2.1.1 |
(Clearing members are limited to financial institutions)
Financial institutions applying to TAIFEX for engaging in clearing operations of OTC derivatives (hereinafter referred to as clearing operations) shall be those which have been approved by the competent authority to engage in derivatives trading or handle derivatives operations, and have obtained TAIFEX clearing membership qualifications.
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2.1.2 |
(Classification and business scope of clearing members)
Based on the scope of business, clearing members of TAIFEX can be classified into:
- Individual Clearing Member: Handles clearing operations of proprietary OTC derivatives.
- General Clearing Member: Handles clearing operations of proprietary and client OTC derivatives.
For a clearing member being a branch established within the territory of the R.O.C. by a foreign financial institution, if its clearing operations of proprietary derivatives involve trading by the head office or other branches, the head office shall issue a commitment letter stating its obligation of jointly performing clearing and settlement.?
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2.1.3 |
(Financial requirements of individual clearing members)
Individual clearing members of TAIFEX shall meet the following criteria:
- Required minimum paid-in capital of NTD 2 billion. However, exception applies under any of the following circumstances:
- The clearing member is a subsidiary of a financial holding company prescribed in the “Financial Holding Company Act.” The required minimum paid-in capital of such financial holding company or foreign financial holding company is NTD 2 billion or above, and it will issue a guarantee letter to TAIFEX to guarantee its performance of such clearing member's obligation and relevant responsibilities to handle clearing and settlement.
- The clearing member is a subordinate company as prescribed in the “Company Act.” The required minimum paid-in capital of such controlling company is NTD 2 billion or above, and it will issue a guarantee letter to TAIFEX to guarantee its performance of such clearing member's obligation and relevant responsibilities to handle clearing and settlement.
- The clearing member is a branch established within the territory of the R.O.C. by a foreign financial institution according to the law. The required minimum paid-in capital of the head office is NTD 2 billion or above, and it will issue a commitment letter to TAIFEX stating its commitment to jointly perform such clearing member’s obligation and relevant responsibilities to handle clearing and settlement
- Financial structure
- If the clearing member is a bank, its Capital Adequacy Ratio shall not be less than 10.5%.
- If the clearing member is an insurance enterprise, its Risk Based Capital Ratio shall equals or exceeds 200% and Net Worth Ratio?shall not be less than 3%.
- If the clearing member is a securities firm, its Regulatory Capital Adequacy Ratio shall equals or exceeds 200%.
- If the clearing member is a bills finance company, its Capital Adequacy Ratio shall not be less than 8%.
- If the clearing member is a futures commission merchant that concurrently operates as a leverage transaction merchant, its adjusted net capital shall not be less than 30% of the total amount of customer margins required for the open positions of futures traders.
- If the clearing member is a subsidiary of a financial holding company prescribed in the “Financial Holding Company Act,” the capital adequacy ratio of such a group capital adequacy ratio calculated and reported by a financial holding company?or foreign financial holding company shall not be lower than 100%.
- If the clearing member is a subordinate company prescribed in the “Company Act,” the financial structure of such controlling company shall meet the provisions of Items 1 to 5 of this subparagraph according to the type of business to which it is attributed.
- If the clearing member is a branch established within the territory of the R.O.C. by a foreign financial institution according to the law, the financial structure of the head office shall meet the provisions of Items 1 to 5 of this subparagraph according to the type of business to which it is attributed.
- OTC derivatives Default Fund
- Clearing members are required to contribute to TAIFEX the OTC derivatives Default Fund of NTD 20 million prior to engaging in clearing operations of OTC derivatives.
- Clearing members are required to contribute to the OTC derivatives Default Fund based on the amount computed by TAIFEX subsequent to engaging in clearing operations of OTC derivatives.
The formats of the guarantee letter or commitment letter prescribed in items 1,2 and 3 of preceding sub-paragraph under paragraph 1. shall be announced by TAIFEX additionally.
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2.1.4 |
(Financial requirements of general clearing members)
General clearing members of TAIFEX shall meet the following criteria:
- Required minimum paid-in capital of NTD 8 billion.
- Financial structure
- If the clearing member is a bank, its Capital Adequacy Ratio shall not be less than 10.5%.
- If the clearing member is a securities firm, its Regulatory Capital Adequacy Ratio shall equals or exceeds 200%.
- If the clearing member is a futures commission merchant that concurrently operates as a leverage transaction merchant, its adjusted net capital shall not be less than 30% of the total amount of customer margins required for the open positions of futures traders.
- OTC derivatives Default Fund
- Clearing members are required to contribute to TAIFEX the OTC derivatives Default Fund of NTD 30 million prior to engaging in clearing operations of OTC derivatives.
- Clearing members are required to contribute to the Default Fund based on the amount computed by TAIFEX subsequent to engaging in clearing operations of OTC derivatives.
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2.1.5 |
(Adequate personnel required for clearing operations)
Clearing members shall appoint at least 1 Supervisor to manage the following matters:
- Personnel in an adequate number shall be appointed to handle clearing operations of OTC derivatives.
- Appoint competent specialists to conduct clearing operations.
- Personnel conducting the collection and payment of Margin and Settlement Amount, cashiers and accountants shall not concurrently serve one another's positions.
- The company applying to become a general clearing member must appoint competent specialists to engage in client clearing operations.
Clearing members must compile a list of supervisors and specialists conducting clearing operations prescribed in the preceding paragraph to file a registration with TAIFEX prior to launching clearing operations. Any changes to the aforementioned list shall be filed with TAIFEX within 5 business days.
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2.1.6 |
(Premises and equipment requirements of clearing members)
The premises and equipment of clearing members engaging in clearing operations of OTC derivatives must meet the following criteria:
- Premises for handling clearing operations.
- Installation of information equipment for handling clearing operations.
- Completed connection with TAIFEX's OTC clearing system.
- Completed connection with TAIFEX-approved trade confirmation platform.
- Designation of specialists and installation of hotlines to contact TAIFEX.
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2.1.7 |
(Clearing members are required to issue a negative qualifications statement for the applicant of the clearing member)
A company intending to apply to become a clearing member shall issue a Declaration of non-violation of any disqualification to TAIFEX, and the content of the aforementioned statement will be announced by TAIFEX additionally.
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2.1.8 |
(Clearing members are required to establish an internal control system)
Clearing members shall establish an internal control system pursuant to the rules and regulations of clearing operations prescribed by the competent authority and TAIFEX.
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2.1.9 |
(Reporting and corrections by clearing members failing to meet membership criteria constantly)
A clearing member failing to meet the criteria prescribed from Articles 2.1.3 to 2.1.8 shall file a report with TAIFEX before the 10th day of the next month and make corrections before the set deadline.
For a clearing member failing to meet membership criteria as mentioned in the preceding paragraph, TAIFEX may adopt the following measures:
- A letter to be sent to the clearing member requesting the reasons for the failure and a concrete improvement plan, and provision of the latest finance-related data.
- A letter to be sent to the competent authority.
- To conduct inspections when necessary to gain an understanding of the financial and business health of the clearing member, and follow up with further guidance.
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2.1.10 |
(Disposal in cases where clearing members fail to meet financial criteria and shall improve within specified period)
A clearing member failing to meet the criteria prescribed in Subparagraph 1 or 2 under paragraph 1 of Article 2.1.3 and Subparagraph 1 or 2 of Article 2.1.4 shall make corrections within 3 months.
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2.1.11 |
(Disposal in cases where clearing members fail to contribute to the OTC derivatives settlement fund constantly according to the regulations)
A clearing member failing to contribute to the OTC derivatives Default fund according to the Clause 2 under Subparagraph 3 under paragraph 1 of Article 2.1.3 and Clause 2 under Subparagraph 3 of Article 2.1.4 shall make corrections within 15 days.
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2.1.12 |
(Disposal in cases where the premises and personnel of clearing members fail to meet membership criteria constantly)
A clearing member failing to meet the criteria prescribed in Article 2.1.5 or Article 2.1.6 shall make corrections within 1 month.
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2.1.13 |
(Disposal in cases where clearing members fail to meet financial criteria)
Clearing member involved in conditions prescribed in Article 2.1.10, TAIFEX may impose an additional clearing margin or suspend a part or all of the OTC clearing operations.
If the clearing member meets TAIFEX’s criteria of clearing membership, TAIFEX may, depending on the condition, cancel its imposition of the additional clearing margin and suspension.
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2.1.14 |
(An extension of the deadline by clearing members failing to make corrections before the deadline with justifiable cause)
A clearing member failing to make corrections before deadline with justifiable cause may apply to TAIFEX for an extension before the deadline; such an extension shall not exceed the provisions of Articles 2.1.10 to 2.1.12, and shall be granted once only.
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2.1.15 |
(Termination of clearing membership if a clearing member fails to meet criteria, fails to make corrections before the deadline, or still fails to meet criteria after corrections)
Subsequent to the setting of a deadline for correction by TAIFEX, if a clearing member fails to make corrections or still fails to meet the criteria for clearing membership after it made corrections, TAIFEX will terminate its clearing membership immediately.
A clearing member that fulfills either of the circumstances below shall be deemed as still failing to meet the criteria after it made corrections:
- After the clearing member made corrections to meet the criteria before the deadline, it fails to meet the same criteria for clearing membership again within a month.
- The clearing member has been required to make corrections following the setting of a deadline as many as three times in the past year.
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2.1.16 |
(Reasons for TAIFEX’s termination of a clearing membership)
If any of the following circumstances exist with respect to the clearing member, TAIFEX may terminate its clearing membership, and handle the matter according to Article 54 of the Futures Trading Act:
- A relevant authority has revoked the clearing member's company registration or dissolved the clearing member.
- The competent authority has issued an instruction revoking the clearing member's operation license.
- The clearing member has been pronounced bankrupt by a final court ruling.
- The clearing member fails to perform clearing and settlement obligations.
- The clearing member violates a law or regulation or continues to fail to comply with administrative orders by the competent authority based on laws and regulations.
- The clearing member violates the Articles of Incorporation or OTC Operating Rules of the Taiwan Futures Exchange Corporation, or other rules or regulations, and the circumstances are serious.
- The clearing member's clearing or settlement practices violate good faith and integrity in a manner sufficient to harm others.
- The clearing member is unable to meet the criteria of TAIFEX's clearing membership and, following an inquiry by TAIFEX and the setting of a deadline for correction, the clearing member fails to make corrections or continues to fail to meet the criteria after making corrections.
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