The Financial Supervisory Commission (hereinafter, the "FSC") issued the Jin-Guan-Zheng-Tou-10300429801 Circular of October 30, 2014 (hereinafter, the "Circular") to amend the permissible amount of margin purchases and short sales of securities and the maximum financing ratio for OTC-traded securities of Article 61 of the Securities and Exchange Law with an effective date on November 3, 2014.

Article 61 of the Securities and Exchange Law provides: "The permissible amount, terms, financing ratio, and the margin percentage required for margin purchases and short sales for securities transactions shall be prescribed by the Competent Authority after consultation with and consent from the Central Bank of China. The eligibility criteria of securities for margin purchases and short sales shall be prescribed by the Competent Authority."

The Circular amended the permissible amount, terms, financing ratio and the margin percentage provisions as follows pursuant to the above requirements:

  1. The permissible amount of margin purchases for each customer shall be NT$80 million, while the permissible amount for short sales is NT$60 million. However, for shares which are not common shares of constituent companies of Taiwan 50 Index, common shares of the constituent companies of Taiwan's Information Technology Index, the common shares of ETF futures securities investment trust funds and their constituent companies, and the common shares of the constituent companies of the ETF futures trust funds, offshore ETF equity funds and the Taiwan Stock Index announced by Morgan Stanley Capital International Inc. (MSCI), as announced by Taiwan Stock Exchange, the permissible amount of margin purchases shall be NT$40 million, while the permissible amount of short selling shall be NT$30 million.
  2. The permissible amount of the margin purchases or short sales of a single listed security by each customer shall be NT$30 million in both cases, and the permissible amount of the margin purchases or short sales of a single OTC security shall be NT$20 million in both cases.
  3. If a securities firm engages in short sales to address its hedging requirements for handling business, the permissible amount of short sales shall be NT$120 million. The permissible amount of short sales of a single listed security shall be NT$60 million, and the permissible amount of short sales of each single OTC security shall be NT$40 million.
  4. The term shall be six months. Before the term expires, an entity that extends credit may allow a client to apply for a six-month extension. Before the one-year term expires, the entity that extends credit may review the credit status of the client and grant another six-month extension to the client.
  5. The maximum financing ratio is 60% of the value of listed and OTC securities.
  6. The minimum margin percentage is 90% for both listed and OTC securities.

This Circular further abolishes the Jin-Guan-Zheng-Tou-10300406141 Circular of October 14, 2014 and the Jin-Guan-Zheng-Chi-10300122116 Circular of April 28, 2014 from the FSC.