In consideration of risk management, both clearing members and FCMs should properly monitor the positions of their proprietary and client accounts. The responsibility of risk control is shared among TAIFEX, the clearing members and the FCMs. The position monitoring hierarchy of the futures market is as follows:
The criteria for position monitoring to the clearing members include:
- Adjusted Net Capital (ANC): ANC is the position management criteria generally adopted by global futures exchanges and is computed in accordance with the rules prescribed by the FSC.
- Clearing Margin:the number of newly increased contracts of each clearing member shall be limited by its excess margin deposits. To maintain the right of clients under Article 43 of the Regulations Governing Futures Commission Merchants to pay in full and in advance the margin required by an order, and to avoid clearing members having insufficient excess margin on deposit with TAIFEX as a result of being unable to deposit funds at night, in the event that the clearing margin required by a new position exceeds a clearing member's excess margin after the cut off time for making deposits to cover margin calls for the regular trading session, TAIFEX may temporarily refrain from limiting the member's new orders within a given amount until the end of the after-hours session (05:00 on the following day).
- Concentration risk: When the percentage of the potential market exposure of any clearing member to the total potential market exposures of all TAIFEX clearing member reach 20 percentage, or the percentage of the open positions in any single series of any option contract of any clearing member to the total open interest of the same series reach 20 percentage, TAIFEX may impose an additional clearing margin on the clearing member.
- The percentage of the loss on the net open positions of each clearing member to its adjusted net capital shall not exceed the prescribed level.
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