Financial Regulation of the Financial Services Authority of the Republic of Indonesia Number 6 of 2024 Concerning Securities Transaction Financing by Securities Companies for Clients and Short Selling Transactions by Securities Companies

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FINANCIAL SERVICES AUTHORITY REGULATION
OF THE REPUBLIC OF INDONESIA
NUMBER 6 OF 2024
CONCERNING
SECURITIES TRANSACTION FINANCING BY SECURITIES COMPANIES FOR CLIENTS AND SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES

BY THE GRACE OF GOD THE ALMIGHTY,

THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that in order to increase liquidity and deepen the financial market through margin transaction financing and/or short selling transactions, as well as to strengthen risk management, it is necessary to update the provisions related to margin transaction financing and/or short selling transactions so as to meet the needs of capital market participants and align with international practices; b. that margin transaction financing and/or short selling transactions regulated in Financial Services Authority Regulation Number 55/POJK.04/2020 concerning Securities Transaction Financing by Securities Companies for Clients and Short Selling Transactions by Securities Companies are unable to accommodate the needs as referred to in letter a, so it is necessary to replace it;
c. based on the considerations referred to in letter a and letter b, it is necessary to establish a Financial Services Authority Regulation concerning Securities Transaction Financing by Securities Companies for Clients and Short Selling Transactions by Securities Companies;

Recalling:

1. Law Number 8 of 1995 concerning the Capital Market (State Gazette of the Republic of Indonesia Year 1995 Number 64, Supplement to the State Gazette of the Republic of Indonesia Number 3608) as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);
   FINANCIAL SERVICES AUTHORITY
   REPUBLIC OF INDONESIA

2. Law Number 21 of 2011 concerning the Financial Services Authority (State Gazette of the Republic of Indonesia Year 2011 Number 111, Supplement to the State Gazette of the Republic of Indonesia Number 5253) as amended by Law Number 4 of 2023 concerning the Development and Strengthening of the Financial Sector (State Gazette of the Republic of Indonesia Year 2023 Number 4, Supplement to the State Gazette of the Republic of Indonesia Number 6845);

DECIDING:
Establishing: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING SECURITIES TRANSACTION FINANCING BY SECURITIES COMPANIES FOR CLIENTS AND SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES.

CHAPTER I
GENERAL PROVISIONS

Article 1
In this Financial Services Authority Regulation, the following terms are defined as:

1. Securities Company is a party that conducts activities as an underwriter of securities and/or a securities broker or investment manager.
2. Securities are securities or investment contracts, whether in conventional and digital form or other forms in accordance with technological developments, that give the owner the right to directly or indirectly obtain economic benefits from the issuer or from a specific party based on an agreement and any derivatives of Securities, which can be transferred and/or traded on the capital market.
3. Party is an individual, legal entity, company, joint venture, association, or organized group.
4. Clearing and Guarantee Institution is a Party that provides clearing and/or guarantee services for the settlement of Securities transactions conducted through market organizers on the capital market and other services that can be implemented to support inter-market activities.
5. Margin Transaction is a transaction to purchase Securities for the benefit of clients financed by the Securities Company.
6. Short Selling Transaction is a transaction to sell Securities where the Securities in question are not owned by the seller at the time the transaction is executed.
7. Financing Collateral is a sum of funds and/or Securities owned by the client held by the Securities Company as collateral for the settlement of Margin Transactions or Short Selling Transactions.
8. Margin Transaction Financing Securities Account is a client's Securities account specifically used for Margin Transaction activities.
9. Short Selling Transaction Financing Securities Account is a client's Securities account specifically used for Short Selling Transaction activities.
10. Initial Collateral is a sum of funds and/or Securities that must be deposited by the client to the Securities Company as Financing Collateral at the time of opening a Margin Transaction Financing Securities Account or a Short Selling Transaction Financing Securities Account.
11. Financing Collateral Fulfillment Request is a request by the Securities Company to the client to submit funds and/or Securities in order to meet the maximum value of financing provided by the Securities Company to the client or the minimum value of Financing Collateral that must be met by the client.
12. Financing Agreement is an agreement between the Securities Company and the client containing rights and obligations related to the financing of the client's securities transaction settlement by the Securities Company, which may consist of fund financing and/or securities financing.
13. Long Position is the balance of Securities in a specific account in the Securities subsidiary ledger showing a number of Securities owned by the Securities Company or a number of Securities that must be delivered by the Securities Company to the client.
14. Short Position is the balance of Securities in a specific account in the Securities subsidiary ledger showing a number of Securities sold by the Securities Company for its own interest and/or the client's interest, but at the time of sale, the Securities in question are not yet owned by the Securities Company and/or not yet delivered by the client to the Securities Company.
15. Debit Balance is the balance in the Margin Transaction Financing Securities Account or Short Selling Transaction Financing Securities Account showing the amount of money that must be paid by the client to the Securities Company.
16. Stock Exchange is a market organizer on the capital market for exchange transactions.
17. Stock Exchange Member is:
    a. a securities broker that has obtained a business license from the Financial Services Authority; and b. another party that has obtained approval from the Financial Services Authority, which has the right to use the Stock Exchange's system and/or facilities in accordance with Stock Exchange regulations.
18. Securities Financing Institution is a Party that conducts securities transaction financing business activities.
19. Adjusted Net Working Capital is the amount of the Securities Company's current assets minus all liabilities and ranking liabilities of the Securities Company, plus subordinated debt, and other adjustments.
20. Trading Day is the day when Securities trading is held at the Stock Exchange, namely Monday to Friday, unless that day is a national holiday or declared as a stock exchange holiday by the Stock Exchange.
21. Haircut is a factor reducing the fair market value of Securities according to its risk by a certain percentage of the fair market value of Securities.

CHAPTER II
FINANCING OF SECURITIES TRANSACTION SETTLEMENT BY SECURITIES COMPANIES

First Section
General

Article 2
(1) The financing of funds and/or Securities for the settlement of securities transactions by Securities Companies is prohibited from being provided except for Margin Transactions and/or Short Selling Transactions. (2) Securities Companies in providing financing for Margin Transactions are prohibited from transferring client receivables from regular Securities accounts to Margin Transaction Financing Securities Accounts.

Second Section
Requirements for Margin Transaction and Short Selling Transaction Financing

Article 3
Securities Companies conducting Margin Transaction and/or Short Selling Transaction financing must first meet the following provisions:
a. have a business license from the Financial Services Authority to conduct activities as a securities broker that administers client Securities accounts; b. have Adjusted Net Working Capital based on the requirements as Stock Exchange Members that provide financing in the context of Margin Transactions as established in Stock Exchange regulations; and
c. have approval from the Stock Exchange to conduct Margin Transactions and/or Short Selling Transactions.

Article 4
(1) Securities Companies providing fund financing through Margin Transactions must have sufficient financing sources to finance the settlement of Securities purchase transactions.
(2) For fund financing through Margin Transactions as referred to in paragraph (1), Securities Companies may use sources:
a. equity; and/or b. financing from other Parties;

(3) Securities Companies are prohibited from using client funds as a source of financing for the settlement of purchase transactions for other clients.

Article 5
Securities Companies in providing Margin Transaction financing and/or Short Selling Transaction financing must establish a Haircut rate for Securities that can be used as Financing Collateral other than Securities traded with financing.

Article 6
In the event that Securities Companies provide securities financing through Short Selling Transactions, Securities Companies must have agreements with Clearing and Guarantee Institutions, Securities Financing Institutions, other Securities Companies, custodian banks, and/or other Parties approved by the Financial Services Authority to borrow Securities required for the settlement of Short Selling Transactions.

Article 7
Securities Companies may assume the settlement obligations of Margin Transactions of clients from other Securities Companies, by meeting the takeover procedures established in Stock Exchange regulations.

Article 8
In the event that a Stock Exchange Member's approval as a Stock Exchange Member that can provide financing for Margin Transactions and/or Short Selling Transactions is revoked by the Stock Exchange, such Stock Exchange Member must settle ongoing Margin Transactions and/or Short Selling Transactions by meeting the provisions established in Stock Exchange regulations.

CHAPTER III
OBLIGATIONS OF THE STOCK EXCHANGE REGARDING SECURITIES COMPANIES PROVIDING FINANCING FOR SECURITIES TRANSACTION SETTLEMENT

Article 9
In providing approval as referred to in Article 3 letter c, the Stock Exchange must examine the fulfillment of requirements by Securities Companies at least containing:
a. sufficiency of Adjusted Net Working Capital; b. sufficiency of financing sources;
c. having agreements as referred to in Article 6 in the event that the Securities Company provides securities financing through Short Selling Transactions;
d. having written risk management guidelines and procedures that are adequate regarding Margin Transactions and/or Short Selling Transactions at least containing:

1. Securities that can be financed and used as collateral;
2. the value of collateral that must be maintained for each financing provided;
3. Financing Collateral Fulfillment Requests to clients in the event that the value of collateral decreases; and
4. the mechanism for settling the execution of client collateral by selling and/or buying Securities or taking other actions in the event that a client receiving financing does not meet obligations regarding Financing Collateral Fulfillment Requests from the Securities Company;
   e. having adequate systems to carry out Margin Transaction financing and/or Short Selling Transaction financing activities; and f. having Margin Transaction Financing Agreements and/or Short Selling Transaction Financing Agreements.

Article 10
(1) The Stock Exchange must conduct periodic examinations of the requirements as referred to in Article 9 based on risk assessments of Securities Companies that have obtained approval and provide financing for Margin Transactions and/or Short Selling Transactions. (2) The Stock Exchange must regulate the period for periodic examinations based on risk assessments of Securities Companies currently providing financing for Margin Transactions and/or Short Selling Transactions.

CHAPTER IV
CLIENT REQUIREMENTS ELIGIBLE TO RECEIVE FINANCING FOR SECURITIES TRANSACTION SETTLEMENT

Article 11
In providing financing for the settlement of Margin Transactions or Short Selling Transactions to clients, Securities Companies must consider requirements that must be met by clients at least:
a. having a smooth transaction history proven by:

1. having an active regular Securities account; and
2. the quality of financing for securities transactions under the name of the respective client in the Financial Services Authority's financial information service system is categorized as smooth, if financing already exists;
   b. having 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 the Securities Company based on a Financing Agreement; and
   c. having deposited Initial Collateral for each Margin Transaction Financing Securities Account and Short Selling Transaction Financing Securities Account.

CHAPTER V
ESSENTIAL CLAUSES OF FINANCING AGREEMENTS FOR CLIENT SECURITIES TRANSACTIONS

Article 12
Margin Transaction Financing Agreements and/or Short Selling Transaction Financing Agreements as referred to in Article 9 letter f must contain at least the following clauses:
a. the high level of client investment risk; b. collateral valuation policies for Securities, including the types of Securities accepted as Financing Collateral, the determination of their fair market value, and the determination of Haircut;
c. the client's obligation to meet the Securities Company's requests at any time regarding the client's securities transaction financing activities;
d. the Securities Company's obligation to notify clients of Financing Collateral Fulfillment Requests; e. the Securities Company's right, in the event that the client does not meet Financing Collateral Fulfillment Requests, to sell or buy Securities or take other actions agreed upon with the client at any time without providing reasons or notification or obtaining prior approval to fulfill:

1. the Financing Collateral value requirements determined in the Financing Agreement; and
2. the client's obligations in settling securities transactions;
   f. clients of the Securities Company cannot choose which Securities will be liquidated or sold to meet their obligations; g. the maximum limit of client Securities that can be sold or bought by the Securities Company as Financing Collateral in the context of Financing Collateral Fulfillment Requests, Margin Transaction settlement, and/or Short Selling Transactions; h. circumstances that cause the Securities Company to close Margin Transaction Financing Securities Accounts or Short Selling Transaction Financing Securities Accounts at any time;
   i. financing provisions including the calculation of financing interest rates and methods for calculating financing interest;
   j. provisions regarding securities lending and borrowing agreements between clients and the Securities Company in client Short Selling Transactions; k. the financing period for Margin Transactions and/or Short Selling Transactions is at most 12 (twelve) months and can be extended again based on evaluation results by the Securities Company;
   l. in the event that the Securities Company uses financing from Securities Financing Institutions to provide Margin Transaction financing for specific clients, the Securities Company must:
3. transfer the client's collateral Securities from the client's sub-account in the Securities Company's administration to the client's sub-account in the Securities Financing Institution's administration; and
4. require the client to grant power of attorney to the Securities Company regarding the use of the client's collateral Securities by the Securities Financing Institution;
   m. the assumption of settlement obligations for Margin Transactions of clients from other Securities Companies; n. dispute resolution; and o. force majeure.

CHAPTER VI
SECURITIES REQUIREMENTS ELIGIBLE TO BE TRADED IN CLIENT SECURITIES TRANSACTION FINANCING

Article 13
Securities Companies are prohibited from conducting Margin Transactions and/or Short Selling Transactions on Securities that are not listed on the Stock Exchange.

Article 14
(1) Requirements for Securities that can:
a. be traded with financing for securities transaction settlement; and b. be used as Financing Collateral, are established by the Stock Exchange in Stock Exchange regulations.
(2) In establishing Securities requirements as referred to in paragraph (1), for equity Securities, the Stock Exchange must consider at least:
a. the minimum average daily transaction value in a certain period; b. the minimum number of Parties owning the Securities in a certain period;
c. the fundamental factors of the Securities; and
d. special criteria for Securities eligible for Short Selling Transactions, including limits on the maximum percentage of the total number of outstanding Securities that can be traded.
(3) The Stock Exchange must further regulate the Haircut amount for Securities that can be used as Financing Collateral as referred to in paragraph (1).

Article 15
(1) The Stock Exchange must announce to the public Securities that meet or do not meet the requirements as referred to in Article 14 paragraph (1) and report to the Financial Services Authority at the latest 2 (two) Trading Days before the last Trading Day of each month. (2) In the event of material information, the Stock Exchange must review the fulfillment of requirements for Securities meeting the requirements as referred to in Article 14 paragraph (1). (3) The Stock Exchange must announce the results of the review as referred to in paragraph (2) to the public and report to the Financial Services Authority on the same day. (4) The Stock Exchange must provide Margin Transaction and/or Short Selling Transaction data to the public.

Article 16
Securities Companies must take follow-up action in the event that Securities no longer meet the requirements established by the Stock Exchange as Securities eligible to be traded with financing for securities transaction settlement and/or used as Financing Collateral with the following provisions:
a. in the event that the Securities are removed from the margin Securities list, thereby causing the client's margin financing ratio to reach the Financing Collateral Fulfillment Request ratio and/or the ratio requiring immediate sale of Securities, the Securities Company must:

1. issue a Financing Collateral Fulfillment Request to the client and/or sell Securities in accordance with this Financial Services Authority Regulation; or
2. settle excess financing above the Financing Collateral Fulfillment Request ratio for the client's ongoing Margin Transaction transactions on margin Securities at the latest 5 (five) Trading Days since the Securities were removed;
   b. in the event that the Securities are removed from the short selling Securities list, the Securities Company must settle financing for the Securities that are already ongoing at the latest 5 (five) Trading Days since the Securities were removed or no longer meet the requirements based on the Financing Agreement; and
   c. in the event that the Securities are removed from the collateral Securities list, thereby causing the client's Short Selling Transaction financing ratio to reach the Financing Collateral Fulfillment Request ratio or the ratio requiring immediate purchase of Securities, the Securities Company must:
3. issue a Financing Collateral Fulfillment Request to the client and/or buy Securities in accordance with this Financial Services Authority Regulation; or
4. settle excess financing above the Financing Collateral Fulfillment Request ratio for the client's ongoing Short Selling Transaction transactions on Securities at the latest 5 (five) Trading Days since the Securities were removed.

Article 17
(1) In the event that Financing Collateral funds or Securities are blocked and/or seized by law enforcement, the Securities Company must exclude the blocked and/or seized Financing Collateral funds or Securities from the financing calculation until the block is lifted or the seized funds or Securities are returned. (2) In the event that Financing Collateral Securities are temporarily suspended from trading by the Stock Exchange for 3 (three) consecutive Trading Days based on orders from the Financial Services Authority or Stock Exchange supervision, the Securities Company must apply a 100% (one hundred percent) Haircut to the Financing Collateral Securities on the 4th (fourth) Trading Day since the first temporary suspension of trading, until the temporary suspension of trading is revoked. (3) In the event that Financing Collateral Securities have their listing removed from the Stock Exchange, the Securities Company must apply a 100% (one hundred percent) Haircut to the Financing Collateral Securities on the Trading Day after the listing removal is conducted. (4) If Financing Collateral Securities as referred to in paragraphs (1), (2), and (3) cause the client's financing ratio to reach the Financing Collateral Fulfillment Request ratio, the Securities Company must:
a. issue a Financing Collateral Fulfillment Request to the client and/or sell Securities in accordance with this Financial Services Authority Regulation; or b. settle excess financing above the Financing Collateral Fulfillment Request ratio for the client's ongoing Margin Transaction transactions and/or Short Selling Transaction transactions on Securities at the latest 5 (five) Trading Days since the Securities were removed.

CHAPTER VII
MECHANISM FOR CLIENT SECURITIES TRANSACTION FINANCING

First Section
General

Article 18
Before providing financing or accepting the transfer of financing for the settlement of Margin Transactions and/or Short Selling Transactions, Securities Companies must ensure:
a. the client has met the requirements as referred to in Article 11; and b. the Securities Company has met the requirements as referred to in Article 4 and Article 6.

Article 19
The value of Financing Collateral for client obligations in Margin Transaction Financing Securities Accounts or Short Selling Transaction Financing Securities Accounts includes:
a. a sum of funds deposited by the client at the Securities Company as collateral in the Margin Transaction Financing Securities Account or Short Selling Transaction Financing Securities Account; and b. the fair market value of Securities in the Long Position as collateral in the Margin Transaction Financing Securities Account or Short Selling Transaction Financing Securities Account in the Securities subsidiary ledger after calculating Haircut.

Article 20
Securities Companies must record Margin Transactions and Short Selling Transactions in accordance with financial accounting standards.

Article 21
Securities Companies are prohibited from providing Margin Transaction financing and/or Short Selling Transaction financing to clients of the Securities Company who are commissioners, directors, major shareholders, controlling shareholders, or employees of the said Securities Company, along with their affiliates.

Article 22
(1) Securities Companies must meet the maximum limit provisions for providing Margin Transaction financing and/or Short Selling Transaction financing to 1 (one) client or several clients who have mutual affiliate relationships at most 10% (ten percent) of the Adjusted Net Working Capital position on 2 (two) Trading Days before providing Margin Transaction financing and/or Short Selling Transaction financing. (2) In the event that Margin Transaction financing and/or Short Selling Transaction financing to clients reaches the maximum limit as referred to in paragraph (1), Securities Companies cannot provide new Margin Transaction financing and/or Short Selling Transaction financing to the client.

Second Section
Margin Transactions

Article 23
Before approving the financing of Margin Transaction settlement, Securities Companies must ensure that a sum of funds and/or Securities is available in the Margin Transaction Financing Securities Account as Initial Collateral.

Article 24
(1) Securities Companies must record the value of fund financing for Margin Transactions at the amount of receivables for Margin Transactions provided by the Securities Company to the Securities Company's client. (2) Securities Companies must record the value of fund financing for Margin Transactions as a Debit Balance in the Margin Transaction Financing Securities Account.

Article 25
(1) The value of Initial Collateral at the time of the first transaction submitted to the Stock Exchange using the Margin Transaction Financing Securities Account is at least:
a. 50% (fifty percent) of the value of the Securities purchase; or b. Rp 50,000,000.00 (fifty million rupiah), whichever is higher.

(2) The valuation of Initial Collateral in the form of Securities must take Haircut into account.

Article 26
(1) The value of financing funds for Margin Transactions that may be provided by the Securities Company to clients shall not exceed 65% (sixty-five percent) of the value of Financing Collateral. (2) The valuation of Financing Collateral in the form of Securities must take Haircut into account.

Article 27
(1) If the value of Financing Collateral decreases such that the total financing value as referred to in Article 26 exceeds 65% (sixty-five percent) of the value of Financing Collateral, the Securities Company must issue a Collateral Fulfillment Request to the client of the Securities Company. (2) The client as referred to in paragraph (1) must fulfill the Collateral Fulfillment Request, so that the financing value does not exceed 65% (sixty-five percent) of the value of Financing Collateral as referred to in Article 26.

Article 28
If the client fails to fulfill the Collateral Fulfillment Request as referred to in Article 27 within a maximum period of 3 (three) Trading Days, the Securities Company on the 4th (fourth) Trading Day must immediately sell the Securities in the Financing Collateral evidenced by conducting a sell offer so that the financing value does not exceed 65% (sixty-five percent) of the value of Financing Collateral.

Article 29
If the financing value has reached 80% (eighty percent) of the value of Financing Collateral, the Securities Company, with or without notification to the client of the Securities Company, must immediately sell the Securities in the Financing Collateral evidenced by conducting a sell offer so that the financing value does not exceed 65% (sixty-five percent) of the value of Financing Collateral.

Article 30
The Securities Company may establish financing mechanisms and maximum financing ratios to conduct Collateral Fulfillment Requests to clients and/or sales of client Securities that are stricter than the financing mechanisms and maximum financing ratios as referred to in Article 19, Article 22, Article 25, Article 26, Article 27, and Article 29.

Article 31
The Securities Company must submit written confirmation to the client of the Securities Company regarding the sale transaction as referred to in Article 28 and Article 29, which is distinguished from written confirmation regarding transactions based on client orders on the same day as the sale of client Securities by the Securities Company as referred to in Article 28 and Article 29.

Part Three
Short Selling Transactions

Article 32
Before approving to finance the settlement of Short Selling Transactions for clients, the Securities Company must:
a. ensure that a certain amount of funds and/or Securities is available in the Short Selling Transaction Financing Securities Account as Initial Collateral; b. consider the availability of Securities at the time of settlement of the Short Selling Transaction at least:

1. having other Securities that can be converted or exchanged into the Securities used for the settlement of the Short Selling Transaction; or
2. having exercised rights over options or warrants to obtain the Securities used for the settlement of the Short Selling Transaction;
   c. ensure that the client has signed a securities lending agreement with the Securities Company; and
   d. ensure that the client has understood the rights and obligations regarding the Short Selling Transaction.

Article 33
The value of financing for Securities for Short Selling Transactions is equal to the fair market value of the 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 subsidiary Securities books.

Article 34
(1) The value of Initial Collateral at the time of the first transaction submitted to the Stock Exchange using the Short Selling Transaction Financing Securities Account must be at least:
a. 50% (fifty percent) of the value of the Short Selling Transaction; or b. Rp50,000,000.00 (fifty million rupiah), using the higher amount.
(2) The valuation of Initial Collateral in the form of Securities must take Haircut into account.

Article 35
(1) The value of Financing Collateral must be at least 150% (one hundred fifty percent) of the value of the Short Selling Transaction at the time the first Short Selling Transaction occurs, with the provision that the Financing Collateral mentioned must consist of at least Initial Collateral and funds received from the sale of Securities through the aforementioned Short Selling Transaction. (2) The valuation of Financing Collateral in the form of Securities must take Haircut into account.

Article 36
The value of Financing Collateral for Short Selling Transactions that must be maintained by the client must be at least 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position.

Article 37
(1) If the value of Financing Collateral decreases and/or the fair market value of the Securities in the Short Position increases such that the value of Financing Collateral as referred to in Article 36 is less than 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position, the Securities Company must issue a Collateral Fulfillment Request to the client of the Securities Company. (2) The client as referred to in paragraph (1) must fulfill the Collateral Fulfillment Request, so that the value of Financing Collateral 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 Article 36.

Article 38
If the client fails to fulfill the Collateral Fulfillment Request as referred to in Article 37 within a maximum period of 3 (three) Trading Days, the Securities Company on the 4th (fourth) Trading Day must immediately buy back the Securities sold through the Short Selling Transaction evidenced by conducting a buy offer so that the value of Financing Collateral is not less than 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position.

Article 39
If the value of Financing Collateral is less than 120% (one hundred twenty percent) of the fair market value of the Securities in the Short Position, the Securities Company must immediately buy back the Securities in the Short Position evidenced by conducting a buy offer so that the value of Financing Collateral is not less than 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position.

Article 40
(1) The Securities Company must submit written confirmation to the client of the Securities Company regarding the buy transaction as referred to in Article 38 and Article 39.
(2) The written confirmation as referred to in paragraph (1) must be distinguished from written confirmation regarding transactions based on client orders on the same day as the buy of client Securities by the Securities Company as referred to in Article 38 and Article 39.

Article 41
Short Selling Transactions are limited by the following provisions:
a. the sell offer price entered into the Stock Exchange trading system must be equal to or above the last traded price at the Stock Exchange; and b. the Securities Company must mark "short selling" when executing the sell order in the Stock Exchange trading system.

Part Four
Securities Lending Agreement in Financing Client Short Selling Transactions

Article 42
The Securities Company may settle client Short Selling Transaction financing using:
a. its own portfolio; or b. Securities borrowed from:

1. Clearing and Guarantee Institution;
2. Securities Financing Institution;
3. Other Securities Companies;
4. Custodian Banks; and/or
5. Other Parties.

Article 43
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 ownership of Securities including voting rights, pre-emptive rights, bonuses, dividends, and interest; e. tax obligations; f. costs related to lending; g. default; h. valuation method for borrowed Securities and collateral; and
i. dispute resolution mechanism.

Article 44
(1) In carrying out its functions, the Clearing and Guarantee Institution must create a standard securities lending contract whose content complies with the provisions as referred to in Article 43. (2) The contract as referred to in paragraph (1) must have been approved by the Financial Services Authority to be used by all Parties as referred to in Article 42.

Article 45
(1) In the event that the Parties as referred to in Article 42 do not use the standard securities lending contract as referred to in Article 44, such Parties must create a securities lending contract whose content complies with this Financial Services Authority Regulation, accompanied by legal opinions from 2 (two) legal consultants registered with the Financial Services Authority. (2) The securities lending contract as referred to in paragraph (1) must be submitted to the Financial Services Authority to obtain approval before it becomes effective.

CHAPTER VIII
SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES

Article 46
Securities Companies conducting Short Selling Transactions for their own interest must follow the following provisions:
a. before conducting Short Selling Transactions, the Securities Company:

1. has opened a separate account for Short Selling Transactions;
2. has set aside funds and/or Securities in the account as referred to in item 1 of at least 50% (fifty percent) of the value of the Short Selling Transaction as assets set aside by the Securities Company to cover Short Selling Transaction risks;
3. ensures 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 for the settlement of the Short Selling Transaction; b) having exercised rights over options or warrants to obtain the Securities used for the settlement of the Short Selling Transaction; and/or c) having conducted a securities lending agreement in the Short Selling Transaction with and/or through Parties as referred to in Article 42 which is made using contracts as referred to in Article 43 to Article 45; and
4. has approval from the Stock Exchange to conduct Short Selling Transactions;
   b. at the time the first Short Selling Transaction occurs, the value of assets set aside as referred to in letter a item 2 plus 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 assets set aside plus funds received from the sale of Securities through the Short Selling Transaction as referred to in 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 assets set aside plus funds received from the sale of Securities through the Short Selling Transaction as referred to in letter b decreases and/or the fair market value of the Securities in the Short Position increases such that the value of assets set aside plus funds received from the sale of Securities through the Short Selling Transaction is less than:
5. 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position, the Securities Company must add assets set aside and/or buy back Securities traded via short selling within a maximum of 3 (three) Trading Days, so that the value of assets set aside plus 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 letter c; and
6. 120% (one hundred twenty percent) of the fair market value of the Securities in the Short Position, the Securities Company must immediately add assets set aside and/or buy back Securities traded via short selling, so that the value of assets set aside plus 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 letter c;
   e. Short Selling Transactions by the Securities Company are limited by the following provisions:
7. the sell offer price entered into the Stock Exchange trading system is equal to or above the last traded price at the Stock Exchange; and
8. the Securities Company marks "short selling" when executing the sell order in the Stock Exchange trading system;
   f. the Securities Company is prohibited from conducting Short Selling Transactions on Securities other than those designated by the Stock Exchange as Securities that can be traded via short selling; and g. if Securities no longer meet the conditions set by the Stock Exchange as Securities that can be traded via short selling, ongoing Short Selling Transactions by the Securities Company must be settled within a maximum of 5 (five) Trading Days since the Securities no longer meet the conditions set by the Stock Exchange.

Article 47
(1) Securities Companies conducting Short Selling Transactions on underlying Securities as liquidity providers are exempt from the obligations referred to in Article 46.
(2) The Stock Exchange must regulate minimum provisions that must be met by Securities Companies as liquidity providers in conducting Short Selling Transactions on underlying Securities.

CHAPTER IX
ADMINISTRATIVE SANCTIONS

Article 48
(1) Any Party that violates the provisions as referred to in Article 2, Article 3, Article 4 paragraph (1) and (3), Article 5, Article 6, Article 8, Article 9, Article 10, Article 11, Article 12, Article 13, Article 14 paragraph (2) and (3), Article 15, Article 16, Article 17, Article 18, Article 20, Article 21, Article 22 paragraph (1), Article 23, Article 24, Article 25, Article 26, Article 27, Article 28, Article 29, Article 31, Article 32, Article 34, Article 35, Article 36, Article 37, Article 38, Article 39, Article 40, Article 41, Article 43, Article 44, Article 45, Article 46, and Article 47 paragraph (2), shall be subject to administrative sanctions. (2) Sanctions as referred to in paragraph (1) shall also be imposed on Parties who cause the occurrence of violations as referred to in paragraph (1). (3) Sanctions as referred to in paragraph (1) and paragraph (2) shall be imposed by the Financial Services Authority. (4) Administrative sanctions as referred to in paragraph (1) consist of:
a. written warning; b. fines, namely the obligation to pay a certain amount of money;
c. restriction of business activities;
d. suspension of business activities; e. revocation of business license; f. cancellation of approval; and/or g. cancellation of registration.
(5) Administrative sanctions as referred to in paragraph (4) letter b, letter c, letter d, letter e, letter f, or letter g may be imposed with or without prior imposition of administrative sanctions in the form of a written warning as referred to in paragraph (4) letter a. (6) Administrative sanctions in the form of fines as referred to in paragraph (4) letter b may be imposed separately or together with the imposition of administrative sanctions as referred to in paragraph (4) letter c, letter d, letter e, letter f, or letter g. (7) The procedure for imposing sanctions as referred to in paragraph (3) shall be carried out in accordance with applicable legislation.

Article 49
In addition to administrative sanctions as referred to in Article 48 paragraph (4), the Financial Services Authority may take certain actions against any Party that violates the provisions of this Financial Services Authority Regulation.

Article 50
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 48 paragraph (4) and certain actions as referred to in Article 49 to the public.

CHAPTER X
TRANSITIONAL PROVISIONS

Article 51
All Margin Transaction Financing and/or Short Selling Transaction Agreements that are ongoing and already exist prior to the implementation of this Financial Services Authority Regulation must be adjusted to this Financial Services Authority Regulation within a maximum of 1 (one) year since this Financial Services Authority Regulation comes into effect.

CHAPTER XI
CLOSING PROVISIONS

Article 52
(1) Upon the implementation of this Financial Services Authority Regulation, Financial Services Authority Regulation Number 55/POJK.04/2020 concerning Securities Transaction Financing by Securities Companies for Clients and Short Selling Transactions by Securities Companies is repealed and declared invalid. (2) The provisions as referred to in Article 15 paragraph (4) shall come into effect after 1 (one) year counted from the date of promulgation.

Article 53
This Financial Services Authority Regulation shall come into effect 6 (six) months from the date of promulgation.

This copy is in accordance with the original
Director of Legal Development
Legal Department
Aat Windradi

To ensure that everyone knows, ordering the promulgation of this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.

Established in Jakarta on April 1, 2024
CHAIRMAN OF THE COMMISSIONERS BOARD
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA,
MAHENDRA SIREGAR

Promulgated in Jakarta on April 3, 2024
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA,
YASONNA H. LAOLY

STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2024 NUMBER 8/OJK signed

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NUMBER 6 YEAR 2024
CONCERNING
SECURITIES TRANSACTION FINANCING BY SECURITIES COMPANIES FOR CLIENTS AND SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES

I. GENERAL
Securities transactions by clients at the Stock Exchange can be conducted in two ways, namely transactions conducted using the client's own funds or referred to as transactions using regular Securities accounts, and transactions partially financed by the Securities Company or commonly referred to as Margin Transaction financing and Short Selling Transaction financing.

Client transactions at the Stock Exchange financed by the Securities Company are conducted based on Financial Services Authority Regulation (POJK) concerning Securities Transaction Financing by Securities Companies for Clients and Short Selling Transactions by Securities Companies. This Regulation regulates regarding Securities requirements, Securities Companies, and clients as well as standard risk management provisions for Margin Transaction financing and/or Short Selling Transaction financing. The aforementioned POJK also mandates the Stock Exchange to regulate more comprehensively and in detail regarding Securities and requirements for Stock Exchange Members who can provide Margin Transaction financing and/or Short Selling Transaction financing services.

Securities transactions at the Stock Exchange using margin financing are activities conducted at almost all Stock Exchanges. The regulation of Margin Transactions in various parts of the world is quite diverse; some are regulated by capital market authorities and Stock Exchanges, while others leave the regulation to the Stock Exchange. Regardless of the regulator, most jurisdictions do not limit equity Securities that can be traded via Margin Transaction financing and/or Short Selling Transaction financing. Regulations on Margin Transactions and/or Short Selling Transactions mostly regulate provisions for Parties providing financing, specifically capital adequacy and risk management provisions.

In practice in the Indonesian capital market, Margin Transaction financing has been running well, but it is suspected that it does not show a significant increasing trend. In addition, from monitoring regular transaction activities, there are transaction values that are not settled on time, resulting in outstanding financing by Securities Companies with a total industry value much larger than the total value of Margin Transactions. This indicates that provisions related to Margin Transactions have not met the needs of market participants. Whereas Short Selling Transaction financing is very minimally conducted by Securities Companies due to the lack of guaranteed availability of Securities, causing uncertainty and high risk for Securities Companies.

Based on the background above, in order to increase liquidity and deepen the financial market through Margin Transaction financing and/or Short Selling Transaction financing, it is necessary to update provisions related to Margin Transaction financing and/or Short Selling Transaction financing so that they meet the needs of capital market participants and align with international practices.

II. ARTICLE BY ARTICLE

Article 1
Clearly sufficient.

Article 2
Clearly sufficient.

Article 3
Clearly sufficient.

Article 4
Paragraph (1)
What is meant by "sufficient financing sources" is that the Securities Company has liquidity that can be used to finance client transactions.

Paragraph (2)
Letter a
Clearly sufficient.

Letter b
Funding from Other Parties includes among others:

1. funding from Securities Financing Institutions;
2. fund loans from financial service institutions;
3. issuance of debt-type Securities or sukuk; and/or
4. sub-ordinated loans from shareholders of the Securities Company.

Paragraph (3)
Clearly sufficient.

Article 5
Clearly sufficient.

Article 6
Clearly sufficient.

Article 7
Clearly sufficient.

Article 8
Clearly sufficient.

Article 9
Letter a
Clearly sufficient.

Letter b
Clearly sufficient.

Letter c
Clearly sufficient.

Letter d
Clearly sufficient.

Letter e
Adequate systems include among others the Securities Company's systems integrated from marketing and trading, risk management, to operations.

Letter f
Clearly sufficient.

Article 10
Paragraph (1)
What is meant by "periodically" is a specific time period set by the Stock Exchange according to the risk of the Securities Company conducting Margin Transaction and/or Short Selling Transaction financing activities.

Paragraph (2)
Clearly sufficient.

Article 11
Letter a
What is meant by "active regular Securities account" is an account that has Securities and fund balances and there are Securities and fund mutations for 6 (six) consecutive months.

Letter b
Clearly sufficient.

Letter c
What is meant by "Initial Collateral" is Initial Collateral that has taken Haircut into account.

Article 12
Letter a
The high level of client investment risk is caused by changes in Securities prices that have the potential to cause:

1. Client Financing Collateral to decrease or become exhausted; or
2. Client Financing Collateral to become smaller than the client's obligations to the Securities Company.

Letter b
For equity-type Securities actively traded at the Stock Exchange, their fair market value uses the last traded price at the Stock Exchange.
For debt-type Securities, their fair market value uses reference prices set by Securities price valuation institutions.
For debt-type Securities whose fair market value is not issued by a Securities price valuation institution, the fair market value is determined based on agreement between both Parties in the form of an agreement.

The determination of Haircut refers to the size of Haircut set by Stock Exchange regulations and/or committees at the Clearing and Guarantee Institution.

Letter c
What is meant by "Securities Company request" includes among others Collateral Fulfillment Requests for Margin Transaction and/or Short Selling Transaction financing.

Letter d
Clearly sufficient.

Letter e
Clearly sufficient.

Letter f
Clearly sufficient.

Letter g
Clearly sufficient.

Letter h
Clearly sufficient.

Letter i
Clearly sufficient.

Letter j
Clearly sufficient.

Letter k
Clearly sufficient.

Letter l
Clearly sufficient.

Letter m
Clearly sufficient.

Letter n
Clearly sufficient.

Letter o
Clearly sufficient.

Article 13
Clearly sufficient.

Article 14
Clearly sufficient.

Article 15
Clearly sufficient.

Article 16
Letter a
The ratio of the obligation to immediately sell Securities is known as the forced sell ratio.

Item 1
Clearly sufficient.

Item 2
Settlement of excess financing above the Collateral Fulfillment Request ratio includes among others the transfer of excess financing to other receivable accounts.

Letter b
Clearly sufficient.

Letter c
The ratio of the obligation to immediately buy Securities is known as the forced buy ratio.

Article 17
Clearly sufficient.

Article 18
Clearly sufficient.

Article 19
Clearly stated.

Article 20
Clearly stated.

Article 21
The term "affiliation" refers to:
a. Family relationships due to marriage up to the second degree, both horizontally and vertically, namely the relationship of a person with:

1. husband or wife;
2. parents of the husband or wife and the husband or wife of the child;
3. grandparents of the husband or wife and the husband or wife of the grandchild;
4. siblings of the husband or wife along with the husband or wife of the respective sibling; or
5. husband or wife of the sibling of the person in question;
   b. Family relationships due to lineage up to the second degree, both horizontally and vertically, namely the relationship of a person with:
6. parents and children;
7. grandparents and grandchildren; or
8. siblings of the person in question;
   c. Relationships between the party and employees, directors, or commissioners of that party;
   d. Relationships between two (2) or more companies where there is one or more members of the board of directors, management, board of commissioners, or supervisors who are the same; e. Relationships between the company and parties, directly or indirectly, in any manner, controlling or being controlled by the company or such parties in determining the management and/or policies of the company or such parties; f. Relationships between two (2) or more companies that are controlled, directly or indirectly, in any manner, in determining the management and/or policies of the company by the same party; or g. Relationships between the company and major shareholders, namely parties who directly or indirectly own at least 20% (twenty percent) of the shares carrying voting rights of the company.

Article 22
Clearly stated.

Article 23
Clearly stated.

Article 24
Clearly stated.

Article 25
Clearly stated.

Article 26
Paragraph (1)
Clearly stated.
Paragraph (2)
The Haircut calculation on Collateral for Financing in the form of Securities applies as long as the financing remains outstanding.

Article 27
Clearly stated.

Article 28
The term "immediately selling Securities in Collateral for Financing" means placing a sell order when trading opens in session 1 (one).

Article 29
The term "immediately selling Securities in Collateral for Financing" means placing a sell order since the financing value has reached 80% (eighty percent).

Article 30
Clearly stated.

Article 31
Clearly stated.

Article 32
The obligations as referred to in this paragraph may be carried out by the risk management function of the Securities Company.

Article 33
Clearly stated.

Article 34
Clearly stated.

Article 35
Paragraph (1)
Clearly stated.
Paragraph (2)
See the explanation of Article 26 paragraph (2).

Article 36
Clearly stated.

Article 37
Clearly stated.

Article 38
The term "immediately buying Securities in Short Position" means placing a buy order when trading opens in session 1 (one).

Article 39
The term "immediately buying Securities in Short Position" means placing a buy order since the value of the Collateral for Financing is less than 120% (one hundred twenty percent) of the fair market value of the Securities in Short Position.

Article 40
Clearly stated.

Article 41
Clearly stated.

Article 42
Letter a
Clearly stated.
Letter b
Number 1
Clearly stated.
Number 2
Clearly stated.
Number 3
Clearly stated.
Number 4
Clearly stated.
Number 5
"Other parties" include, among others, insurance companies and pension funds in accordance with applicable legislation.

Article 43
Clearly stated.

Article 44
Clearly stated.

Article 45
Clearly stated.

Article 46
Letter a
Clearly stated.
Letter b
Clearly stated.
Letter c
Clearly stated.
Letter d
Number 1
Clearly stated.
Number 2
The term "immediately adding segregated assets and/or buying Securities transacted via short selling" means adding assets or placing a buy order since the value of segregated assets plus funds received from the sale of Securities through Short Selling Transactions is less than 120% (one hundred twenty percent) of the fair market value of the Securities in Short Position. Letter e Clearly stated. Letter f Clearly stated. Letter g Clearly stated.

Article 47
Paragraph (1)
The term "liquidity provider" refers to a Stock Exchange Member who has obtained approval from the Stock Exchange to trade Securities and has the obligation to offer sell orders and buy orders for Securities every trading day to support the creation of Securities trading liquidity in accordance with applicable legislation. Paragraph (2) Clearly stated.

Article 48
Clearly stated.

Article 49
"Specific actions" include, among others, ordering the Securities Company to adjust the Securities Company's accounting related to margin financing.

Article 50
Clearly stated.

Article 51
Clearly stated.

Article 52
Clearly stated.

Article 53
Clearly stated.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 76/OJK