Newsletter
AMENDMENT TO REGULATIONS GOVERNING FUTURES TRANSACTIONS BY FOREIGN INVESTORS
The Securities and Futures Commission (SFC) on October 31 promulgated an amendment to the Handling Points Governing Futures Transactions by Overseas Chinese and Foreign Investors. The amendment is outlined as follows:
A QFII or a GFI may engage itself in securities related futures transactions for hedging purpose up to the current securities position held by such QFII or GFI without obtaining further permission from the SFC. However, the aggregate amount of the initial performance bond required for the QFII's or GFI's open position of futures in each settlement month together with the investment of the QFII or GFI in government bonds, New Taiwan Dollars denominated time deposits, money market instruments with maturity no longer than 90 days should not exceed thirty percent of the outstanding remitted investment fund of such QFII or GFI. According to our further discussion with the SFC, the outstanding remitted investment fund should mean the amount of the total inward-remitted amount minus the total outward-remitted amount, namely, the net remitted amount.
At any time, the aggregate market value of all QFII or GFIs' open position in each settlement month should not exceed 30% of the aggregate market value, based on the previous day's closing price, of the underlying securities of the futures contract.
A QFII or GFI wishing to conduct in securities related futures transactions should through its local agent or representative open a trading account with a futures commissioned merchant and execute the risk disclosure letter and account opening agreement. The custody agreement entered into by a QFII or GFI and its custodian bank should indicate that the custodian bank will for and on behalf of the QFII or GFI pay the initial performance bond or supplement such bond and report the related information to the competent authority.
The custodian bank of a QFII or GFI should report to TIMEX by 4:00 p.m. each day the remaining remitted fund for the previous business day and the balance of its investment amount in government bonds, time deposits and money market instruments. In addition, the custodian should submit monthly detailed list of index futures traded by the QFII or GFI together with the monthly fund use report to the SFC.