The clearing and settlement process is undertaken through the Clearing Department of the TAIFEX. Those who intend to conduct clearing business should apply for a clearing membership to the Clearing Department of the TAIFEX. All the FCMs have to clear their positions through a registered clearing member which has to demonstrate financial compliance at all times and which falls into one of the following three categories according to different business scopes:
- Individual Clearing Member - a FCM member who is entitled to clear trades for its own client and proprietary accounts.
- General Clearing Member - a FCM member who is entitled to clear trades for its client and proprietary accounts and for those of other FCMs
- Special Clearing Members - a non-FCM financial institution that applies for concurrent operation of futures clearing business and is entitled to clear trades on behalf of the FCMs.
The Clearing Department of the TAIFEX administers the collection of margins from clearing members and the transfer of funds among members to settle losses and gains on a daily basis. Each clearing member is required to open a client margin account and a house margin account with one of the settlement banks designated by the TAIFEX. Customer funds must be maintained in the client account and segregated from clearing members' own assets in the house account.
The Clearing Department calculates the liabilities of (1) clearing margin; (2) variation margin and (3) clearing fees for each clearing member after the market closes. If the amount of funds in the clearing member's account is insufficient to meet its liabilities, the clearing member will receive margin call from the TAIFEX and have to post required margin into its bank account to supplement the deficit.