Regulations Governing Securities Finance Enterprises Article 18

Securities finance enterprises handling margin purchases and short sales of securities shall establish early warning and allocation guidelines for the handling of margin purchases and short sales in accordance with the operating rules referred to in the preceding article, and shall publicly disclose on a daily basis information on credit extended in connection with margin purchases and short sales.The early warning and allocation guidelines referred to in the preceding paragraph shall provide for safety stock amounts and calculation formulas for loans of each security, and when the balance of loans of that security plus the safety stock amount of that security reaches the combined total of the amounts of that security under each of the following subparagraphs, loans of that security shall be suspended:1.The margin purchase balance.2.The securities finance enterprise's proprietary securities.3.Securities borrowed from the TWSE securities borrowing and lending system.4.Securities borrowed from customers.5.Securities borrowed from securities firms or other securities finance enterprises that conduct securities borrowing and lending business or securities margin purchase and short sale business.When a principal first purchases securities by margin purchase and on the same day sells short the same kind of securities in an amount not greater than the amount purchased by margin purchase, the requirement of the preceding paragraph regarding safety stock may be exempted.