Is the Taiwan Stock Market Facing a Margin Call Crisis? Exchange Clarifies Financing Maintenance Rate Data, Urges Investors Not to Panic

The Taiwan stock market has recently suffered consecutive sharp declines, raising concerns over margin calls as financing maintenance rates appear precarious. On July 28, the Taiwan Stock Exchange emphasized that, as of July 27, the overall market's consolidated credit transaction maintenance rate was approximately 175%, significantly higher than the current minimum margin call threshold of 130%.

The exchange noted that recent media reports citing a market-wide financing maintenance rate of 143% have caused investor anxiety about a potential wave of margin calls. It warned that some media outlets separately reporting data for listed and over-the-counter markets may lead to investor misunderstanding. The consolidated credit transaction maintenance rate includes both financing and short-selling positions across both listed and OTC markets. The 175% figure remains well above the 130% minimum margin call level and also exceeds the initial maintenance rate of 166%. The reported 143% likely results from incomplete calculations that fail to account for all consolidated credit factors.

According to statistics, on July 27, the amounts subject to margin calls and forced liquidations accounted for less than 0.1% and 0.03% of total market turnover, respectively—far lower than levels seen during the April 2025 reciprocal tariff incident. The exchange stated that year-to-date forced liquidation amounts and affected investor counts remain within a safe range relative to overall market trading volume and investor base.

Furthermore, per the "Securities Firms' Operational Guidelines for Securities Financing and Lending Business," forced liquidations are not executed immediately. When the maintenance rate falls below 130%, securities firms must notify investors after market close on the same day (T-day). Investors are then given two business days from the date of notification to top up collateral. If no top-up occurs and the rate remains below 130%, liquidation proceeds on the next business day (T+3). However, if the consolidated maintenance rate recovers to 130% or above on the liquidation day, the action is suspended. If it rebounds to 166% or higher, the margin call record is canceled.

As of 15:30 on July 28, total default declarations by securities firms amounted to over NT$370 million, but net exposure after offsetting was only about NT$2 million. Defaulting investors were not concentrated among younger demographics, and no significant anomalies were observed. Overall market settlement operations remain orderly.

The exchange urged investors not to believe unverified market rumors or panic excessively. Amid market volatility, it advised maintaining rationality and carefully assessing investment risks and personal financial conditions.