trades are reported. The same shall apply when the sum of the out-trade amounts of a TPEx traded ETF beneficial certificate plus the out-trade amounts, as converted into NT dollars, of its corresponding additional-currency beneficial certificate reach the above threshold.The conversion of the aforementioned foreign currency into NT dollars shall be based on the exchange rate announced by the TPEx on the business day preceding the trade date.
- When the total trades for which a securities broker reports out-trades or account number corrections for the same investor on the same trade date reach 1 million shares of stock (or beneficial units), or reach 1,000 trading units of bonds (or beneficial certificates), or reach a monetary amount of NT$50 million, or greater, the TPEx may, depending on the circumstance, require the broker to submit relevant documentation within a prescribed time period. The same shall apply when the sum of the number of shares or amounts of the out-trades or account number corrections of a TPEx traded ETF beneficial certificate plus the number of shares or amounts, as converted into NT dollars, of the out-trades or account number corrections of its corresponding additional-currency beneficial certificate reach the above threshold.The conversion of the aforementioned foreign currency into NT dollars shall be based on the exchange rate announced by the TPEx on the business day preceding the trade date.
- The securities broker shall internally prepare an itemized ledger showing corrections to account numbers for hierarchical review, and shall retain a copy for their files.
- Procedures for account number correction required because of a cause that is attributable to the investor:
- The securities broker shall report correction of the account number in accordance with the investor's instructions in the "Application for Account Number Correction" consented to by the parties of both the pre- and post-correction account numbers. (If the account number prior to correction is the number of a vacated account, the securities broker shall provide verification of such fact.) In such a case, the account number correction must be reported no later than 10 a.m. on the second business day after the trade date. For a reverse auction transaction that is executed and settled on the same day, the report must be made no later than 6 p.m. on the next business day.
- For an account number correction by a professional institutional investor, if the application for correction is made in one of the manners that is permitted for brokerage orders as set out in Article 62 of the TPEx Trading Rules, the investor is not required to submit the Application referred to in the preceding item. The securities broker shall keep the related materials. However, if the pre- and post-correction account numbers are account numbers for which different agents are appointed, or belong to different professional institutional investors which furthermore have not appointed the same agent, the securities firm shall keep the aforesaid consent material verifying the expressions of intent of both parties for the pre- and post-correction account numbers.
- A securities broker shall keep the aforesaid materials related to applications for account number correction for at least 5 years.
- A trade made through the securities firm's error account may not be changed to a trade under a customer's account, and neither may a trade made through a customer's account be changed into a trade under the error account.
- Where an out-trade occurs in securities trading by a securities broker through an omnibus account, the report of the out-trade may not be based on the omnibus account. The report of the out-trade shall be based on the post-allocation securities trading account of the individual principal. However, this rule does not apply to account number corrections.
- Where an out-trade or account number correction occurs in trading conducted by reverse auction, the securities broker shall produce an "Out-Trade Handling Report - Occurrence" or an "Investor Account Number Correction Report," and shall attach a copy of the order form, order confirmation, and execution report for that particular trade, and a written explanation of the reasons for the occurrence stamped with the seal of the company, the company's responsible person, and the person handling the matter, and submit them to the trading department of the TPEx for approval, after which, the TPEx shall input them into the computer system on behalf of the broker. If the need for account number correction arises due to a cause that is attributable to the investor, an "Application for Account Number Correction" consented to by the parties of both the pre- and post-correction account numbers shall also be submitted. For a reverse auction transaction that is executed and settled on the same day, the report must be made no later than 6 p.m. on the next business day.
- A securities broker may, upon application by an investor, report an out-trade for the price difference caused by erroneous execution of a brokerage order, but the provisions relating to repurchase or resale shall not apply.
- In the event that an error occurs in relation to a day trade, the securities broker shall take appropriate action according to the following procedures:
- If the out-trade or account number correction is reported by 10 a.m. on the second business day after the trade date, the broker shall first cancel the already reported day trade position, and then report the out-trade or account number correction.
- If the out-trade or account number correction is reported after 10 a.m. on the second business day after the trade date, the broker may report an out-trade only for the price difference after the offset of the buy and sell sides of the day trade. Reporting of account number correction is not allowed.
- Out-trade and account number correction after reporting delayed settlement shall be handled in accordance with the provisions of the preceding item.
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Procedures for handling out-trades:
- A securities broker reporting an out-trade in accordance with Point 2 shall handle the out-trade, on that day or the following business day, through its error account by a repurchase or resale of equal volume. However, securities of the same type traded on the same trade date may first be mutually offset; the securities broker shall enter information related to offsets in its out-trade report.
- Once reversal trades have been carried out in accordance with the preceding paragraph, the securities firm will be required to input the outcome of the out-trade reversal into the computer no later than 10 am on the second business day after the reversal date. After an out-trade that occurred in trading conducted by reverse auction has been handled through a resale or repurchase, the securities broker shall submit a copy of the order form, order confirmation, and execution report for that particular trade, and a written explanation of the reasons stamped with the seal of the company, the company's responsible person, and the person handling the matter, to the trading department of the TPEx, which shall input them into the computer system on behalf of the broker.
- If the securities broker is unable to complete trade reversals within the timeframe specified in subparagraph 1 for reasons that are not attributable to itself, it shall produce and maintain detailed records and supporting documents of the entire process for future reference.
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Principles for Reporting and Handling of Out-Trades and Account Number Corrections:
- Securities brokers shall report out-trades and account number corrections on the basis of bona fide errors, and the following are prohibited:
- Reporting an account number correction when an out-trade should be reported, or reporting an out-trade when an account number correction should be reported.
- Reporting an out-trade or account number correction because of an investor's failure to comply with required procedures for the transfer of stock by insiders.
- Reporting an out-trade or account number correction because of an investor's violation of the prohibition of sale by insiders or related parties during a treasury stock repurchase period.
- Reporting an out-trade or account number correction because of an investor's violation of regulations related to the right to compel disgorgement of improper gains by insiders.
- Evading any rule or regulation that should be complied with, or, where an error is not attributable to the securities broker, assisting an investor to improperly or falsely report an out-trade or account number correction with respect to a trade by the investor.
- Any other reporting of an out-trade or account number correction that is not based on a bona fide error.
- The securities broker shall bear sole liability for injury to the rights and interests of the investor, or for any other disputes, arising out of the reporting and handling of out-trades or account number corrections.
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Handling of violations:
- Given the occurrence of any of the circumstances listed below in the reporting of out-trades or correction of account numbers by a securities broker, the TPEx may apply mutatis mutandis Article 93 of the TPEx Trading Rules and notify the securities broker to improve its practices, and in addition may impose a penalty of not more than NT$100,000:
- Failure to comply with Point 2, subparagraph 1, 2, 5, 8, or 10, or Point 3. This excludes circumstances with reasonable cause and with the approval of the TPEx.
- Failure to comply with Point 2, subparagraph 3 or 4.
- Failure to comply with any item of subparagraph 1 of Point 4.
- When a securities broker seriously violates Point 4, subparagraph 1 in its reporting of out-trades or correction of account numbers, the TPEx may apply mutatis mutandis Articles 94, 97, and 101 of the TPEx Trading Rules and issue a warning, or impose a penalty of not more than NT$300,000, or restrict or suspend its trading or terminate its contract for TPEx trading of securities, and additionally may apply mutatis mutandis Article 100 of the TPEx Trading Rules and notify the securities broker to warn its employees, or halt their execution of business for a period from 1 month to 6 months.
- If a securities broker reports an out-trade or account number correction on the basis of a bona fide error, but the error is serious, or the TPEx finds obvious operational negligence, the TPEx may apply mutatis mutandis Articles 94 of the TPEx Trading Rules and issue a warning, or impose a penalty of not more than NT$300,000, and additionally may apply mutatis mutandis Article 100 of the TPEx Trading Rules and notify the securities broker to warn its employees, or halt their execution of business for a period from 1 month to 6 months.
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These Directions and any amendments hereto shall be publicly announced and implemented after submission to and approval by the competent authority.
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