| Article 1 |
These Directions are issued under Article 78, paragraph 2, of the TAIFEX Operating Rules.
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| Article 2 |
A futures commission merchant that is not a clearing member (hereinafter, the "mandating futures commission merchant") may apply to participate in futures trading on the exchange of the TAIFEX only if the mandating futures commission merchant has entered into a clearing and settlement mandate contract with the clearing member to mandate the clearing member to handle clearing and settlement operations for its futures trading on the TAIFEX's market.
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| Article 3 |
When entering into a contract with the TAIFEX to use the centralized market, a mandating futures commission merchant shall report to the TAIFEX only one clearing member to handle clearing and settlement operations on its behalf.
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| Article 4 |
When either the mandating futures commission merchant or the clearing member terminates the clearing and settlement mandate contract, such party shall notify the other party and the TAIFEX in writing one month prior to the termination.
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| Article 5 |
A mandating futures commission merchant shall open a client margin account in a financial institution designated by the clearing member for margin payment and collection purposes.
A mandating futures commission merchant engaging in proprietary futures trading shall open a proprietary margin account in a financial institution designated by the clearing member.
A clearing member, the financial institution referred to in the preceding paragraph, and the mandating futures commission merchant shall enter into a contract governing transfer of margin funds between the clearing member and the mandating futures commission merchant by the financial institution upon notification by the clearing member.
The contract referred to in the preceding paragraph shall specify that when the mandating futures commission merchant defaults clearing and settlement obligations on the ROC futures or securities markets, undergoes bankruptcy or any other significant credit crisis, or commits a significant breach of contract when engaging in futures trading on a foreign market, the settlement bank shall suspend the use of funds in the mandating futures commission merchant's clearing margin account upon notification by the clearing member.
The clearing member shall provide the TAIFEX with a copy of the contract referred to in the preceding paragraph.
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| Article 6 |
A mandating futures commission merchant engaging in futures trading shall pay margins at the margin levels and within the time limit prescribed by the clearing member.
The margin levels shall be prescribed by the clearing member, but shall be higher than the level set by the TAIFEX for clearing members.
Margin may be paid in cash or in securities approved by the Competent Authority.
The ratio of securities referred to in the preceding paragraph to the total margin amount payable and the haircut rate for such pledged securities shall comply with the regulations prescribed by the Competent Authority and the TAIFEX.
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| Article 7 |
In addition to collecting margin in accordance with the preceding article, a clearing member may adjust the amount of margin depending on the credit status of the mandating futures commission merchant and the nature of the trading.
When margin levels are adjusted, the clearing member shall notify the mandating futures commission merchant to deposit margins within the time limit specified in the clearing and settlement mandate contract.
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| Article 8 |
At the close of the regular trading session each day, a clearing member shall, based upon the information provided by the TAIFEX, prepare relevant statements on futures trading positions and margins broken down by mandating futures commission merchants and deliver the same to the mandating futures commission merchant to confirm the latter's position structure, volume, and margin payment and collection amounts, or the type, quantity, and collateral value of the securities for the day.
In the relevant statements on futures trading positions and margins referred to in the preceding paragraph, the margin for the contracts in each trading account shall be calculated on the basis of the total number of contracts [i.e. by gross margining], except in cases of specified position combinations, futures contract spread combinations, and SPAN margin calculation and collection as provided by the TAIFEX; positions in different trading accounts may not be directly offset except by futures commission merchants qualified to engage in proprietary trading.
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| Article 9 |
A clearing member shall impose limit standards on positions held by the mandating futures commission merchant depending on the latter's financial and trading position status.
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| Article 10 |
When a mandating futures commission merchant fails to pay margins within the prescribed time limit, holds positions in excess of the limit standards, or in the presence of any other event sufficient to affect its financial and business condition, the clearing member shall promptly notify the mandating futures commission merchant to make corrections within a time limit and impose restrictions on the adding of new positions by the mandating futures commission merchant. Where the mandating futures commission merchant fails to make corrections within the time limit set by the clearing member, the clearing member may make the following dispositions:
- Order it to liquidate futures trading contracts.
- Liquidate futures trading contracts for it.
- Take other measures necessary to preserve market order or safeguard futures trading.
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| Article 11 |
A mandating futures commission merchant shall provide relevant business and financial information pursuant to the provisions set down by the clearing member.
The clearing member shall conduct necessary verification of relevant business and financial information provided by the mandating futures commission merchant.
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| Article 12 |
A mandating futures commission merchant shall agree that the clearing member may acquire from the TAIFEX relevant information about trading orders, order confirmations, and trade confirmations.
A clearing member shall maintain confidentiality regarding information and mandate matters it learns when handling clearing and settlement operations and shall make no external disclosures except pursuant to law or regulation or inquiries lawfully conducted by the TAIFEX.
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| Article 13 |
A consigning futures commission merchant shall, in accordance with provisions set down by the clearing member, pay on time clearing handling fees, settlement handling fees, position adjustment fees, position transfer fees, and other relevant fees agreed upon by the two parties.
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| Article 14 |
The clearing and settlement mandate contact between a mandating futures commission merchant and the clearing member shall specify measures to be taken in response to any damage due to causes not attributable to any party of the contract.
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| Article 15 |
The mandate contact between a mandating futures commission merchant and the clearing member shall specify the causes for rescission or termination of the contract.
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| Article 16 |
Any dispute arising between a mandating futures commission merchant and the clearing member with respect to the mandated clearing and settlement operations may be settled in accordance with the provisions of the Futures Trading Act regarding arbitration or submitted to a futures association to request meditation.
The provisions of the preceding paragraph concerning arbitration or meditation shall be specified in the clearing and settlement mandate contract.
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| Article 17 |
The Futures Trading Act and related laws and regulations, the TAIFEX Operating Rules, the Regulations Governing Mandate Contracts, and other rules, regulations, or announcements shall constitute an integral part of the clearing and settlement mandate contract between a mandating futures commission merchant and the clearing member; the same shall apply to any amendments thereto.
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