Taipei, Oct. 23, 2012 (CENS)--The Financial Supervisory Commission (FSC) announced yesterday (Oct. 22) greatly raising the offsetting quota for margin trading and short sales by increasing the ceiling for margin trading by 50%, so as to encourage investors buying stocks and boost the trading volume of the stock market.
The offsetting of margin trading and short sales allows investors to buy stocks via margin trading and then sell the same stocks via short sales, or vice versa, on the same day. The investors then only have to settle their transactions for delivery with the balance. It is similar to intraday trading.
The new practice will hit the road in the near future, after securities firms revise their computer systems and credit-risk management system. It will greatly increase the trading amount based on the offsetting of margin trading and short sales, which now accounts for 11% of the total trading volume. The measure is designed to activate stock trading, as the local stock market has been plagued by low trading volume for quite a while.
At present, investors can only carry out intraday trading via the offsetting of margin trading and short sales under the credit trading system. The FSC, however, still refused to accept the proposal of opening intraday trading comprehensively, due to the concern over the risk of default on delivery.
The FSC pointed out that at present for the offsetting of margin trading and short sales, the quotas for margin trading and short sales should be calculated separately. For constituent stocks such as TSMC, the ceiling for margin trading every account is set at NT$60 million and that for short sales at NT$40 million. For non-constituent stocks, the ceilings are set at NT$30 million and NT$20 million, respectively. Under the new measure, when the amount of margin trading has reached the daily ceiling, it will be increased by 50% in midsession for offsetting with short sales. For instance, when an investor's margin trading has reached the ceiling of NT$60 million in midsession, he can still boost the margin-trading amount by 50%, or NT$30 million, for offsetting with short sales.
(by Philip Liu)
