Clearing houses are responsible for the clearing and settlement of executed futures trades and are obliged to honor futures contracts. The involvement of clearing houses ensures the reliable performance of futures contracts. Every futures exchange has its own clearing house, though the organization of each exchange’s clearing house varies. Some are independent organizations, while others belong to the exchange. Currently, Taiwan’s futures clearing house is a concurrently operated enterprise of the Taiwan Futures Exchange Corporation (TAIFEX).
Pursuant to Chapter 3, Article 46 of Taiwan’s Futures Trading Act, the clearing of futures trades is executed by a clearing member through the clearing house. Pursuant to Article 73 of the Operating Rules of the Taiwan Futures Exchange Corporation, participants in the clearing and settlement operations of the exchange must enter into clearing and settlement contracts with TAIFEX and obtain clearing member licenses. Pursuant to Article 76 of the Operating Rules, clearing members must comply with TAIFEX’s Operating Rules, the clearing and settlement contract, and other rules, regulations, and public announcements. Clearing members also have a duty to fulfill all settlement obligations to TAIFEX and other related responsibilities. In addition, pursuant to Article 78 of the Operating Rules, clearing members accepting a mandate to engage in futures clearing and settlement operations must enter into a contract with the mandating FCM to handle clearing and settlement for it.
To carry out the aforementioned contract clearing and settlement operations and ensure the fulfillment of contractual duties, TAIFEX has established the following related measures:
- Clearing member licensing standards
- Market financial security mechanisms
- Margin requirements for traded products
- Market position surveillance and oversight
- Clearing and settlement procedures