Objects and Statistics for Day Trading

Statistics


 

Foreword

In order to provide investors with hedging channels and optimize transaction mechanisms, beginning from January 6, 2014, investors have been permitted to engage in long (buy first, sell later) day trading of securities on the spot market. Beginning from June 30 2014, investors have been permitted to engage in short (sell first, buy later) day trading of securities on the spot market.

Investors may engage in day trading by the buying first and selling later, or selling first and buying later of securities of the same type and quantity during regular trading hours (09:00-13:30). They also may engage in day trading by buying during regular trading hours and then selling in after-hours fixed-price trading, or by selling during regular trading hours and then buying in after-hours fixed-price trading. After a buy order or sell order for the security is executed on the cash (spot) market, an equal quantity of the security is offset through the same brokerage account within the same trading day, and the settlement of funds is conducted based on the price difference after the offsetting of the opposite trades. When the market trend is uncertain, the investor misjudges the trend, or securities bought by the investor soar during mid-session, the investor may conduct an opposite offsetting trade timely to mitigate the risk or to realize profit in advance.

 

System Introduction

I.Definition of day trading:

Please refer to Article 1 of Operational Rules Governing Day Trades of Securities.

II.Investor Eligibility:

Please refer to Article 2 of Operational Rules Governing Day Trades of Securities.

 

Securities Eligible for Day Trading( Details of Securities Eligible for Day Trading

  1. The component stocks of TWSE’s Taiwan 50 Index, Taiwan Mid-Cap 100 Index and Taipei Exchange’s TPEx 50 Index are eligible for securities day trading.
  2. Underlying stocks of warrants (including underlying stocks of warrants allowed to be issued by Class A issuers) announced by the Taiwan Stock Exchange or Taipei Exchange. Underlying stocks of warrants will become eligible for day trading on the next business day of the date such stocks become eligible for warrants issuance.
  3. ETFs: “Beneficial certificates issued by a securities investment trust enterprise (SITE) for an offering of a securities investment trust ETF”, “Any beneficial certificate issued by a futures trust enterprise for an offering of an exchange-traded futures trust fund”, and “Any beneficial certificate, fund share or investment unit issued for an offering of an offshore ETF issued by an offshore fund entity”. ETFs are eligible for securities day trading on the first day new ETFs are listed on the Taiwan Stock Exchange or Taipei Exchange.
  4. Securities Eligible for Margin Purchase and Short Sale: TWSE or TPEx shall publicly announce them as shares eligible for margin purchase and short sale.
  5. Subject securities of securities borrowing and lending transaction.
  6. Securities for which an altered trading method or disposition measures have been announced under the rules of the TWSE or the TPEx are not eligible for day trading.

 

Trading hours

Investors may engage in day trading by the buying first and selling later, or selling first and buying later of securities of the same type and quantity during regular trading hours (09:00-13:30). They also may engage in day trading by buying during regular trading hours and then selling in after-hours fixed-price trading, or by selling during regular trading hours and then buying in after-hours fixed-price trading.

Day trading may not be used for odd-lot trades, block trades, trades conducted under Article 74 of the TWSE Operating Rules, and trades conducted through over-the-counter price negotiation under Article 32-1, and trades under Article 39, of the TPEx Rules Governing Securities Trading on the TPEx.

 

Procedures for Handling Shortfalls in Securities Deliverable in Day Trading

I.Procedures for Sell-First, Buy-Later Day Trading

  1. If an investor first sells spot securities during regular trading hours and then buys the securities during regular trading hours or in after-hours fixed-price trading, the investor has completed a (sell-first, buy-later) day trade.
  2. If, after an investor has sold securities on the spot market, the investor fails to complete an opposite purchase to close out the day trade, the investor may change the status of the trade from a day trade to a short sale of securities borrowed on margin or through a securities loan, or may use the procedures for Lending of Securities to Cover Shortfalls in Securities Deliverable in Day Trading. Under the latter procedures, the securities broker will borrow securities from the inventory of investors who are willing to lend them, and the broker will then lend them to the investor who sold the spot securities but failed to complete an opposite purchase to close out the day trade.
  3. Please refer to Chapter III of Operational Rules Governing Day Trades of Securities.

II.Lending of Securities to Cover a Shortfall in Securities Deliverable in Day Trading

Please refer to Article 7,10 and 11 of Operational Rules Governing Day Trades of Securities.

III.Bidding Procedures, Negotiation Procedures and Settlement-Driven Securities Borrowing

Please refer to Article 8 of Operational Rules Governing Day Trades of Securities.

IV.Forced Repurchase

Please refer to Article 9 of Operational Rules Governing Day Trades of Securities.

V.Halting of Sell-First Day Trading

Please refer to Article 12 of Operational Rules Governing Day Trades of Securities.

VI.Fee Obligations

Please refer to Article 13 of Operational Rules Governing Day Trades of Securities.

 

Timing of Reporting

  1. If an investor has signed a general authorization agreement, and on the day of a trade does not wish to offset the trade in day trading, the principal shall, before market close, make a statement to the securities broker. The securities broker shall confirm the statement and keep a record.
  2. Please refer to Article IV of Operational Rules Governing Day Trades of Securities.

 

Risk Management by Securities Brokers

  1. Limit management: The monetary amount of an investor's initial buy and initial sell orders executed in day trading are included in the calculation toward the single-day trading limit, but the monetary amounts of the opposite offsetting orders executed in day trading are not included in the calculation toward the single-day trading limit. Trading limit amounts may not be credited back for revolving use on the same day after being offset in day trading.
  2. Please refer to Article II of Operational Rules Governing Day Trades of Securities.

 

Reporting of default, out-trade, account number change and change of transaction category

  1. Default:
    1. Settlement default: When handling a settlement default involving a day trade, offset day trade positions already reported do not need to be cancelled for the purpose of making a default report.
    2. Debt default: When an investor, after selling securities on the spot market, fails to complete an opposite purchase to close out the day trade, the investor shall pay in full any price difference and fees incurred in connection with a forced repurchase by 5 p.m. on the first business day after a forced repurchase for the return of borrowed securities, and will be deemed in default if the payment is late.
  2. Out-trades and account number corrections:
    Please refer to Article 2 of Taipei Exchange Directions for Reporting and Handling of Out-Trades and Account Number Corrections by Securities Brokers.
  3. Changes to trading category:
    After securities firms report day trades, they may file an application for changes to trading category only when they have withdrawn the reports. After sales of borrowed securities and sales of margin trading are executed, reports of day trades may be made only when the trading category has been changed into ordinary trading.

 

Note:The above documents have been translated by the Linguitronics Co., Ltd. The English translation is for reference only. In case of any discrepancy between the English version and the Chinese version, the Chinese version shall prevail.