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These Procedural Guidelines are specially adopted in order to effectively implement the provisions of Article 10, Subparagraph 8 of the Taiwan Futures Exchange Corporation Criteria for Clearing Membership.
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When a clearing member is unable to remain in conformance with clearing member standards, it shall report to this Corporation by the tenth day of the following month, and shall make corrections within the prescribed time period.
In cases where a clearing member is unable to remain in conformance with clearing member standards, this Corporation will adopt the following measures:
- Issue a letter to the clearing member requesting an explanation of the reasons and a concrete plan for corrections, as well as ongoing submissions of the most recent financial information.
- Issue a letter of notification to the competent authority.
- When necessary, undertake audits to gain an understanding of the firm's financial and operational condition, and conduct follow-up guidance.
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When a clearing member is unable to remain in conformance with the following clearing member standards, corrections shall be required to be made within a period of one month:
- Individual clearing members:
- Total current assets remain below the level of 1.2 times total current liabilities for five successive business days.
- Total liabilities less futures traders' equity are over 80 percent of owner's equity.
- Owner's equity is below 80 percent of paid-in capital.
- The adjusted net capital of an individual clearing member with less than NT$100 million of designated operating funds is less than 30 percent of the aggregate amount of client margins required for unliquidated positions.
- The adjusted net capital of an individual clearing member with NT$100 million or more but less than NT$200 million of designated operating funds is less than 25 percent of the aggregate amount of client margins required for unliquidated positions.
- The adjusted net capital of an individual clearing member with NT$200 million or more of designated operating funds is less than 20 percent of the aggregate amount of client margins required for unliquidated positions.
- General clearing members:
- Total current assets remain below total current liabilities for five successive business days.
- Total liabilities less futures traders' equity are higher than owner's equity.
- Owner's equity is below 80 percent of paid-in capital.
- The clearing member's adjusted net capital is less than 20 percent of the aggregate amount of client margins required for unliquidated positions.
- Special clearing members:
- Total current assets remain below total current liabilities for five successive business days.
- Total liabilities less futures traders' equity are higher than owner's equity.
- Owner's equity is less than paid-in capital.
- The clearing member's adjusted net capital is less than 20 percent of the aggregate amount of client margins required for unliquidated positions.
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Upon the occurrence of any one of the following conditions, a clearing member shall be required to make corrections within 15 days:
- The clearing member fails to obtain within the prescribed time period a credit rating report issued by a credit rating institution approved by the competent authority.
- An individual clearing member with designated operating funds of less than NT$100 million fails to establish an irrevocable line of credit with a clearing bank exclusively for futures margin settlements as prescribed by regulations.
- A clearing member fails to maintain deposits of clearing and settlement funds in accordance with regulations after carrying out clearing and settlement operations.
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When any condition in Article 3 applies to a clearing member and the clearing member has been required to make corrections within a prescribed period of time more than twice within the most recent one year, or any of the following conditions have occurred during the period prescribed for corrections, this Corporation will immediately raise the amount of the given clearing member's clearing margin to 1.2 times the published amount:
- Individual clearing members:
- Total current assets are below total current liabilities.
- Total liabilities less futures traders' equity are higher than owner's equity.
- Owner's equity is below 60 percent of paid-in capital.
- The clearing member's adjusted net capital is less than 20 percent of the aggregate amount of client margins required for unliquidated positions.
- General clearing members:
- Total current assets are below total current liabilities.
- Total liabilities less futures traders' equity are higher than owner's equity.
- Owner's equity is below 60 percent of paid-in capital.
- The clearing member's adjusted net capital is less than 20 percent of the aggregate amount of client margins required for unliquidated positions.
- Special clearing members:
- Total current assets are below total current liabilities.
- Total liabilities less futures traders' equity are higher than owner's equity.
- Owner's equity is below 60 percent of paid-in capital.
- The clearing member's adjusted net capital is less than 20 percent of the aggregate amount of client margins required for unliquidated positions.
- When a clearing member achieves conformance with this Corporation's standards for clearing member status for five successive business days, this Corporation may cancel the measure raising the amount of its clearing bond on the following business day.
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A clearing member unable to maintain conformance with Articles 7 or 8 of the Criteria for Clearing Membership shall be required to make corrections within a period of one month.
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When a clearing member has legitimate reasons for being unable to make corrections within the prescribed period of time, it may, prior to the expiry of the period, apply to this Corporation for a one-time extension that shall not exceed the [respective periods] set forth in Articles 3, 4, and 6.
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When a clearing member has been required by this Corporation to make corrections and either fails to carry out corrective measures or fails to meet standards after carrying out corrective measures, this Corporation will immediately terminate its clearing member status.
Where any one of the following conditions apply to a clearing member, it will be deemed failure to meet standards after carrying out corrective measures as referred to in the preceding paragraph:
- The clearing member has met standards within the prescribed time period after carrying out corrective measures, but within one month thereafter fails a second time to conform with the same standard.
- The clearing member has been required to make corrections more than three times within the most recent one-year period.
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These Guidelines and any amendments hereto shall take force after submission to and approval and recordation by the competent authority.
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