TWSE Market Insights

＜中文版＞

In April 2025, global financial markets faced their most significant challenges since the 2020 COVID-19 pandemic. Impacted by the announcement of reciprocal tariff policies in the United States, escalating geopolitical risks and concerns over trade barriers triggered a global wave of panic selling. The Taiwan capital market was not immune; on April 7, the TAIEX plummeted shortly after the opening bell, setting historical records for both single-day percentage and point drops. The weighted index hit the daily limit down—a rare occurrence—placing immense pressure on market liquidity.

To stabilize the market, the competent authority immediately launched stabilization measures on April 7. These included adjusting the limits of total short selling volume, raising margin requirements for short selling, and expanding the scope of substitute collateral. By allowing investors to use a wider range of liquid assets to meet margin calls, these measures effectively mitigated the systemic risk of forced liquidations caused by a liquidity crunch.

This market stress test served as a critical opportunity to re-examine the margin trading mechanism and collateral regulations. In response to structural shifts and evolving trading patterns, as well as the increasing demand for capital flexibility, the Taiwan Stock Exchange (TWSE) re-evaluated its regulatory framework. Following extensive consultations with industry stakeholders, the temporary collateral measures were officially institutionalized on March 30, 2026, further enhancing the flexibility and resilience of Taiwan’s securities finance infrastructure.

The regulatory review focused on the development of the odd lot and Emerging Stock Board (ESB) markets. Since the launch of intraday odd lot trading in 2020, the segment has become increasingly active. The surge in high-priced 'heavyweight' stocks has driven retail investors toward odd lot trading as a primary entry point.　　On the other hand, the ESB has operated for a long time, with its market-making mechanisms, quoting systems, and price stabilization measures reaching maturity. To mitigate potential liquidity risks during extreme market corrections, the authority has integrated odd lots and ESB stocks into the permanent collateral framework.

(1) Enhancing Odd Lot Utility Amid Growing Market Participation

Since October 26, 2020, intraday odd lot trading has flourished. With the rising value of TAIEX heavyweights, as of May 2026, 49 listed stocks are priced above NT$1,000, and 43 are between NT$500 and NT$1,000. Prior to this reform, retail investors lacked capital flexibility due to the inability to use odd lots as collateral. Following stakeholder consultations, the use of odd lots as substitute collateral has been deemed viable.

(2) Leveraging the Mature Emerging Stock Board (ESB) for Asset Liquidity

The ESB has operated for over 20 years, featuring professional market-making with continuous two-way firm quotes. While it has no daily price limits, the existing circuit breaker mechanism effectively manages volatility. Sponsoring brokers are obligated to provide liquidity, ensuring a degree of realization guarantee for collateral disposal. Furthermore, investors can access real-time "best bid/ask" and "weighted average prices" through the system, enabling brokers to calculate margin maintenance ratios based on real-time data provided by TPEx.

(1) Odd Lots of Listed (TWSE/TPEx) Securities

1. Valuation Base: Calculated based on the opening auction reference price or the opening price on the day of deposit.
2. Collateral Maintenance Ratio: A 70% valuation for stocks eligible for margin trading; a 50% valuation for non-eligible stocks, consistent with standard lot risk management.
3. Daily Mark-to-Market (MTM): Calculated based on the closing price, excluding the final odd lot trade price.
4. Deposit Procedures: Follows existing TDCC (Taiwan Depository & Clearing Corporation) workflows; assets must be transferred to the margin account within two business days (T+2).
5. Return of Collateral: Odd lots shall be transferred back to the investor’s custody account, following existing standardized workflows.
6. Disposal of Margin Account Balances: Following existing standardized workflows, brokers shall entrust other securities brokers to dispose of the balances and substitute collateral through the "Default Handling Account."

Table 1: Odd Lot Market Trading Volume Trends

Year	Trading Value (NT$ 100M)
2024	14,823.78
2025	21,071.32
2026(to April)	19,156.41

(2) Emerging Stocks (ESB)

1. Valuation Base: Calculated based on the Weighted Average Price (WAP) of the previous business day. If no trades occurred, the mean of the highest bid and lowest ask quotes among all sponsoring brokers at the close of the previous business day shall be used.
2. Collateral Maintenance Ratio: Calculated at 40% of the valuation base specified in the preceding paragraph.
3. Daily MTM: Calculated based on the daily WAP at the close of trading; if no trades occurred, the mean of the bid-ask quotes at the close is used.
4. Deposit Procedures: Follows existing TDCC (Taiwan Depository & Clearing Corporation) workflows; assets must be transferred to the margin account within two business days (T+2).
5. Return of Collateral: ESB stocks shall be transferred back to the investor’s custody account, following existing standardized workflows.
6. Disposal of Margin Account Balances: Following existing standardized workflows, brokers shall entrust other securities brokers to dispose of the balances and substitute collateral through the "Default Handling Account."

Table 2: Emerging Stock Market (ESB) Scale

Year	Market Cap (NT$ 100M)	Trading Value (NT$ 100M)
2024	13,832	39.80
2025	11,331	51.39
2026(to May)	12,372	19.09

Supporting Measures for Risk Management and Operational Efficiency

Due to the different trading mechanisms of the ESB, specific supporting measures have been established:

1. Replacement Timeline: Given the shorter delisting notice period for ESB stocks (15 days versus 40 days for listed stocks), collateral must be replaced at least five business days before delisting, except for IPO transfers.
2. Ex-rights/Ex-dividends: ESB stocks are exempt from the pro-forma ex-right mechanism; new shares from stock dividends of 20% or more are not required to be deposited.
3. Data Transmission: To facilitate margin maintenance calculations, TPEx provides intraday quotes via the FIX protocol. Post-market valuation files are transmitted after the ESB close at 3:00 PM, reducing development costs for brokers.

In response to digital trends, new mechanisms have been introduced to streamline operations:

1. Broker Discretion: Considering the granular value of odd lots and varying quality of ESB stocks, brokers may set risk standards and refuse collateral with excessive risk or limited utility.
2. Optimized Notification Mechanism: To overcome the 3:00 PM ESB close and potential calculation delays, brokers may—with the investor's prior consent—issue margin calls via digital channels such as SMS or App push notifications.
3. Digitalized Applications: Investors may now use electronic certificates to apply for collateral substitution or update contact information (mobile, email), enhancing service efficiency.

The continued market volatility following April 7, 2025—where the index hit the limit down followed by two days of continued decline—underscored the stress investors face during rapid asset depreciation. These events served as a catalyst for institutionalizing the diversified collateral system.

By integrating odd lots and ESB stocks into the margin framework and optimizing digital notifications on March 30, 2026, TWSE is proactively addressing the practical needs of investors. This expansion enhances capital efficiency and provides a vital buffer during market turbulence, reducing the risk of forced liquidations due to collateral limitations.

Moving forward, TWSE will continue to monitor the performance of these new measures and remain attentive to emerging market trends. We are committed to refining the margin trading system to balance efficiency, security, and risk management, fostering the sustainable development of Taiwan’s capital market.