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These Procedures are promulgated in accordance with Article 10 of the Guidelines for Consigned Clearing and Settlement Operations by Clearing Members of the Taiwan Futures Exchange Corporation (hereinafter, "TAIFEX"). A clearing member restricting trading or suspending trading of the consigning futures commission merchant or liquidating futures contracts on its behalf shall comply with these Procedures.
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Procedures for Applications to Restrict Trading by a Consigning Futures Commission Merchant
- In the event any of the following circumstances occurs with respect to a consigning futures commission merchant, the clearing member may, out of consideration of position risk management, file an application during the regular trading session with the TAIFEX to restrict trading by the consigning futures commission merchant:
- The consigning futures commission merchant holds outstanding positions in excess of the position limit prescribed by the clearing member.
- The consigning futures commission merchant fails to pay required margin within the time limit prescribed by the clearing member.
- Other events sufficient to affect the financial or business condition of the clearing member.
- A clearing member filing an application with the TAIFEX to restrict trading by the consigning futures commission merchant shall comply with the following procedures:
- Confirm the total amount of outstanding positions held by the consigning futures commission merchant.
- Notify the consigning futures commission merchant by telephone and in writing and keep on record sufficient proof of such notice.
- Complete an "Application by Clearing Member to Restrict/Suspend Trading by a Consigning Futures Commission Merchant" (Schedule 1), fax the same to the Clearing Department of the TAIFEX, and confirm the receipt thereof by telephone.
- Deliver to the Clearing Department of the TAIFEX the original of the "Application by Clearing Member to Restrict/Suspend Trading by a Consigning Futures Commission Merchant" before the close of the regular trading session on the next business day.
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Procedures for Applications to Suspend Trading by a Consigning Futures Commission Merchant
- In the event that a consigning futures commission merchant whose trading has been restricted still fails to abide by the clearing and settlement consignment contract between the two parties, the clearing member may, out of consideration of position risk management, apply during the regular trading session to the TAIFEX to suspend trading by the consigning futures commission merchant.
- A clearing member filing an application with the TAIFEX to suspend trading by the consigning futures commission merchant shall comply with the following procedures:
- Confirm the total amount of outstanding positions held by the consigning futures commission merchant.
- Notify the consigning futures commission merchant by telephone and in writing and keep on record sufficient proof of such notice.
- Complete an "Application by Clearing Member to Restrict/Suspend Trading by a Consigning Futures Commission Merchant," fax the same to the Clearing Department of the TAIFEX, and confirm the receipt thereof by telephone.
- Deliver to the Clearing Department of the TAIFEX the original of the "Application by Clearing Member to Restrict/Suspend Trading by a Consigning Futures Commission Merchant" before the close of the regular trading session on the next business day.
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Procedures for Applications to Cancel the Restriction or Suspension of Trading
A clearing member filing an application during the regular trading session to cancel the restriction or suspension of trading by the consigning futures commission merchant shall comply with the following procedures:
- Confirm the total amount of outstanding positions held by the consigning futures commission merchant.
- Complete an "Application by Clearing Member to Cancel the Restriction/Suspension of Trading by a Consigning Futures Commission Merchant" (Schedule 2), fax the same to the Clearing Department of the TAIFEX, and confirm the receipt thereof by telephone.
- Notify the consigning futures commission merchant by telephone and in writing that the restriction or suspension of its trading has been canceled.
- Deliver to the Clearing Department of the TAIFEX the original of the "Application by Clearing Member to Cancel the Restriction/Suspension of Trading by a Consigning Futures Commission Merchant" before the close of the regular trading session on the next business day.
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Procedures for Liquidating Futures Trading Contracts on Behalf of the Consigning Futures Commission Merchant
- To carry out the liquidation of open positions held by a consigning futures commission merchant for its own or client accounts, the clearing member shall open a "position disposal account" with an account number of "900000+check codes" in a total of 7 codes and file a report with the Clearing Department of the TAIFEX.
- In the event that a consigning futures commission merchant whose trading has been restricted or suspended still fails to abide by the clearing and settlement consignment contract between the two parties, the clearing member may, in consideration of risk management for futures positions, liquidate the open positions held by the consigning futures commission merchant for its own or client accounts.
- Before carrying out liquidation on behalf of the consigning futures commission merchant, the clearing member shall notify the Clearing Department of the TAIFEX by telephone and fax it the "Report of Liquidation of Open Positions by Clearing Member on behalf of the Consigning Futures Commission Merchant" (Schedule 3), and simultaneously notify the consigning futures commission merchant by telephone and in writing.
- When carrying out liquidation on behalf of the consigning futures commission merchant, the clearing member shall be limited to the volume reported by it; any losses arising due to exceeding of the reported position volume shall be born by the clearing member.
- After receiving the trade confirmations, the clearing member carrying out liquidation on behalf of the consigning futures commission merchant shall promptly notify the consigning futures commission merchant of the number of lots executed and transaction prices of the liquidated positions.
- Upon receiving the trade confirmations from the clearing member, the consigning futures commission merchant shall immediately notify the futures trader whose open positions were liquidated, and prepare a "Position Liquidation Report" (Schedule 4) and fax the same to the clearing member to report the information about futures trader positions to be liquidated.
- After receiving the report faxed by the consigning futures commission merchant, the clearing member shall, on the day of the transaction, at 2:30 p.m. if close of market is at 1:45 p.m. pursuant to the futures trading contract, or at 4:30 p.m. if close of market is at 4:15 p.m. pursuant to the futures trading contract, execute "position transfer" via the on-line clearing system to assign the positions in the position disposal account by volume to the proprietary or client account reported by the consigning futures commission merchant.
- In the event that at the same time the clearing member carries out liquidation operations on behalf of the consigning futures commission merchant, the futures trader of the consigning futures commission merchant also liquidates positions, such that redundant positions occur, the consigning futures commission merchant shall handle the situation through its segregated Error Account.
- The consigning futures commission merchant shall provide the information about the futures trader's liquidated positions to the clearing member. The liquidation principles shall be specified in its internal control system and reported to the TAIFEX. The consigning futures commission merchant shall be liable for damages to a futures trader whose positions should not be liquidated but are reported for liquidation.
- The clearing member carrying out liquidation operations on behalf of the consigning futures commission merchant shall deposit clearing margin where there remain open positions in the position disposal account after settlement of accounts.
- The clearing member may charge the consigning futures commission merchant for any expenses arising from liquidating positions on its behalf.
- After completing the handling of the positions, the clearing member shall file a report with the TAIFEX by the close of the regular trading session on the next business day, annexing the following documents:
- Original of the "Report of Liquidation of Open Positions by Clearing Member on behalf of the Consigning Futures Commission Merchant."
- Photocopies of the margin call notification to the consigning futures commission merchant and the notification of liquidation of open positions on its behalf.
- Photocopies of the consignment order and trading record for the liquidation of positions on the consigning futures commission merchant's behalf.
- Original of the "Position Transfer Report" (Schedule 5).
- Photocopy of the trade confirmation statements for the day of the liquidation through the position disposal account.
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Specification of Rights and Obligations
- Events upon the occurrence of which the clearing member may restrict trading or suspend trading by the consigning futures commission merchant or liquidate futures contracts on its behalf shall be specified in the clearing and settlement consignment contract between the clearing member and the consigning futures commission merchant.
- The respective rights and obligations of the clearing member, the consigning futures commission merchant, and the futures trader deriving from the restriction of trading or suspension of trading of the consigning futures commission merchant, or liquidation of futures contracts on its behalf, by the clearing member in accordance with these Procedures, and the measures for handling for any damage and trading disputes arising therefrom, shall respectively be specified in the clearing and settlement consignment contract between the clearing member and the consigning futures commission merchant and the consignment contract between the consigning futures commission merchant and the futures trader.
- The operational principles and procedures for the restriction of trading or suspension of trading of the consigning futures commission merchant, or liquidation of futures contracts on its behalf, by the clearing member shall be specified in the Business Rules of the clearing member and reported to the TAIFEX.
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