Decision of the Chairman of the Capital Market Supervisory Agency and Financial Institutions No. KEP-258/BL/2008 Regarding Securities Transaction Financing by Securities Companies for Clients and Short Selling Transactions by Securities Companies

MINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA CAPITAL MARKET SUPERVISORY AGENCY AND FINANCIAL INSTITUTIONS EXTRACT DECISION OF THE CHAIRMAN OF THE CAPITAL MARKET SUPERVISORY AGENCY AND FINANCIAL INSTITUTIONS NUMBER KEP-258/BL/2008 REGARDING SECURITIES TRANSACTION FINANCING BY SECURITIES COMPANIES FOR CLIENTS AND SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES

CHAIRMAN OF THE CAPITAL MARKET SUPERVISORY AGENCY AND FINANCIAL INSTITUTIONS,

Considering: that in order to increase the liquidity of Securities transactions and the quality of financing for the settlement of Securities transactions by Securities Companies for clients, as well as to increase legal certainty regarding Securities transactions, it is deemed necessary to perfect Regulation Number V.D.6, Appendix of the Decision of the Chairman of Bapepam Number: Kep-09/PM/1997 regarding Financing for the Settlement of Securities Transactions by Securities Companies for Clients by establishing a new Decision of the Chairman of the Capital Market Supervisory Agency and Financial Institutions;

Recalling: 1. Law Number 8 of 1995 concerning Capital Markets (State Gazette of 1995 Number 64, Supplement to the State Gazette Number 3608);
2. Government Regulation Number 45 of 1995 concerning the Conduct of Activities in the Capital Markets Sector (State Gazette of 1995 Number 86, Supplement to the State Gazette Number 3617) as amended by Government Regulation Number 12 of 2004 (State Gazette of 2004 Number 27, Supplement to the State Gazette Number 4372);
3. Government Regulation Number 46 of 1995 concerning Audits in the Capital Markets Sector (State Gazette of 1995 Number 87, Supplement to the State Gazette Number 3618);
4. Presidential Decree of the Republic of Indonesia Number 45/M of 2006;

DECIDES:

Establishing: DECISION OF THE CHAIRMAN OF THE CAPITAL MARKET SUPERVISORY AGENCY AND FINANCIAL INSTITUTIONS REGARDING SECURITIES TRANSACTION FINANCING BY SECURITIES COMPANIES FOR CLIENTS AND SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES.

MINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA CAPITAL MARKET SUPERVISORY AGENCY AND FINANCIAL INSTITUTIONS

Article 1
Regulations regarding Securities Transaction Financing by Securities Companies for Clients and Short Selling Transactions by Securities Companies are governed by Regulation Number V.D.6 as contained in the Appendix of this Decision.

Article 2
Stock Exchanges are required to:
a. establish Stock Exchange regulations governing the requirements for Securities that can be traded with financing by Securities Companies and that can be used as collateral for financing in the aforementioned transactions, as referred to in number 5 of Regulation Number V.D.6 of the Appendix of this Decision, no later than 3 (three) months since this Decision was established. b. prepare systems and/or trading facilities that facilitate the implementation of Short Selling Transactions as referred to in number 6 letter c item 10) and number 8 letter e of Regulation Number V.D.6 of the Appendix of this Decision, no later than one year since this Decision was established.

Article 3
Clearing and Guaranteeing Institutions are required to create standard securities lending and borrowing contracts as referred to in number 6 letter d item 3) of Regulation Number V.D.6 of the Appendix of this Decision, no later than 3 (three) months since this Decision was established.

Article 4
(1) Securities Companies that have provided financing facilities for Securities transactions to clients prior to the implementation of this Decision are required to adjust the financing transactions provided to clients as referred to in Regulation Number V.D.6, Appendix of this Decision, no later than December 31, 2008. (2) Regulations regarding client requirements eligible to receive financing from Securities Companies as referred to in number 3 of Regulation Number V.D.6, Appendix of this Decision, apply since the establishment of this Decision to new clients who will be provided with financing facilities for Securities transactions by Securities Companies.

Article 5
The Decision of the Chairman of Bapepam Number: Kep-09/PM/1997 dated April 30, 1997, regarding Financing for the Settlement of Securities Transactions by Securities Companies for clients, remains valid until December 31, 2008.

MINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA CAPITAL MARKET SUPERVISORY AGENCY AND FINANCIAL INSTITUTIONS

Article 6
This Decision takes effect from the date of establishment.
To ensure that everyone knows it, the announcement of this Decision is ordered by placing it in the State Gazette of the Republic of Indonesia.
Established in: Jakarta
On the date: June 30, 2008

Chairman of the Capital Market Supervisory Agency and Financial Institutions signed.
A. Fuad Rahmany
NIP 060063058

Copy consistent with the original
Head of the General Affairs Division signed.
Prasetyo Wahyu Adi Suryo
NIP 060076008

APPENDIX
REGULATION NUMBER V.D.6: SECURITIES TRANSACTION FINANCING BY SECURITIES COMPANIES FOR CLIENTS AND SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES

1. In this Regulation, the following terms are defined as:
   a. Initial Collateral is a sum of funds and/or Securities that clients are required to deposit with Securities Companies as Financing Collateral upon the opening of a Margin Transaction Financing Securities Account or a Short Selling Transaction Financing Securities Account. b. Financing Collateral is a sum of funds and/or Securities owned by clients that are held by Securities Companies as collateral for the settlement of Margin Transactions or Short Selling Transactions.
   c. Margin Call is a request by Securities Companies to clients to submit funds and/or Securities in order to meet the maximum financing value limit provided by Securities Companies to clients or the minimum Financing Collateral value limit that clients are required to meet.
   d. Financing Agreement is an agreement between Securities Companies and clients containing rights and obligations related to the financing of the settlement of clients' Securities transactions by Securities Companies, which may include fund financing and/or Securities financing. e. Long Position is the balance of Securities in a specific account in the subsidiary Securities ledger showing a quantity of Securities owned by Securities Companies or a quantity of Securities that Securities Companies are required to deliver to clients. f. Short Position is the balance of Securities in a specific account in the subsidiary Securities ledger showing a quantity of Securities sold by Securities Companies for its own interests and/or clients' interests, but at the time of sale, such Securities were not owned by Securities Companies and/or not yet delivered by clients to Securities Companies. g. Margin Transaction Financing Securities Account is a clients' Securities account specifically used for Margin Transaction activities. h. Short Selling Transaction Financing Securities Account is a clients' Securities account specifically used for Short Selling Transaction activities.
   i. Debit Balance is the balance in a Margin Transaction Financing Securities Account or a Short Selling Transaction Financing Securities Account showing the amount of money that clients are required to pay to Securities Companies.
   j. Credit Balance is the balance of funds in clients' Securities accounts showing the obligations of Securities Companies to clients and/or showing collateral including Financing Collateral in Margin Transaction Financing Securities Accounts or Short Selling Transaction Financing Securities Accounts. k. Margin Transaction is a transaction to purchase Securities for the benefit of clients financed by Securities Companies.
   l. Short Selling Transaction is a transaction to sell Securities where such Securities are not owned by the seller at the time the transaction is executed.

2. Requirements for Securities Companies That Can Provide Financing for the Settlement of Securities Transactions
   a. Financing for the settlement of Margin Transactions and/or Short Selling Transactions can only be conducted if Securities Companies have met all of the following requirements:

1. have a business license from Bapepam and LK to conduct activities as Securities Brokers that administer clients' Securities accounts;
2. have Adjusted Net Working Capital as required in Regulation Number V.D.5 concerning the Maintenance and Reporting of Adjusted Net Working Capital;
3. obtain approval from the Stock Exchange to conduct Margin Transactions and/or Short Selling Transactions;
4. in the event that Securities Companies provide fund financing through Margin Transactions, Securities Companies must have sufficient financing sources to finance the settlement of Securities purchase transactions; and
5. in the event that Securities Companies provide Securities financing through Short Selling Transactions, Securities Companies must have agreements with Clearing and Guaranteeing Institutions, other Securities Companies, Custodian Banks, and/or other parties approved by Bapepam and LK to borrow Securities necessary for the settlement of Securities sale transactions.
   b. Before granting approval as referred to in number 2 letter a item 3), Stock Exchanges are required to examine the operational systems of Securities Companies, particularly those related to risk management systems for financing the settlement of Securities transactions for clients.
   c. Stock Exchanges that have granted such approval are required to conduct periodic examinations of the operational systems as referred to in number 2 letter b at least once a year.

3. Requirements for Clients Eligible to Receive Financing for the Settlement of Securities Transactions.
   Financing for the settlement of Margin Transactions or Short Selling Transactions can only be provided by Securities Companies if clients meet all of the following criteria:
   a. have a regular Securities account, to know the clients' transaction history; b. have opened a Margin Transaction Financing Securities Account for clients who will conduct Margin Transactions or a Short Selling Transaction Financing Securities Account for clients who will conduct Short Selling Transactions at Securities Companies based on Financing Agreements and still have a regular Securities account as referred to in letter a to accommodate Securities transactions not financed by Securities Companies; and
   c. have deposited Initial Collateral with a value of at least IDR 200,000,000.00 (two hundred million rupiah) for each Margin Transaction Financing Securities Account and Short Selling Transaction Financing Securities Account.

4. Key Points of Clients' Securities Transaction Financing Agreements
   The Financing Agreement as referred to in number 3 letter b must at least contain the following clauses:
   a. the high level of clients' investment risk due to changes in Securities prices that may result in, among other things, a decrease, depletion, or negative balance of clients' Financing Collateral; b. Financing Collateral valuation policies regarding Securities, including among others the types of Securities accepted as Financing Collateral, the determination of fair market value, and the determination of haircuts (if any);
   c. clients' obligation to fulfill Securities Companies' requests at all times regarding, among other things, Margin Calls for Margin Transactions, and/or Short Selling Transactions;
   d. Securities Companies' obligation to notify clients of Margin Calls; e. Securities Companies' rights, in the event that clients fail to fulfill Margin Calls, to sell or buy Securities or take other actions agreed upon with clients at any time without providing reasons, notification, or prior approval in order to fulfill:

1. the Financing Collateral value requirements determined in the Financing Agreement; and
2. clients' obligations in the settlement of Securities transactions.
   f. Clients of Securities Companies cannot choose which Securities will be liquidated or sold to fulfill their obligations; g. The maximum limit of clients' Securities that can be sold or bought by Securities Companies in the context of Margin Calls, the settlement of Margin Transactions, and/or Short Selling Transactions; h. Matters that cause Securities Companies to close Margin Transaction Financing Securities Accounts or Short Selling Transaction Financing Securities Accounts at any time;
   i. Financing provisions including among others the financing period, calculation of financing interest rates, and methods for calculating financing interest; and
   j. Provisions regarding securities lending and borrowing agreements between clients and Securities Companies in the context of clients' Short Selling Transactions.

5. Requirements for Securities Eligible for Trading in Clients' Securities Transaction Financing
   a. Margin Transactions and/or Short Selling Transactions can only be executed if such Securities are listed on Stock Exchanges, unless otherwise determined by Bapepam and LK. b. Requirements for Securities eligible for trading with financing for the settlement of Securities transactions and that can be used as Financing Collateral are established by Stock Exchanges in Stock Exchange regulations.
   c. In establishing the requirements for Securities as referred to in number 5 letter b, Stock Exchanges are required to consider at least the following matters:

1. the minimum average daily transaction value over a certain period;
2. the minimum number of parties holding Securities over a certain period;
3. fundamental factors of Securities; and
4. specific criteria for Securities eligible for Short Selling Transactions, including limits on the maximum percentage of total outstanding Securities that can be traded.
   d. Securities meeting the requirements as referred to in number 5 letter c must:
5. be announced to the public and reported to Bapepam and LK by Stock Exchanges on the last working day of each month;
6. have their compliance reviewed if there is material information, and the results of such reviews must be announced to the public and reported to Bapepam and LK by Stock Exchanges on the same day.
   e. In the event that Securities no longer meet the requirements established by Stock Exchanges as Securities eligible for trading with financing for the settlement of Securities transactions and that can be used as Financing Collateral, financing for ongoing clients' Securities transactions must be settled no later than 5 (five) trading days after the Securities no longer meet the requirements established by Stock Exchanges.

6. Mechanism for Clients' Securities Transaction Financing
   a. General Provisions

1. Before financing the settlement of Margin Transactions and/or Short Selling Transactions, Securities Companies are required to examine the following matters:
   a) clients have met the requirements as referred to in number 3; and b) Securities Companies have met the requirements as referred to in number 2 letter a items 4) and 5).
2. The value of Financing Collateral for clients' obligations in Margin Transaction Financing Securities Accounts or Short Selling Transaction Financing Securities Accounts is:
   a) the amount of money recorded in Credit Balances as collateral in Margin Transaction Financing Securities Accounts or Short Selling Transaction Financing Securities Accounts; and b) the fair market value of Securities in Long Positions as collateral in Margin Transaction Financing Securities Accounts or Short Selling Transaction Financing Securities Accounts in the subsidiary Securities ledger after accounting for haircuts.
3. Securities Companies are required to record Margin Transactions and Short Selling Transactions in accordance with the applicable accounting regulations of Securities Companies.
   b. Margin Transactions
4. Before approving the financing for the settlement of Margin Transactions, credit officers in the order and trading departments of Securities Companies must ensure that a sufficient amount of funds and/or Securities are available in Margin Transaction Financing Securities Accounts as Initial Collateral.
5. The value of fund financing for Margin Transactions is equal to the amount of receivables from Margin Transactions provided by Securities Companies to clients and is recorded as Debit Balances in Margin Transaction Financing Securities Accounts.
6. The value of Initial Collateral is at least 50% (fifty percent) of the value of Securities purchases at the time of the transaction or IDR 200,000,000.00 (two hundred million rupiah), whichever is higher.
7. The value of fund financing for Margin Transactions that can be provided by Securities Companies to clients is at most 65% (sixty-five percent) of the value of Financing Collateral.
8. If the value of Financing Collateral decreases such that the financing value as referred to in number 6 letter b item 2) exceeds 65% (sixty-five percent) of the value of Financing Collateral, then Securities Companies are required to issue Margin Calls to their clients, and clients are required to fulfill the Margin Calls, so that the financing value does not exceed 65% (sixty-five percent) of the value of Financing Collateral as referred to in number 6 letter b item 4).
9. If clients fail to fulfill the Margin Calls as referred to in number 6 letter b item 5) no later than 3 (three) trading days, then Securities Companies on the 4th (fourth) trading day are required to immediately sell Securities in the Financing Collateral, evidenced by making sell offers, so that the financing value does not exceed 65% (sixty-five percent) of the value of Financing Collateral.
10. If the financing value reaches 80% (eighty percent) of the value of Financing Collateral, then Securities Companies, with or without notification to clients, are required to immediately sell Securities in the Financing Collateral, evidenced by making sell offers, so that the financing value does not exceed 65% (sixty-five percent) of the value of Financing Collateral.
11. Securities Companies are required to provide written confirmations to their clients regarding the sales transactions as referred to in number 6 letter b items 6) and 7), which are distinguished from written confirmations of transactions based on clients' orders on the same day as the sales of clients' Securities by Securities Companies as referred to in number 6 letter b items 6) and 7).
    c. Financing for Short Selling Transactions
12. Before approving the financing for the settlement of Short Selling Transactions, credit officers in the order and trading departments of Securities Companies are required to:
    a) ensure that a sufficient amount of funds and/or Securities are available in Short Selling Transaction Financing Securities Accounts as Initial Collateral; b) consider the availability of Securities at the time of settlement of Short Selling Transactions, including among others:
    (1) having other Securities that can be converted or exchanged into Securities used for the settlement of Short Selling Transactions; or (2) having exercised rights over options or warrants to obtain Securities used for the settlement of Short Selling Transactions. c) ensure that clients have signed securities lending and borrowing agreements with Securities Companies; and d) ensure that clients understand the rights and obligations regarding such Short Selling Transactions.
13. The value of Securities financing for Short Selling Transactions is equal to the fair market value of Securities traded via short selling by clients financed by Securities Companies and recorded in the Short Position balances of Short Selling Transaction Financing Securities Accounts in the subsidiary Securities ledger.
14. The value of Initial Collateral is at least 50% (fifty percent) of the value of Short Selling Transactions or IDR 200,000,000.00 (two hundred million rupiah), whichever is higher.
15. The value of Financing Collateral is at least 150% (one hundred fifty percent) of the value of Short Selling Transactions at the time the first Short Selling Transaction occurs, where such Financing Collateral must consist of at least Initial Collateral and funds received from the sale of Securities through such Short Selling Transactions.
16. The value of Financing Collateral for Short Selling Transactions that clients are required to maintain is at least 135% (one hundred thirty-five percent) of the fair market value of Securities in Short Positions.
17. If the value of Financing Collateral decreases and/or the fair market value of Securities in Short Positions increases such that the value of Financing Collateral as referred to in number 6 letter a item 2) is less than 135% (one hundred thirty-five percent) of the fair market value of Securities in Short Positions, then Securities Companies are required to issue Margin Calls to their clients, and clients are required to fulfill the Margin Calls, so that the value of Financing Collateral is not less than 135% (one hundred thirty-five percent) of the fair market value of Securities in Short Positions as referred to in number 6 letter c item 5).
18. If clients fail to fulfill the Margin Calls as referred to in number 6 letter c item 6) no later than 3 (three) trading days, then Securities Companies on the 4th (fourth) trading day are required to immediately buy back Securities sold via Short Selling Transactions, evidenced by making buy offers, so that the value of Financing Collateral is not less than 135% (one hundred thirty-five percent) of the fair market value of Securities in Short Positions.
19. If the value of Financing Collateral is less than 120% (one hundred twenty percent) of the fair market value of Securities in Short Positions, then Securities Companies are required to immediately buy back Securities in Short Positions, evidenced by making buy offers, so that the value of Financing Collateral is not less than 135% (one hundred thirty-five percent) of the fair market value of Securities in Short Positions.
20. Securities Companies are required to provide written confirmations to their clients regarding the purchase transactions as referred to in number 6 letter c items 7) and 8), which are distinguished from written confirmations of transactions based on clients' orders on the same day as the purchases of clients' Securities by Securities Companies as referred to in number 6 letter c items 7) and 8).
21. Short Selling Transactions are limited by the following provisions:
    a) Sell offer prices entered into the Stock Exchange trading system must be above the last traded price on the Stock Exchange; and b) Securities Companies are required to mark "short" when executing sell orders in the Stock Exchange trading system. d. Securities Lending and Borrowing Agreements in the context of clients' Short Selling Transaction financing.
22. Securities Companies can only provide financing for clients' Short Selling Transactions if the Securities used by Securities Companies for the settlement of such Securities transactions are obtained by Securities Companies borrowing Securities from and/or through:
    a) Clearing and Guaranteeing Institutions (LKP); b) other Securities Companies; c) Custodian Banks; and/or

APPENDIX

d) Other parties.

2. Standard securities lending contracts must contain details including:
   a) quantity and type of Securities; b) duration of the lending; c) collateral; d) rights related to the ownership of Securities, including voting rights, pre-emptive rights, bonuses, dividends, and interest; e) tax obligations; f) costs associated with the lending; g) breach of contract; h) valuation methods for lent Securities and collateral; and i) dispute resolution mechanisms.

3. In carrying out its functions, the Clearing and Guaranteeing Institution must create standard securities lending contracts whose content complies with paragraph 6 letter d item 2) and has been approved by Bapepam and LK for use by all Parties as referred to in paragraph 6 letter d item 1).

4. Any Party as referred to in paragraph 6 letter d item 1) that does not use the standard securities lending contract as referred to in paragraph 6 letter d item 3) may create a securities lending contract whose content complies with these regulations, provided it is accompanied by a legal opinion from 2 (two) legal consultants registered with Bapepam and LK and must be submitted to Bapepam and LK for approval before it becomes effective.

7. Securities Companies are prohibited from providing financing for Margin Transactions and/or Short Selling Transactions to their clients who are commissioners, directors, or employees of the said Securities Company.

8. Short Selling Transactions by Securities Companies
   Securities Companies conducting Short Selling Transactions for their own account must follow the following regulations:

a. Before conducting a Short Selling Transaction, the Securities Company must:

1. have opened a separate account for Short Selling Transactions;
2. have set aside funds and/or Securities in the account as referred to in paragraph 8 letter a item 1) of at least 50% (fifty percent) of the value of the Short Selling Transaction as assets segregated by the Securities Company to cover Short Selling Transaction risks; and
3. ensure that Securities are available at the time of settlement of the Short Selling Transaction, including:
   a) having other Securities that can be converted or exchanged into the Securities used to settle the Short Selling Transaction; b) having exercised rights over options or warrants to obtain the Securities used to settle the Short Selling Transaction; and/or c) having entered into a securities lending agreement for the Short Selling Transaction from and/or through parties as referred to in paragraph 6 letter d item 1). Securities lending agreements must be made using contracts as referred to in paragraph 6 letter d item 2), item 3), and item 4).

b. At the time the first Short Selling Transaction occurs, the value of the segregated assets as referred to in paragraph 8 letter a item 2) plus the funds received from the sale of Securities through the Short Selling Transaction must be at least 150% (one hundred fifty percent) of the value of the Short Selling Transaction.

c. The value of the segregated assets plus the funds received from the sale of Securities through the Short Selling Transaction as referred to in paragraph 8 letter b must be maintained by the Securities Company at least 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position.

d. If the value of the segregated assets plus the funds received from the sale of Securities through the Short Selling Transaction as referred to in paragraph 8 letter b decreases and/or the fair market value of the Securities in the Short Position increases such that the value of the segregated assets plus the funds received from the sale of Securities through the Short Selling Transaction is less than:

1. 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position, then the Securities Company must add segregated assets and/or buy the Securities traded via short selling no later than 3 (three) trading days, so that the value of the segregated assets plus the funds received from the sale of Securities through the Short Selling Transaction is not less than 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position as referred to in paragraph 8 letter c.
2. 120% (one hundred twenty percent) of the fair market value of the Securities in the Short Position, then the Securities Company must immediately add segregated assets and/or buy the Securities traded via short selling, so that the value of the segregated assets plus the funds received from the sale of Securities through the Short Selling Transaction is not less than 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position as referred to in paragraph 8 letter c.

e. Short Selling Transactions by Securities Companies are limited by the following regulations:

1. The sell offer price entered into the Stock Exchange trading system must be above the last traded price on the Stock Exchange; and
2. The Securities Company must mark "short" when executing the sell order on the Stock Exchange trading system.

f. Securities Companies may only conduct Short Selling Transactions over Securities designated by the Stock Exchange as Securities eligible for short selling.

g. In the event that Securities no longer meet the conditions set by the Stock Exchange as Securities eligible for short selling, then ongoing Short Selling Transactions by the Securities Company must be settled no later than 5 (five) trading days from the date the Securities no longer meet the conditions set by the Stock Exchange.

9. Without prejudice to criminal provisions in the field of Capital Markets, Bapepam and LK may impose sanctions on any violation of these regulations, including Parties causing the violation.

Established in: Jakarta
On date: 30 June 2008
Chairman of the Capital Market Supervisory Board and Financial Institutions

signed.
A. Fuad Rahmany
NIP 060063058

Copy matches the original
Head of General Affairs Section

signed.
Prasetyo Wahyu Adi Suryo
NIP 060076008

Appendix: 1
Regulation Number: V.D.6
ILLUSTRATION OF MARGIN TRANSACTIONS AND SHORT SELLING TRANSACTIONS

1. Assumptions used in the illustration
   a. In calculations, decimal numbers below 0.5 are rounded down to 0 and 0.5 and above are rounded up to 1; and b. Commission, transaction costs, taxes, and other costs are ignored.

2. Illustration of Client Margin Transactions
   Client A opens a Margin Transaction Financing Securities Account by depositing Initial Collateral valued at Rp200,000,000.-. With the margin facility, the Securities Company can finance Client A by Rp200,000,000,- [50% of the Margin Transaction Value, paragraph 6 letter b item 3)] so that Client A can buy 400,000 shares of stock valued at Rp 400,000,000,- (Rp1,000,- per share). At the time of transaction settlement, the Securities Company will pay Rp400,000,000,- to the Clearing and Guaranteeing Institution, where Rp 200,000,000,- comes from the Client's Initial Collateral and Rp 200,000,000,- is financing from the Securities Company. The purchased shares subsequently become Financing Collateral so that the total Financing Collateral becomes valued at Rp400,000,000,-. Thus, the financing-to-collateral ratio is:
   Rp200,000,000 : Rp400,000,000 (i.e., from Rp1,000 x 400,000 shares) = 50%

Stock price decrease condition

• If the stock price decreases to Rp900,- and Financing Collateral only includes these shares, then the decrease will cause the Financing Collateral to also decrease to Rp900 x 400,000 = Rp360,000,000.-. Meanwhile, the financing value that the client must repay to the Securities Company remains Rp200,000,000,- so the financing-to-collateral ratio will increase to:
  Rp200,000,000 : Rp360,000,000 (i.e., from Rp900 x 400,000 shares) = 56%
• If the stock price decreases to Rp769,- then the financing ratio becomes:
  Rp200,000,000 : Rp307,600,000 (i.e., from Rp769 x 400,000 shares) = 65%
• If the stock price decreases to Rp700,- then the financing ratio becomes:
  Rp200,000,000 : Rp280,000,000 (i.e., from Rp700, x 400,000 shares) = 71%

When the financing ratio reaches 71%, the Securities Company must issue a Margin Call to the client to submit additional funds or Securities to the Margin Transaction Financing Securities Account, so that the financing provided becomes at most 65% (sixty-five percent). To meet this ratio, the client must submit additional funds and/or Securities of at least:

financing value [amount of collateral x maximum financing limit] = Rp200,000,000 [Rp280,000,000 (from Rp700,x400,000 shares) x 65%] = Rp18,000,000

The additional funds and/or Securities are used to reduce the financing amount, so the financing ratio returns to:
(Rp200,000,000 - Rp18,000,000) : Rp280,000,000 = 65%

If the client does not submit additional funds and/or Securities while the stock price decreases further to Rp 600, then the financing ratio becomes Rp200,000,000 : Rp240,000,000 (i.e., Rp600 x 400,000 shares) = 83%

In this condition, the Securities Company must execute the collateral to restore the financing ratio to 65%. The amount of collateral that must be executed is:
(Rp200,000,000 - X) / (Rp240,000,000 - X) = 65%

Note: X is the executed collateral
The collateral that must be executed by the Securities Company is Rp125,702,879,-, so the financing value decreases to Rp74,297,121,-, which is Rp200,000,000 minus Rp125,702,879,- and the collateral value decreases to Rp114,297,121,-, which is Rp240,000,000 minus Rp125,702,879. Thus, the financing-to-collateral ratio becomes:
(Rp200,000,000 - Rp125,702,879) / (Rp240,000,000 - Rp125,702,879) = Rp74,297,121 / Rp114,297,121 = 65%

Margin Transaction Illustration Table:
Shares 400,000
Stock Price (Rp) 1,000 900 769 700 600
Financing Value (Rp) 200,000,000
Financing Collateral Value (Rp) 400,000,000 360,000,000 307,600,000 280,000,000 240,000,000 Ratio 50% 56% 65% 71% 83% Additional Funds/Securities (Rp) - - - 18,000,000 - Collateral Execution (Rp) - - - - 125,702,879

3. Illustration of Client Short Selling Transactions:
   Client B opens a Short Selling Transaction Financing Securities Account by depositing Initial Collateral to the Securities Company valued at Rp200,000,000. With Short Selling Transactions, the Securities Company can provide financing for Securities for Short Selling Transactions equal to the value of Securities traded via short selling by the client. financed by the Securities Company and recorded in the Short Position balance of the Short Selling Transaction Financing Securities Account in the Securities subsidiary ledger. With collateral of Rp200,000,000 [50% of the Short Selling Transaction Value, paragraph 6 letter c item 3)] the client can conduct Short Selling Transactions worth Rp400,000,000 (assuming stock price is Rp1,000,- per share and number of shares is 400,000 shares).

At the time of transaction settlement, the Securities Company will receive funds valued at Rp400,000,000,- from the Clearing and Guaranteeing Institution. The funds received from the sale subsequently become Financing Collateral, so the Financing Collateral ratio to the Short Position is:
(Rp200,000,000 (Initial Collateral) + Rp400,000,000 (funds from short selling)) / Rp400,000,000 (fair market value of Securities in Short Position) = 150%

Stock price increase condition

• If the fair market value of shares in the Short Position increases to Rp 1,100, then the increase will cause the fair market value of Securities in the Short Position to increase to Rp 1,100 x 400,000 = Rp440,000,000,-, so the Financing Collateral ratio to the Short Position will decrease to:
  Rp600,000,000 : Rp440,000,000 (i.e., from Rp1,100 x 400,000 shares) = 136%

• If the fair market value of shares in the Short Position increases to Rp 1,111,- then the Financing Collateral ratio to the Short Position becomes:
  Rp600,000,000 : Rp444,400,000 (i.e., from Rp1,111 x 400,000 shares) = 135%

• If the fair market value of shares in the Short Position increases further to Rp1,200, then the Financing Collateral ratio to the Short Position becomes:
  Rp600,000,000 : Rp480,000,000 (i.e., from Rp1200 x 400,000 shares) = 125%

When the Financing Collateral ratio to the Short Position is less than 135%, the Securities Company must issue a Margin Call to the client to submit additional funds or Securities to the Short Selling Transaction Financing Securities Account so that the Financing Collateral value to the fair market value of shares in the Short Position becomes at least 135% (one hundred thirty-five percent).

When the fair market value of shares in the Short Position is Rp480,000,000, the Financing Collateral should be Rp480,000,000 x 135% = Rp.648,000,000. Because the existing collateral is Rp600,000,000, the client must submit additional funds and/or Securities of at least Rp48,000,000,-

If the client does not submit additional funds and/or Securities while the fair market value of shares in the Short Position increases further to Rp1,300, then the Financing Collateral ratio to the fair market value of shares in the Short Position becomes:
Rp600,000,000 : Rp520,000,000 (i.e., from Rp1,300 x 400,000 shares) = 115%

In this condition, the Securities Company must execute the collateral to buy shares in the Short Position in order to restore the ratio between Financing Collateral to the fair market value of shares in the Short Position to 135% (one hundred thirty-five percent). The collateral that must be executed is the value of shares in the Short Position that must be bought, which is:

(Rp600,000,000 - X) / (Rp520,000,000 - X) = 135%

Note: X is the value of shares in the Short Position that must be bought The shares in the Short Position that must be bought by the Securities Company are valued at Rp 291,077,467 or as many as Rp 291,077,467 : Rp1300 = 223,923 shares so that the ratio between Financing Collateral to the fair market value of shares in the Short Position is 135% (one hundred thirty-five percent) with the following calculation:
(Rp600,000,000 - Rp 291,077,467) / (Rp520,000,000 - Rp 291,077,467) = 135%

Short Selling Transaction Illustration Table:
Shares 400,000
Stock Price (Rp) 1,000 1,100 1,111 1,200 1,300 Short Position Value (Rp) 400,000,000 440,000,000 444,444,444 480,000,000 520,000,000 Financing Collateral Value (Rp) 600,000,000 Ratio 150% 136% 135% 125% 115% Additional Funds/Securities (Rp) - - - 48,000,000 - Purchase (Rp) - - - - 291,077,467

Closing of Short Selling Transaction Financing Securities Accounts.
If Client B intends to close the Short Selling Transaction Financing Securities Account when the price reaches Rp 1,300, then the Securities Company will purchase shares in the Short Position valued at Rp1,300 x 400,000 = Rp520,000,000. With this purchase, the remaining Financing Collateral value becomes:
Rp600,000,000 – Rp520,000,000 = Rp80,000,000.

With the closing of the account, the Securities Company receives the return of 400,000 shares valued at Rp 520,000,000 and the Client receives the remaining Financing Collateral of Rp 80,000,000,-