TAIWAN FUTURES EXCHANGE-Clearing-Exchange Traded Derivatives Clearing-Margining-Margin Calculation

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Clearing

Exchange Traded Derivatives Clearing

OTC Derivatives Clearing

Qualifying Central Counterparty (QCCP) Disclosure

Quantitative Disclosure

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Clearing

Exchange Traded Derivatives Clearing

OTC Derivatives Clearing

Qualifying Central Counterparty (QCCP) Disclosure

Quantitative Disclosure

Margin Calculation

Gross margining method	TAIFEX calculates and collects clearing margins from clearing members using the gross margining method. According to this method, the positions under each clearing member’s account will be margined on a gross basis. For instance, Clearing Member A (an individual clearing member) holds two client accounts, and one of the accounts holds a 3-lot long position and the other account holds a 2-lot short position. Clearing Member A will therefore be margined on a 5-lot gross position by TAIFEX.
Margin requirement	The margin requirement shall be calculated and collected for a clearing member’s margined positions on a daily basis, using the gross margining method described above. For instance, if the clearing margin level for one contract is NT$220,000, the margin requirement for Clearing Member A with a 5-lot position as stated in the prior example, is NT$ 1.1 million for the day.
Types of gains (losses)	TAIFEX calculates three types of gains (losses) on a daily basis for its clearing members. These are gains (losses) on daily transactions, gains (losses) on open positions, and gains (losses) on expired positions. These three types of gains (losses) are included in the calculation of the principal's margin account balance. (For options contracts, only gains (losses) on expired positions are calculated.)
Gains (losses) on daily transactions	The gains (losses) on a clearing member’s realized trades are calculated daily. The balance is derived from the price difference between the transactions and the daily settlement prices. Index Futures, Commodity Futures and FX Futures Contracts Formula: Number of contracts in a given opening trade made by a clearing member in a day × (the daily settlement price for the day – transaction price) × contract multiplier (value per quoted unit) Example: Consider a certain client of Clearing Member A opened a long position of June TAIEX futures at 9,500 on a certain day. Another client opened 3 short positions of June TAIEX futures at 9,200 on the same day (the daily settlement price is 9,000 for the day). Thus, TAIFEX’s Clearing System calculates a daily transaction gain of NT$20,000 for Clearing Member A. Single Stock Futures Formula: Number of contracts in a given opening trade made by a clearing member in a day × (value of the contract at the daily settlement price – value of the contract at the transaction price on the day) Value of the contract at the daily settlement price for the day = (the daily settlement price for the day × contract multiplier for the day) + the fair value of other distributable gains Value of the contract at the transaction price on the day = (the transaction price on the day × contract multiplier for the day) + the fair value of other distributable gains
Gains (losses) on open positions	The gains (losses) of the balance of positions held by a clearing member will be calculated on a gross basis, with the amount being derived from the price difference between the daily settlement price and the settlement price on the previous trading day. Index Futures, Commodity Futures and FX Futures Contracts Formula: The daily balance of the position held × (the daily settlement price – the daily settlement price on the previous trading day) × contract mutiplier (value per quoted unit) Example: The balance of Clearing Member A’s position held, recorded after the close of clearing procedures on the previous trading day is a 250-lot long position of June TAIEX futures, and the clearing member sold a 300-lot contract of June TAIEX futures (the daily settlement prices on the previous day and on the day of the transaction are 9,200 and 9,500 respectively). Thus, TAIFEX’s Clearing System calculates a loss of NT$3,000,000 on the open positions of Clearing Member A. Single Stock Futures Formula: The daily balance of the positions held × (value of the contract at the daily settlement price – value of the contract at the daily settlement price on the previous trading day) Value of the contract at the daily settlement price = (the daily settlement price × contract multiplier on the day of calculation) + the fair value of other distributable gains Value of the contract at the daily settlement price on the previous trading day = (the daily settlement price on the previous day × contract multiplier on the day of calculation) + the fair value of other distributable gains (1)The underlying security is common stocks For buy-side and sell-side positions held in Single Stock Futures Contracts at market close in the regular trading session of the business day preceding the effective date of contract adjustment (i.e., the ex-dividend date of the Underlying Securities), the addition to the buy side equity amount and the deduction from the sell-side equity amount shall be adjusted on the effective date of contract adjustment or after-hours trading session of the business day preceding the effective date of contract adjustment by the equivalent of the cash dividend amount received on shares of the Underlying Securities in the quantity of the Underlying Assets as defined in Article 12.（Article 24, Taiwan Futures Exchange Corporation Trading Rules for Single Stock Futures Contracts） (2)The underlying security is exchange-traded funds(ETFs) For buy-side and sell-side positions held in Single Stock Futures Contracts at market close in the regular trading session of the business day preceding the effective date of contract adjustment (i.e., the ex-dividend date of the Underlying Securities), the addition to the buy-side equity amount and the deduction from the sell-side equity amount shall be adjusted on the effective date of contract adjustment or after-hours trading session of the business day preceding the effective date of contract adjustment by the equivalent of the income distribution amount received on the Underlying Securities in the quantity of the Underlying Assets as defined in Article 12, with amounts of less than NT$1.00 unconditionally rounded down. （Article 24-1, Taiwan Futures Exchange Corporation Trading Rules for Single Stock Futures Contracts）
Gains (losses) on expired positions	Index Futures, Commodity Futures and FX Futures Contracts If a clearing member holds positions of expiring contracts until the expiry day, the gain (loss) on the expired positions will be calculated and the appropriate adjustments will be made to the clearing member’s account. The amount will be derived from the price difference between the final settlement price and the daily settlement price for the previous trading day. Formula: The balance of the position held in the expiring contract after the close of trading hours on the last trading day × (the final settlement price – the daily settlement price on the previous trading day) × contract multiplier (value per quoted unit) Example: After market close on the final settlement day of June TAIEX Futures, the balance of Clearing Member A’s recorded holding positions is a 150-lot long position and a 70-lot short position in June TAIEX Futures, the final settlement price and the daily settlement price on the previous trading day are 9300 and 9200. Thus, TAIFEX’s Clearing System calculates a gain of NT$1.6 million on the expired positions of Clearing Member A on the final settlement day. Stock Index Options If the “final buyer exercise list” shows that a clearing member has held positions of expiring contracts until their expiry day, the gains (losses) on those expired positions will be calculated. The gain (loss) number is derived from the price difference between the final settlement price and the strike price. Formula: The balance of a clearing member’s open positions according to the final buyer exercise list on the expiry date × (the final settlement price – the strike price) × value of an index point Example: After market close on the final settlement day of June TAIEX Options, the balance of Clearing Member A’s positions in June TAIEX Futures Options with strike price 5600 is a 150-lot long call position, and the settlement price is 5,700. Thus, TAIFEX’s Clearing System calculates a gain of NT$0.75 million from the expired positions on the final trading day. Equity Options If the “final buyer exercise list” shows that a clearing member has held positions of expiring contracts until their expiry day, then the gains (losses) on the expired positions will be calculated. The gain (loss) is derived by the net difference between the value of the Underlying Assets, as calculated based on the final settlement price,and the exercise amount. Commodity Options If the “final buyer exercise list” shows that a clearing member has held positions of expiring contracts until their expiry day, then the gains (losses) of the expired positions will be calculated. The gain (loss) is derived from the price difference between the final settlement price and the strike price. Single Stock Futures If there is a balance of open positions of expiring contracts under a clearing member’s account on the expiry date, then the gains (losses) on the expired positions will be calculated. The gain (loss) is derived from the price difference between the contract value at the final settlement price and the contract value at the daily settlement price for the previous trading day. Formula: The daily balance of the positions held on the final trading day × (value of the contract at the final settlement price – value of the contract at the settlement price for the previous trading day) (1) The underlying security is common stocks Value of the contract at the final settlement price = (the final settlement price × contract multiplier for the day) + the fair value of preemptive rights to participate in the cash capital increase event + the fair value of other distributable gains Value of the contract at the daily settlement price on the previous day = (the daily settlement price on the previous day × contract multiplier for the previous day) + the fair value of other distributable gains Fair value of preemptive rights to participate in the cash capital increase granted is calculated with the following formulas: a.If the payment deadline occurs prior to the last trading day: Max [(the closing price of the underlying securities at the time of the deadline for payment – the subscription of the cash capital increase) × the number of shares that may be subscribed with the preemptive rights to participate in the cash capital increase, 0] b. If the payment deadline occurs after the last trading day: Max [(the closing price of the underlying securities on the last trading day – the subscription of the cash capital increase) × the number of shares that may be subscribed with the preemptive rights to participate in the cash capital increase, 0] Prior to the expiry of the single stock futures contract, the fair value of preemptive rights to participate in the cash capital increase granted is not incorporated into the calculation of the value of the single stock futures contract. However, on the final settlement day, the value of the contract at the final settlement price is inclusive of the fair value of preemptive rights to participate in the cash capital increase granted. The calculation of the fair value of other distributable gains equivalent stated previously shall be handled pursuant to Article 27 of the TAIFEX Trading Rules for Single Stock Futures Contracts. (2)The underlying security is exchange-traded funds(ETFs) Value of the contract at the final settlement price = (the final settlement price × contract multiplier for the day) + the fair value of other distributable gains Value of the contract at the daily settlement price on the previous day = (the daily settlement price on the previous day × contract multiplier for the previous day) + the fair value of other distributable gains
Daily clearing margin balance	The TAIFEX clearing system calculates each clearing member’s margin balance after trading hours each day based on each clearing member’s daily deposit or withdrawal of cash or non-cash margin, daily transaction gains (losses), gains (losses) on open positions, and gains (losses) on expired positions.

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