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Margin "A" on Index Options = Closing price of the underlying spot index × Value per index point × Risk coefficient
The value obtained by this formula is rounded upward to the nearest NT$1000. The risk coefficient is set in accordance with Article 4-1 of the "TAIFEX Methods and Standards for Receipt of Clearing Margins", which provides as follows: "The calculation of the risk coefficient of clearing margins for stock index option contracts is based on the price movements of the underlying stock index within a certain period, anti-procyclicality and other possible factors with at least a 99 percent confidence interval to cover two-day premium price variation."
Margin "B" on Index Options is simply the "A" margin × 0.5, rounded up to the nearest NT$1000.
Margin "A" and Margin “B” of the TAIEX Weekly Options are the same as the TAIEX Options.

The method required by TAIFEX to calculate margins only indicates the minimum margin requirement; Article 46 of the "Regulations Governing Futures Commission Merchants" also provides as follows: "In addition to the margins set by the TAIFEX futures exchange in accordance with Article 15, paragraph 1, subparagraph 4 of the Futures Trading Act, a futures commission merchant may collect extra margins depending on a customer's credit strength and the nature of the trades conducted by the customer." An FCM is therefore within its rights to collect additional margin from a particular customer.

The ratio can be figured out, the percentage of initial margin and maintenance margin over clearing margin, as prescribed by TAIFEX. The ratio for initial margin and maintenance margin of all kinds of TAIFEX products (except for Mini-TAIEX futures, Mini-TAIEX Flexible futures, Micro-TAIEX futures, Mini Electronics Sector Futures, Mini Finance Sector Futures, and single stock futures with 1,000 shares of underlying security as exchange-traded funds(ETFs)(Ex: Mini-Yuanta/P-shares Taiwan Top 50 ETF Futures)) is 1.35 and 1.035. Margin for Mini-TAIEX futures (including weekly contract) and Mini-TAIEX Flexible futures are set at 1/4 of TAIEX futures margin, margin for Micro-TAIEX futures is set at 1/20 of TAIEX futures margin, margin for Mini-Electronics Sector futures is set at 1/8 of Electronics Sector Index futures margin and margin for Mini-Finance Sector futures is set at 1/4 of Finance Sector Index futures margin, margin for single stock futures with 1,000 shares of underlying security as ETFs is set at 1/10 of single stock futures with 10,000 shares of the same underlying security margin(Ex: margin for Mini-Yuanta/P-shares Taiwan Top 50 ETF Futures is set at 1/10 of Yuanta/P-shares Taiwan Top 50 ETF Futures margin).
In the case of TAIEX futures, for example, let us suppose the currently announced standard is 61,000 for the clearing margin, 64,000 for the maintenance margin, and 83,000 for the initial margin. The aforesaid initial margin and maintenance margin are calculated by the above ratio and rounded up to the nearest NT$1000.

Taking TAIEX futures as an example, the margin is set in accordance with Article 4 of the "Methods and Standards for Receipt of Clearing Margins", which provides as follows: "The clearing margin for a stock index futures contract shall be the futures index multiplied by the value of each index point multiplied by the risk coefficient."
The risk coefficient is calculated based on the movement of a stock index expressed in points within a certain period, anti-procyclicality and other possible factors, with at least a 99 percent confidence interval to cover two-day index price variation. Article 5, subparagraph 1 of the "Methods and Standards for Receipt of Clearing Margins" provides as follows: "If the difference between the current clearing margin level and the level calculated daily reaches adjusting level (the adjusting level of FX futures is 5 percent, the adjusting level of the rest contracts is 10 percent), TAIFEX may proceed to adjust the clearing margin."
Adjustments of the margin for TAIEX futures are not based simply on index movements; rather, the current margin is compared each day against the clearing margin obtained each day on the basis of the risk coefficient. When they differ by 10 percent or more, the margin may be adjusted.

Article 43, paragraph 2 of the "Regulations Governing Futures Commission Merchants" provides as follows: "Where a futures commission merchant engages in sub-brokered foreign futures trading services, in collecting margins or premiums from the futures commission merchant placing the order, it shall act in accordance with the requirements of the foreign futures exchange."

The offshore foreign investors must meet margin requirements by depositing margins in accepted foreign currencies including US Dollars, Euros, Yen, Pounds, Australian Dollars, Hong Kong Dollars, and Renminbi. The profit and loss calculation of all products is in terms of denominated currency of respective contracts.

The historical margin data of Taifex listing contracts is announced on the Taifex's website, and can be inquired on the historical data query page.

You can use an FCM's MTS system to apply to create short calendar strangles or straddles from calls or puts expiring in different months. However, the trading orders used to create a strangle or straddle must specify the same expiration month. For more information on other types of combination positions, visit https://www.taifex.com.tw/enl/eng5/marginReqSSO.

Combination positions can be created in certain eligible TAIFEX futures contracts (TX, TE, TF, MTX, MXFFX, TMF, XIF, GTF, G2F, E4F, BTF, SOF, SHF, ZEF, ZFF, GDF, TGF, RHF, RTF, TJF, UDF, SPF, UNF, SXF, F1F, XEF, XJF, XBF, XAF, BRF, STF) . Positions are first taken through separate orders, then open long and short positions are combined one-to-one and margin requirements are computed based on the combinations. More information is available on the TAIFEX website at https://www.taifex.com.tw/enl/eng5/marginReqIndexFut
The detail applicable to the combination of single stock futures with the same underlying is available on the TAIFEX website at https://www.taifex.com.tw/enl/eng5/marginReqSSF

The TAIFEX system currently only allows for the following combinations of futures and options positions: TX and TXO; MTX and TXO; TMF and TXO; TF and TFO; TE and TEO; ZEF and TEO; ZFF and TFO; Single Stock Futures and Equity Options expired in the same expiration date except for Flexible Contracts.
With five exceptions, all these combination positions consist of one futures contract and four options contracts; the exceptions are MTX/TXO combination, in which the ratio is one futures contract versus one options contracts, TMF/TXO combination, in which the ratio is five futures contract versus one options contracts, ZEF/TEO combination, in which the ratio is two futures contracts versus one options contract, ZFF/TFO combination, in which the ratio is one futures contract versus one options contract, Single Stock Futures/Equity Options combination where underlying securities are common stocks, in which the ratio is either one futures contract with 2,000 shares of underlying security versus one options contract or twenty futures contracts with 100 shares of underlying security versus one options contract, and Single Stock Futures/Equity Options combination where underlying securities are exchange-traded funds(ETFs), in which the ratio is either one futures contract with 10,000 shares of underlying security versus one options contract or ten futures contracts with 1,000 shares of underlying security versus one options contract.
The combinations of futures and TAIEX Weekly Options are the same as the combinations of futures and TXO.
The detail applicable to the combination of single stock futures or equity options with the same underlying is available on the TAIFEX website at
https://www.taifex.com.tw/enl/eng5/marginReqSSF.

Take TAIEX products(TX,MTX, Mini-TAIEX weekly futures, TMF, TXO, TAIEX Weekly Option), for example:

• The expiration dates for combination positions that should be the same：
  Bull Call Spread, Bear Call Spread, Bull Put Spread and Bear Put Spread: It currently only allows for combinations in which the expiration dates are the same.
• The expiration dates for combination positions that could be different：
  (1) Time call spread and Time put spread：
  It currently allows for combinations in which the expiration dates are different.
  (2) Straddle or Strangle Positions：
  It currently allows for combinations in which the expiration dates are the same or different.
  (3) Combinations of Options and Futures Positions：
  It currently allows for combinations in which the expiration dates are the same or different.
  (4) Conversion and Reverse Conversion：
  It currently allows for combinations in which the expiration dates are the same or different.

Clearing margins, maintenance margins, and initial margins for day trades in TAIFEX futures contracts are set at 50% of the margins for ordinary trades in the same contracts, rounded up to the nearest NT$1000. With TAIEX Futures (TX), for example, if the initial margin for an ordinary trade is NT$83,000, it then is NT$ 42,000 for a day trade.

The "Chinese National Futures Association Self-Regulatory Rules for Brokerage of Domestic Day Trading by Futures Commission Merchants" provide as follows:

• Must have entered into a futures brokerage agreement for at least three months.
• Must have completed at least 10 futures trades within the past year, regardless whether the trader entered into the brokerage contract less than a year before.

• If the underlying security is common stocks
  If the underlying security is common stocks listed on Taiwan Stock Exchange or Taipei Exchange, the margins requirements for Single Stock Futures are calculated using the formula as follows：
  Margin Requirements for Single Stock Futures(common stocks)
  ＝Futures Price × Multiple of Contract × Margin Rate：
  ※Margin Rates

  Group	Clearing Margin Rate	Maintenance Margin Rate	Initial Margin Rate
  Group 1	10.00%	10.35%	13.50%
  Group 2	12.00%	12.42%	16.20%
  Group 3	15.00%	15.53%	20.25%

  For single stock futures with risk parameters greater than 15%, TAIFEX will round up the actual computation result to the nearest hundredth and the rounded value will be used for clearing margin level. The maintenance margin and initial margin level will be calculated by adding a required mark up of clearing margin level.

• If the underlying security is exchange-traded funds(ETFs)
  If the underlying security is exchange-traded funds(ETFs) listed on Taiwan Stock Exchange or Taipei Exchange, the margin is set as follows:
  Margin Requirements for Single Stock Futur es(ETFs)
  ＝Futures Price × Multiple of Contract × Risk coefficient
  The calculation of the risk coefficient of margins for futures contracts is based on the price movements of the underlying spot within a certain period, anti-procyclicality and other possible factors with at least a 99 percent confidence interval to cover two-day premium price variation.

Currently TAIFEX will only reduce by one-half the margin for day trades of comparatively active spot month and nearest month futures contracts,
such as TAIEX Futures(TX)、Electronic Sector Index Futures(TE)、Finance Sector Index Futures(TF)、Mini-TAIEX Futures(MTX) and Mini-TAIEX weekly futures during regular trading session.
Up to now, the rule shall not apply to Single Stock Futures.

Article 15 of the "TAIFEX Trading Rules for Taiwan Stock Exchange Capitalization Weighted Stock Index Options Contracts" requires that the daily settlement price of the Contract be determined in one of the following ways:

• Based on the last transaction price of the regular trading session; or
• To be determined by TAIFEX if there is no transaction price in the last fifteen minutes before the close of regular trading session or the closing price referred to in the preceding item is deemed unreasonable.

In addition, Article 9 of the TAIFEX Trading Rules provides as follows: "The price limit of premium for the Contracts for the each trading session shall be10 percent of the most recent closing price of the underlying index on the Taiwan Stock Exchange." The determination of daily settlement price and the price limit of premium for the each trading session for the TAIEX Weekly Options are the same as the TAIEX Options.

The closing price of TAIEX options means the last transaction price before market close. Article 15 of the "TAIFEX Trading Rules for Taiwan Stock Exchange Capitalization Weighted Stock Index Options Contracts" requires that the daily settlement price of the Contract be determined in one of the following ways:

• Based on the last transaction price of the regular trading session; or
• To be determined by TAIFEX if there is no transaction price in the last fifteen minutes before the close of regular trading session or the closing price referred to in the preceding item is deemed unreasonable.

• Formula for Calculating Final Settlement Prices of Domestic Stock Index Contracts
  The final settlement price of domestic stock index futures and options contracts shall be determined based on the simple arithmetic mean index of the underlying index during the last 30 minutes of trading before market close of the Taiwan Stock Exchange or Taipei Exchange on the final settlement day, consisting of each disclosed underlying index during the trading period from 1:00 p.m. to 1:25 p.m. and the last index.
  The aforesaid arithmetic mean index shall be rounded to the nearest minimum price fluctuation as specified by each contract or, where the final settlement price is an exact uneven multiple of one half of the minimum price fluctuation, to the nearest higher minimum price fluctuation. If the Taiwan Stock Exchange or Taipei Exchange postpones market close or matching, TAIFEX may extend the aforementioned 30-minute sampling time.
• Formula for Calculating Final Settlement Prices of Foreign Stock Index Contracts
  (1)The final settlement price of TOPIX futures shall be determined based on TOPIX Special Quotation on the business day of Tokyo Stock Exchange (TSE) following the last trading day of TAIFEX TOPIX futures.
  (2)The final settlement price of Dow Jones Industry Average futures shall be determined based on the Special Opening Quotation of Dow Jones Industry Average index calculated by SPDJI on the last trading day of Dow Jones Industry Average futures.
  The final settlement price of S&P 500 Index futures shall be determined based on the Special Opening Quotation of S&P 500 Index calculated by SPDJI on the last trading day of S&P 500 Index futures.
  (3)Nasdaq-100 Index futures and PHLX Semiconductor Sector Futures:
  The final settlement price of Nasdaq-100 Index futures shall be determined based on the Special Opening Quotation of the Nasdaq-100 Index^® calculated by Nasdaq on the last trading day of Nasdaq-100 Index futures.
  The final settlement price of PHLX Semiconductor Sector Futures shall be determined based on the Special Opening Quotation of the PHLX Semiconductor SectorTM Index calculated by Nasdaq on the last trading day of PHLX Semiconductor Sector Futures.
  (4)The final settlement price of FTSE^® 100 Index Futures shall be determined based on the Expiry Value for the FTSE^® 100 Index as calculated by FTSE on the last trading day.
• Formula for Calculating Contract Values of Stock Index Futures Expired Positions
  The contract value of each NTD-denominated stock index futures expired position shall be determined by multiplying the Final Settlement Price of the Contract by the value of each index point, with amounts of less than NT$1.00 unconditionally rounded down.

The daily settlement price for a Single Stock Futures Contract shall be determined as follows:

• The daily settlement price for a Single Stock Futures Contract shall be the volume-weighted average price of all trades during the last minute before market close.
• If there is no trade price for the contract during the last minute before market close, the average of the highest unexecuted bid and lowest unexecuted ask quoted as of market close shall be taken as the daily settlement price.
• When there is no quoted bid price, the lowest quoted ask price shall be taken as the daily settlement price; when there is no quoted ask price, then the highest quoted bid price shall be taken as the daily settlement price.
• When there is no quoted bid nor ask price for a distant-month futures contract, then the price difference between the settlement price of the spot-month futures contract and the settlement price of the distant-month futures contract on the previous business day shall be taken as the basis of calculation, whereby the sum of the current day's settlement price of the spot-month futures contract and the above price difference will be taken as the daily settlement price of the distant-month contract.
• The daily settlement price shall be decided by the TAIFEX where a daily settlement price cannot be determined by any of the methods in subparagraphs 1 to 4, or if the settlement price as calculated by those methods is obviously unreasonable.

Except the adjusted contracts, the daily settlement price of Single Stock Futures Contracts with the same underlying and expiration dates should be the same.

The final settlement price for a Single Stock Futures or Equity option Contract shall be determined by the arithmetic mean of the prices of the underlying security on the securities market during the last 60 minutes of trading before market close on the final settlement day. If the final settlement day of a single stock futures or equity option contract falls on a day on which the underlying security is suspended from trading, the day for determining the final settlement price shall instead be the business day before the first day on which the trading is suspended.

• The underlying security is common stocks
  If the underlying security is common stocks listed on Taiwan Stock Exchange or Taipei Exchange, the calculation of the above mentioned mean price of the underlying security is the simple arithmetic mean of prices for the specific component stock of each disclosed Taiwan Stock Exchange or Taipei Exchange Capitalization Weighted Stock Index during the trading period from 12:30 p.m. to 1:25 p.m. and the last index. The aforesaid simple arithmetic mean prices shall be rounded to the second decimal place.
  The final settlement price of a single stock futures or equity option contract whose underlying security is not a component stock of the Taiwan Stock Exchange or Taipei Exchange Capitalization Weighted Stock Index on the final settlement day shall be the simple arithmetic mean of the last trading prices before each disclosure of the index within the last 60 minutes of trading. If there is no trading price for the underlying security within the trading session, the final settlement price shall be the opening reference price of the underlying security.
  If the Taiwan Stock Exchange or Taipei Exchange postpones market close or matching, TAIFEX may extend the aforementioned 60-minute sampling time.
• The underlying security is exchange-traded funds(ETFs)
  If the underlying security is exchange-traded funds(ETFs) listed on Taiwan Stock Exchange or Taipei Exchange, the calculation of the above mentioned mean price of the underlying security is the simple arithmetic mean of the last trading prices before each disclosure of Taiwan Stock Exchange or Taipei Exchange Capitalization Weighted Stock Index during the trading period from 12:30 p.m. to 1:25 p.m. and the last index. If there is no trading price for the underlying security within the trading session, the final settlement price shall be the opening reference price of the underlying security. The aforesaid simple arithmetic mean prices shall be rounded to the second decimal place.
  If the Taiwan Stock Exchange or Taipei Exchange postpones market close or matching, TAIFEX may extend the aforementioned 60-minute sampling time.

The last trading day for an Equity Option Contract shall be the third Wednesday of the expiration month. An Equity Option Contract may be exercised on the expiration date only. An open position that is in-the-money on the expiration date shall be settled in cash by the net difference between the value of the Underlying Assets, as calculated based on the final settlement price, and the exercise amount.

A trader shall handle all trading and liquidation operations in compliance with the content of the TAIFEX Equity Option Contract. Except the combination of option positions, the same contract portfolio on the same series of the market in option contract can also be held by a trader.

An in-the-money position for an exercised Equity Option means a Call Option position when the value of the Underlying Assets, as calculated based on the final settlement price, is higher than the exercise amount, or a Put Option position when the value of the underlying assets, as calculated based on the final settlement price, is lower than the exercise amount. Writers of in-the-money positions shall pay the difference described in the preceding paragraph, while buyers are entitled to receive the difference.

The adjusted SSF Contracts is the underlying stock after dividends or distributions of income, it does not include cash dividends or distributions of income. The calculation of the final settlement price of the underlying value on the final settlement day does not include cash dividends or distributions of income.

For buy side and sell side positions held in Single Stock Futures Contracts at market close on regular trading session of the business day preceding the effective date of contract adjustment, 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.

On the day before contract adjustment effective day between 15:30 and 17:30, TAIFEX will generate the list of the addition to the buy side equity amount and the deduction from the sell-side equity amount for FCMs and Clearing Members. (The list will be generated between 15:30 and 17:15 if the SSF is included in after-hours trading session)

TAIFEX will make the adjustment in terms of addition to long equity value and deduction from short equity value, keeping the equity value unchanged. The contract adjustments of SSF traded in the after-hour session will take effect from 3:30 pm to 5:15 pm on the business day before the effective date, while others will take effect before 7:00 am on the effective date.

• The underlying securities of TAIFEX Single Stock Futures and Equity Option Contracts, FTSE/TWSE Taiwan 50 Index, and Yuanta/P-shares Taiwan Top 50 ETF: 30% of market value.
• Book-entry central government bonds: 5% of market value.
• Formosa bonds (i.e. foreign currency denominated bonds): 10% of market value.

The public notices of eligible collateral securities can be checked at Taifex official website after 17：00 every day.
https://www.taifex.com.tw/enl/eng5/collateralInq

• The value of securities posted as collateral must not exceed 50% of the required clearing margin.
• The value of securities posted as collateral (c) is calculated by either method (a) or method (b) below, whichever is less will be considered as the value of the collateral:
  (a) the post-haircut value of the securities; or
  (b) the maximum amount that can be posted as collaterals in the form of securities (50% of the required clearing margin for the futures trader's open positions)
  Where a > b, then c = b; where a < b, then c = a.
  [Example]
  Trader A wishes to post 10,000 shares in Taiwan Semiconductor Manufacturing Corporation (TSMC) as collaterals. The market price of TSMC on the day in question is NT$60 per share. The initial margin requirement on Trader A's open position is NT$1 million. We assume that the clearing margin is NT$730,000.

* The market value of the TSMC shares is NT$600,000. The post-haircut value is NT$420,000 (60 x (1 - 30% haircut rate)), and the maximum amount that can be posted as collaterals in the form of securities is NT$365,000 (730,000 x 50% = 365,000). The post-haircut value for the shares is greater than the maximum amount that can be posted as collaterals in the form of securities, and the lesser amount is treated as the actual collateral value of securities posted as collaterals.

* Therefore, the 10,000 shares of TSMC may be used to post NT$365,000 worth of collaterals, and the trader must post NT$635,000 of collaterals in cash.

Customer who has opted one-step performance bond deposits needs to transfer the stocks, ETF, or Formosa Bonds to the appropriate exclusive collateral securities account opened by the TAIFEX with Taiwan Depository & Clearing Corporation (hereafter refers as TDCC). The account name is "Exclusive Collateral Securities Account", and the account number is "0050-89000001".
Customer who has opted two-step performance bond deposits needs to transfer the stocks, ETF,or Formosa Bonds to the appropriate exclusive collateral securities account opened by the FCM with the TDCC; the account name is "Exclusive Collateral Securities Account", and the account number is "XXXX-89000001" (where XXXX is the ID code for the FCM depository participant). The TDCC will issue an ID code for the FCM depository participant when the FCM formally applies to become a TDCC participant.
The last eight digits in TAIFEX and FCM exclusive collateral securities accounts are intended to facilitate the identification of each account. FCMs are required to disclose the account numbers for TAIFEX and FCM exclusive collateral securities accounts in a prominent location at their places of business.

Customer who has opted one-step performance bond deposits needs to transfer bonds to the appropriate exclusive securities account for government-bond collaterals, opened by the TAIFEX with one of the settlement banks listed below. The account name is "Exclusive Collateral Securities Account", and the account numbers are as shown below:

Customer who has opted for two-step performance bond deposits needs to transfer bonds to the exclusive securities account for government-bond collaterals opened by the FCM. After the FCM opens the account accordingly, it is required to display, in a prominent location at its places of business, the account numbers for this account as well as the exclusive securities account for government-bond collaterals.

The key points of such an agreement are as set out below; the trader must read the agreement carefully and the futures commission merchant shall assign registered qualified associated person to explain the agreement to have a good understanding of both parties' rights and obligations before signing:

• The agreement stipulates that any interest, dividends, or other interests generated by the securities belong to the futures trader.
• The agreement stipulates whether the securities can: (a) only be posted as collateral against his own open and new positions; or (b) be posted with the TAIFEX as collateral to fulfill the margin requirements on the positions or new orders of other persons.
• The agreement stipulates the manner in which collateral securities are to be deposited and withdrawn.
• The agreement sets out the circumstances under which collateral securities can be disposed of, and clarifies related rights and obligations.
• The agreement stipulates the collateral ratio, scope, haircut rates and total ceilings of the securities.

When dividends, bonuses, or other interests are distributed by the issuer for the securities that have been posted as collaterals, the trader does not need to take any exclusive action to claim the distribution. Interest generated by the securities in question belongs to the trader, and is delivered to the trader in the manner described below:

• Stocks, ETF and Formosa Bonds
  For stocks, ETF and Formosa Bonds deposited to TAIFEX exclusive collateral securities accounts, the TAIFEX provides an itemized list of traders who deposit securities as collaterals; when they are posted to an FCM's exclusive collateral securities accounts, the FCM provides an itemized list of traders who deposit securities as collaterals to the TDCC for transferring.
• Government bonds
  When interest is paid on government bonds, according to the current regulations, it is required that the interest be deposited directly into the exclusive collateral securities account of any trader who does not take action to claim it. For a trader who has opted for one-step securities deposit, the TAIFEX pays interest to the trader less interest income tax. For a trader who has opted for two-step securities deposit, the TAIFEX pays interest to the FCM, which then withholds interest income tax and forwards the difference to the trader.

When a futures trader posts securities as collaterals, the securities may be disposed of under either of the following two circumstances(if the trader and FCM have contractually agreed to it):

• After FCM closes out all futures trading contracts of a futures trader, if the futures trader’s equity is negative and the futures trader fails to settle the difference by cash within three business days of notification by the FCM, the FCM may sell off securities in the amount necessary to offset the negative equity.
• Where the futures trader opts to allow the FCM or clearing member to post his securities as collaterals to fulfill the margin requirements not limited to his own positions, if the clearing member defaults on its obligations to the TAIFEX, the TAIFEX is entitled to dispose of securities deposited by the trader.

With futures and options contracts, the strategy-based margining system sets margins differently for simply different futures and options strategies. SPAN®, however, in addition to considering individual products and strategies, also considers: (1) hedge relationships of different products; (2) basis risk that arise when hedging between the same contracts with different expiration dates; (3) the implied volatility of options; and other such factors. SPAN® can therefore more efficiently measure the risks associated with the overall portfolio and set the margin that is needed to cover such risks.

The fixed ratios for the intermonth spread charges are set on the basis of liquidity in futures markets overseas as well as our own market here in Taiwan. This method has been adopted by TAIFEX pursuant to authorization granted in Article 5-2, subparagraph 4 of the "TAIFEX Methods and Standards for Receipt of Clearing Margins".

A trader shall sign the “Agreement for Adoption by Customers of SPAN Methodology for Calculating Margins”, and agrees that FCM exercises control over orders placed by the trader, margin calls and compulsory liquidations in accordance with this agreement and the engagement agreement.

Under SPAN® margining, the margin requirement is based on the net risk of the trader’s entire portfolio. When positions change (or are created or closed out), the portfolio is re-examined and offsetting risks are netted out before the margin requirement is calculated. For example, if an inter-commodity or intermonth combination that exits under the logic of offsetting risk is broken up because part of the combination has expired or been closed out, the margin requirement could rise because the formerly offsetting positions can no longer be netted out.

No, they cannot. Margin for day trading positions must be posted in accordance with TAIFEX rules governing day trading margins, and may not be factored into SPAN® margins. The only time they are factored into SPAN® margins is when a trader for some reason is unable to close out a position before the close of trading.

This is most likely due to the decomposition of a combination position in options, as in the following example: A trader with long and short 7800 calls on TXO 200609 applies to create combination positions in which the 7800 calls are combined with options in different series. The next day, the trader decomposes the two combination positions, thus leaving the long and short 7800 calls on TXO 200609 as decomposed positions that can be netted against each other. Open interest can thus change even when no contracts have been traded.

No, unrealized gains or losses should not be factored into a determination regarding whether excess margin is sufficient (but note that the TAIFEX margin standard is only a minimum; an FCM is allowed to require a higher margin on the basis of risk considerations). Once gains or losses on positions are realized, unless otherwise stipulated, they are immediately factored into margin equity, and if a margin is insufficient a margin call will be issued and other necessary risk control actions will be taken.

Point 6 of the "TAIFEX Operational Key Points of Clearing and Settlement for Futures Commission Merchants and Clearing Members" allows FCMs to go online during specified business hours to make additions or deletions, per trader instructions, to/from the reference list of stock index options/equity options to be exercised by long position holders.

Because there are so many different kinds of options trading strategies, TAIFEX only offsets designated options positions. Futures contracts, in contrast, are offset automatically. Futures traders are thoroughly familiar with offsetting operations.

• Pursuant to Article 70 of Futures Trading Act, the creditors of futures commission merchants or designated institutions referred to in the preceding Paragraph shall not file an attachment suit or claim any rights on the said segregated customer margin/premium accounts unless otherwise provided for in this Act.
• Pursuant to Article 71 of Futures Trading Act, a futures commission merchant shall not withdraw any fund from the segregated customer margin/premium account, unless one of the following situations occurs:
  (1) instruction from the futures trader to deliver the excess margins/premiums;
  (2) payment for the futures trader of the margins/premiums due and/or settlement balance;
  (3) payment for the futures trader of brokerage commissions, interests, or other transactional fees payable to the futures broker; or
  (4) other items being approved by the Competent Authority.

Customer margin account management shall refer to aforementioned Act. Therefore, FCMs may not withdraw any fund from the segregated customer margin account.

• Pursuant to Regulations Governing Futures Commission Merchants Article 4, it is required to report to the FSC when a customer margin account is opened, changed, or closed.
• Pursuant to Regulations Governing Futures Commission Merchants Article 42, when a futures commission merchant opens a customer margin account with the institution designated by the FSC, such account shall be designated as a customer margin account. The name of the institution where a customer margin account is opened, and the number of the account, shall be posted publicly by the futures commission merchant in a prominent location at its place of business; the same requirement also applies to amendment or cancellation of the account. Where a futures commission merchant concurrently engages in brokerage of domestic and foreign futures, it shall open separate customer margin accounts. The designated institutions referred to in preceding paragraph are limited to the following:
  (1) Banks that have been approved for foreign exchange or deposit operations by the FSC, and which meet the conditions prescribed by the FSC.
  (2) Central securities depository
  (3) Clearing banks that have been engaged by the Central Bank to carry out registration for book-entry central government bonds, and that meet the conditions prescribed by the FSC.
  Financial institutions concurrently engaged in futures business may not open their customer margin accounts at financial institutions under their operation.
• Pursuant to Article 44 of the Regulations Governing Futures Commission Merchants, when a futures commission merchant accepts futures trading brokerage orders, the payments shall be done through customer margin account. The payments referred to in the preceding paragraph shall be made through the customer's margin account. All withdrawals shall be made through bank transfer, and a detailed and accurate record and receipt shall be prepared as proof of payment.
• Pursuant to Article 45 of the Regulations Governing Futures Commission Merchants, a futures commission merchant shall not exercise overdrafts on funds or securities in customer margin accounts, nor create any security interests or other rights thereupon, nor divert them to serve as another client's margin, premiums, clearing and delivery fees, commissions, or processing fees, or to cover insufficient funds of other clients.
• A futures commission merchant shall set up an itemized account record for each customer, and on a daily basis shall calculate the balance of cash and securities on deposit in each customer's margin account and changes of the actual marginable value of securities and prepare an itemized statement for each customers' margin account.

• Pursuant to Futures Trading Act Article 70, the creditors of futures commission merchants or designated institutions shall not file an attachment suit or claim any rights on the said segregated customer margin/premium accounts unless otherwise provided for in this Act.
• A futures commission merchant shall not withdraw any fund from the segregated customer margin/premium account, unless one of the following situations occurs:
  (1) instruction from the futures trader to deliver the excess margins/premiums;
  (2) payment for the futures trader of the margins/premiums due and/or settlement balance;
  (3) payment for the futures trader of brokerage commissions, interests, or other transactional fees payable to the futures broker; or
  (4) other items being approved by the Competent Authority.
• Pursuant to Futures Trading Act Article 75, the Competent Authority may, in case a futures commission merchant is bankrupt, dissolved, suspended, or is required by acts or regulations to cease to accept trading orders from futures traders, order it to transfer the relevant accounts of its futures traders to another futures commission merchant with whom it has a succession agreement. A futures commission merchant, unless with justified reason and approved by the Competent Authority, shall within two business days of receiving the transfer order from the Competent Authority, transfer the balance of the segregated customer margin/premium account and statements of the futures traders to the designated futures commission merchants.
• A futures commission merchant shall not exercise overdrafts on funds or securities in customer margin accounts, nor create any security interests or other rights thereupon, nor divert them to serve as another client's margin, premiums, clearing and delivery fees, commissions, or processing fees, or to cover insufficient funds of other clients.
• After completion of corporate registration, a futures commission merchant shall lodge an operating bond with a financial institution designated by the FSC, in accordance with the following provisions:
  (1) futures broker: 50 million New Taiwan Dollars.
  (2) futures dealer: 5 million New Taiwan Dollars.
• Pursuant to Article 21 of the Securities Investor and Futures Trader Protection Act, when a futures trader's consigned futures commission merchant breaches contract due to financial difficulties leaving it unable to make payment, where the futures trader has engaged in futures trading on the futures market but is unable to obtain the margin or option premium due and to realize capital gains after completion of clearing procedures at the futures clearing house.

• Pursuant to Regulations Governing Futures Commission Merchants Article 43, where a futures commission merchant engages in sub-brokered foreign futures trading services, in collecting margins or premiums from the futures commission merchant placing the order, it shall act in accordance with the requirements of the foreign futures exchange.
• Pursuant to Regulations Governing Futures Commission Merchants Article 44, the payments referred to in the preceding paragraph shall be made through the customer's margin account. All withdrawals shall be made through bank transfer, and a detailed and accurate record and receipt shall be prepared as proof of payment.
• A futures commission merchant shall set up an itemized account record for each customer, and on a daily basis shall calculate the balance of cash and securities on deposit in each customer's margin account and changes of the actual marginable value of securities and prepare an itemized statement for each customers' margin account.
• The Competent Authority may, in case a futures commission merchant is bankrupt, dissolved, suspended, or is required by acts or regulations to cease to accept trading orders from futures traders, order it to transfer the relevant accounts of its futures traders to another futures commission merchant with whom it has a succession agreement, unless the said futures commission merchant is also a member of a futures clearing house. A futures commission merchant, unless with justified reason and approved by the Competent Authority, shall within two business days of receiving the transfer order from the Competent Authority, transfer the balance of the segregated customer margin/premium account and statements of the futures traders to the designated futures commission merchants.

The contents of On-line report inquiry TAIFEX provides include margin call, margin, position structure, collateral acceptance, expired contracts, futures transaction tax and margin information along with products P/L of 2 sessions, respectively. The interval is up to previous 7 business days.

TAIFEX trading system transfers files to FCMs and Clearing Members through FTP server via TCP/IP. FCMs and Clearing Members may access various files TAIFEX provides and TAIFEX adds standardized reporting files to provide FCMs without increasing developing costs to FCMs, Clearing Members, and TAIFEX itself. FCMs and Clearing Members may access files with familiar interface and approach, file format is saved as CSV format that FCMs and Clearing Members could customize files to add value as needed.

TAIFEX will adjust the margin of the single stock future and equity option as below:

• If the disposition measure has been announced for the underlying security for the first time within the most recent 30 business days, TAIFEX will increase the margin rate by 1.5 times.
• If the disposition measure has been announced two or more times (inclusive) for the underlying security within the most recent 30 business days, TAIFEX will increase the margin rate by 2 times.
• If the disposition measure, except suspending trading of the given security for a specific period, is adopted after reporting to the Surveillance Operations Oversight Committee of Taiwan Stock Exchange or Taipei Exchange for a resolution, TAIFEX will in principle increase the margin rate by 1.5 times, 2 times or 3 times depending on the measure being taken for the first, second, or third (inclusive) or more times within the most recent 30 business days. If the circumstances of the disposition measures are serious, TAIFEX may increase the margin rate by 2 or 3 times.

• The final settlement price shall be determined based on the LBMA Gold Price AM as announced by ICE Benchmark Administration Limited (IBA) on the same calendar day as the last trading day, and the USD/TWD spot exchange rate at 11 AM as announced by Taipei Forex Inc., and after conversion for weight and fineness. The formula is as follows: (LBMA Gold Price AM ÷ 31.1035 × 3.75 × 0.9999 ÷ 0.995) × the USD/TWD spot exchange rate at 11 AM
• In the event that the USD/TWD spot exchange rate at 11 AM has for any reason not been announced by Taipei Forex Inc., the first USD/TWD spot exchange rate announced by Taipei Forex Inc. after 11 AM on the last trading day shall be used as the basis for calculation of the final settlement price.
• When the LBMA Gold Price AM referred to in the preceding paragraph has for any reason not yet been generated before the TAIFEX executes procedures for settlement at expiration, the LBMA Gold Price PM as announced by ICE Benchmark Administration Limited (IBA) after market close on the same calendar day as the last trading day shall be used to calculate the final settlement price.

The application hour for physical delivery of the expiration of NT dollar denominated gold futures and gold option contracts shall be from 16:00 to 17:30 of the last trading day , and including the following matters :

• The buy-side trader (the profiles of long futures, long call or short put) shall deposit the cash amount to the futures commission merchant 's customer margin account by 17:30.
• The sell-side trader (the profiles of short futures, short call or long put) shall transfer the underlying physical gold to Taifex’s exclusive account with Taiwan Depository & Clearing Corporation (TDCC) by 17:00. The account name is “Exclusive Gold Physical Delivery Account “, and the account number is “0050-8900013”.

The futures commission merchant shall report to Taifex the detail information about the buy-side trader’s receivable gold deposit account and the sell-side trader’s underlying physical gold delivery from 16:30 until 17:30 of the last trading day. The buy-side trader’s prepayment shall be transferred to Taifex by the clearing member into the clearing margin account.

The underlying physical gold is the gold on the “Gold Trading Platform” of the Taipei Exchange.

The Taifex will process the delivery of gold versus payment of cash amount from 8:40 a.m. of the final settlement day. In general, trader will receive the underlying physical gold or the respective cash amount by 9:00 a.m.

• The final settlement price of TAIFEX TOPIX Futures is the TOPIX Special Quotation (TOPIX SQ) calculated on the final settlement price determination day (the TSE business day following the last trading day).
• The TOPIX SQ is the free-float adjusted market capitalization-weighted average of that day’s first transaction price for each constituent of the index; therefore, the SQ cannot be calculated until the first transaction prices of all the TOPIX constituents are confirmed at the end of the index’s trading day (2 p.m., Taiwan time). In the event that a constituent does not have a transaction price on that day, its opening reference price is used instead. The TOPIX SQ is calculated to two decimal places. Its minimum price fluctuation is 0.01, which differs from the 0.25 minimum price fluctuation of the TAIFEX TOPIX Futures.
• In principle, the final settlement price determination day for TAIFEX TOPIX Futures is the same as that of the Osaka Stock Exchange’s TOPIX Futures: the second Friday of the expiration month. If the TSE is closed on the second Friday, the final settlement price determination day will be moved forward to the preceding TSE business day (usually, the second Thursday of the expiration month).