TWSE and Gretai initiated new clearing fund system of cash market

TWSE and Gretai initiated new clearing fund system of cash market

The revised Clearing Fund of TWSE and GTSM (Gretai Securities Market) is effective from Jan 1 of 2012. The required contribution of securities firms is cut to NT$3.4 bn. from NT$5 bn. on the TWSE, and to NT1.6 bn. from NT$2.4 bn. on the GTSM.

The contribution of TWSE and GTSM remains the same at NT$3 bn. and NT$0.4 bn. As a result, the new total amount of Clearing Fund in the cash market is decreased from NT$10.8 bn to NT$8.4 bn.

A new measure called “monthly tracking system” will be also implemented. It requires that the contribution of individual securities firm shall not fall under 80% of its average daily VaR in the previous month. The purpose is to strengthen the fairness of contribution. The portion accrued from the difference under the monthly tracking will not be calculated to the Clearing Fund. Instead, it will be regarded as separate additional deposit.

The market participants welcome the new initiative because it will increase the amount of available fund and help to bring in more revenue; In terms of risk management, it is widely believed that the new monthly tracking system will lower market risk, marking the risk of individual securities firm to its own level of unsettled positions.