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Futures commission merchants ("FCMs") and clearing members shall abide by these Points for Attention when depositing proprietary funds as margins to preserve the rights and interests of futures traders during open trading and to carry out clearing obligations.
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An FCM or clearing member shall deposit proprietary funds under the following circumstances:
- Where a futures trader has already deposited the margin in the FCM's segregated customer margin account, but due to circumstances not attributable to the FCM itself, such as natural disaster, rebellion, collateral war damage, elections, or delay in financial institution operations, the given FCM is unable to transfer funds from its segregated customer margin account to the clearing member's segregated customer margin account within the prescribed period of time, or to transfer securities from its securities margin collateral account to the securities margin collateral account of the Taiwan Futures Exchange Corporation ("TAIFEX").
- Where an FCM has already deposited the margin in the clearing member's segregated customer margin account, but due to circumstances not attributable to the clearing member itself, such as natural disaster, rebellion, collateral war damage, elections, or delay in financial institution operations, the given clearing member is unable to transfer funds from its segregated customer margin account to the TAIFEX's segregated clearing fund account within the prescribed period of time.
- Where an FCM has issued a margin call to a futures trader, but the deadline for payment has not yet been reached and the futures trader has not yet paid the margin, resulting in insufficient funds in the FCM's segregated customer margin account and the possibility that the rights of other customers to place orders will be affected.
- Where a clearing member has issued a margin call to a consigning FCM, but the deadline for payment has not yet been reached and the consigning FCM has not yet paid the margin, resulting in insufficient funds in the clearing member's segregated customer margin account and the possibility that the rights of other customers to place orders will be affected.
- Where an FCM or a clearing member carries out backup trades in accordance with the Operating Procedures for Use of Backup Futures Trading Accounts and the funds in the supported FCM's segregated customer margin account are insufficient for payment of the margin required for the supported account, leading to the possibility that the rights of other customers to place orders will be affected.
- Where an FCM encounters a negative equity balance in a futures trader’s margin account as referred to in Article 57-1 of the TAIFEX Operating Rules.
- Where an FCM has deposited an NT Dollar amount in the futures brokerage business customer margin account in the form of central book-entry bonds, and the fair value of the central book-entry bonds of the given day is lower than the original acquisition cost.
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When an FCM or a clearing member uses proprietary funds for a margin deposit, the amount of the margin deposit shall be limited to the amounts required by each of the respective circumstances listed in Point 2.
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When an FCM or a clearing member withdraws proprietary funds originally deposited in a segregated customer margin account, it shall do so in accordance, respectively, with the following provisions:
- An FCM or a clearing member which has deposited proprietary funds in accordance with subparagraphs 1 or 2 of Point 2 shall withdraw the proprietary funds originally deposited in the segregated customer margin account within two business days after the financial institution resumes normal operations.
- An FCM or a clearing member which has deposited proprietary funds in accordance with subparagraphs 3 or 4 of Point 2 shall withdraw the proprietary funds originally deposited in the segregated customer margin account within two business days after receiving the margin call for increasing the customer's margin or after liquidation of the customer's open positions, provided that its account books must show futures trader's equity equal to the amount of the segregated customer margin account before the withdrawal may take place.
- An FCM or a clearing member which has deposited proprietary funds in accordance with subparagraph 5 of Point 2 shall withdraw the proprietary funds originally deposited in the segregated customer margin account within two business days after the supported FCM completes position adjustment in the supported backup account.
- An FCM which has deposited proprietary funds in accordance with subparagraphs 6 and 7 of Point 2 shall withdraw the proprietary funds originally deposited in the segregated customer margin account within one business day from the day when the balance in proprietary funds in the customer margin account is greater than the sum of negative amounts of futures trader's equity and the shortfall between the fair value of the central book-entry bonds of the given day and the original acquisition cost.
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When using proprietary funds for a margin deposit, an FCM or a clearing member shall handle the deposit and withdrawal procedures in accordance with the following provisions:
- Deposits
- When handling the deposit and withdrawal procedures in accordance with subparagraphs 1 to 5 of Point 2:
- An FCM shall transfer the proprietary funds from its proprietary account into the segregated customer margin account of the clearing member.
- A clearing member shall first transfer the proprietary funds from its proprietary account into its segregated customer margin account, and then transfer the funds from its segregated customer margin account into the TAIFEX's segregated clearing margin account.
- When handling the deposit and withdrawal procedures in accordance with subparagraphs 6 and 7 of Point 2, the FCM shall use proprietary funds to make up any deficiency in proprietary funds when the balance of proprietary funds deposited by the FCM in the customer margin account is smaller than the sum of negative amounts of futures trader's equity and the shortfall between the fair value of the central book-entry bonds of the given day and the original acquisition cost. However, the FCM may use any commission, interest or other handling fees not yet withdrawn in the customer margin account to offset the deficiency in proprietary funds.
- Withdrawals
- When handling the deposit and withdrawal procedures in accordance with subparagraphs 1 to 5 of Point 2:
- When an FCM withdraws proprietary funds, it shall note on the withdrawal application that the funds being withdrawn are proprietary funds. When the clearing member processes withdrawal of the funds, it shall transfer the funds directly into the FCM's proprietary account.
- When a clearing member withdraws proprietary funds, it shall transfer the funds directly from the clearing member's segregated customer margin account into its proprietary account.
- An FCM or clearing member applying to the TAIFEX for withdrawal of proprietary funds shall apply for withdrawal of the same amount as in each respective original deposit.
- When handling the deposit and withdrawal procedures in accordance with subparagraphs 6 and 7 of Point 2, the FCM shall allocate the surplus in the proprietary funds from the customer margin account to its own proprietary funds account when the balance of proprietary funds deposited by the FCM in the customer margin account is larger than the sum of negative amounts of futures trader's equity and the shortfall between the fair value of the central book-entry bonds of the given day and the original acquisition cost.
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When an FCM or a clearing member uses proprietary funds for a margin deposit in accordance with subparagraphs 1 through 5 of Point 2, prior to the close of the regular trading session on the same day it shall fax to the TAIFEX an "FCM/Clearing Member Report of Proprietary Funds Use for Margin Deposit" (Appendix 1), and the original copy of such Report shall be submitted to the TAIFEX on the next following business day.
When an FCM uses proprietary funds for a margin deposit in accordance with subparagraph 6 of Point 2, it shall report to the TAIFEX the negative equity balance in the futures trader’s margin account in accordance with Article 57-1 of the TAIFEX Operating Rules.
When an FCM or a clearing member uses proprietary funds for a margin deposit, it shall retain the written materials in connection with the procedures for auditing by the TAIFEX.
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When an FCM or a clearing member applies for withdrawal of proprietary funds originally deposited in a segregated customer margin account in accordance with subparagraphs 1 to 5 of Point 2, it shall first fax to the TAIFEX an "FCM/Clearing Member Application for Withdrawal of Proprietary Funds from Segregated Customer Margin Account" (Appendix 2); for withdrawals pursuant to subparagraph 2 of Point 4, it shall fax a "Proprietary Funds Withdrawal Statement" (Appendix 3) and evidentiary documents, including statements of customer margins and equity amounts. Withdrawal may be carried out only after approval has been issued by the TAIFEX.
The FCM or clearing member shall deliver to the TAIFEX the originals of the "FCM/Clearing Member Application for Withdrawal of Proprietary Funds from Segregated Customer Margin Account" and the "Proprietary Funds Withdrawal Statement" referred to in the preceding paragraph on the next following business day, and shall retain hard copies of the data for the relevant procedures for inspection by the TAIFEX.
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