Regulatory officials will reduce the stock markets' short sale deposit ratio and raise the margin loan cap in a bid to stimulate the market and improve the margin trading mechanism, the Ministry of Finance announced in a statement late Sunday evening.
The ministry will reduce the short sale deposit ratio for the TAIEX and the over-the-counter TAISDAQ to 90 percent from the current 150 percent.
In addition, the margin loan ratio for the TAISDAQ will be raised to 50 percent from 40 percent.
The measures are scheduled to go into effect today.
Officials of the finance ministry said several measures will be implemented at the same time, followed agreement between the ministry and Taiwan's central bank.
Meanwhile, the maximum value of each margin account will be raised to NT$30 million from NT$15 million, while the maximum margin financing for each account on a single Taiwan Stock Exchange-listed stock will be raised to NT$15 million from NT$7.5 million and to NT$10 million from NT$5 million for a TAISDAQ-listed stock.
The maximum short-selling of each account will be raised to NT$20 million from NT$15 million, with that for a single TAIEX-listed stock going to NT$10 million from NT$7.5 million, and NT$7.5 million from NT$5 million for a TAISDAQ-listed stock.
The ministry also decided to give securities financing companies the discretion to adjust the ceiling for each customer depending on their individual credit situation.
In order to oversee the total margin-trading amount of each securities investor, the ministry also decided to set up a system that would consolidate all the trading information of the four securities financing companies.
By doing so, securities regulators would be able to find out the total outstanding position of margin trading for each investor.
Currently, the four securities financing firms do not exchange information between one another. Officials of the finance ministry said the change is aimed at better monitoring the margin trading market and preventing loopholes.
The local stock market did not react positively to measures introduced by the finance ministry last week, including permitting the securities industry to conduct futures trading when managing discretionary managed accounts.
In the past two weeks, representatives of local securities companies and fund houses have proposed a number of measures to revive the stock market, including proposing the reduced margin for short-selling.
"The measures are more to cope with international practice, and not necessarily bring a bullish effect to the stock market [in the short-term]," Minister of Finance Yen Chin-chang (
However, Yen also said that, after talking with other agencies and regulators, a number of measures related to the stock market could be announced in the next few days.
On the issue of enlarging the daily volatility limit on stock movements, Yen said a number of measures are currently under consideration. However, he said he is reluctant to express any personal opinion before a decision is made final.
Other issues, like lowering the rate on securities transaction tax and the ban on short-selling on prices lower than the previous day's closing prices are all under review.
"If there is any substantial result by the ministry [in the next few days], I will announce it immediately," Yen said.
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