Regulation of the Financial Services Authority Number 55/POJK.04/2020 Concerning Securities Transaction Financing by Securities Companies for Clients and Securities Short Selling Transactions by Securities Companies

COPY
FINANCIAL SERVICES AUTHORITY REGULATION
NUMBER 55 /POJK.04/2020
CONCERNING
SECURITIES TRANSACTION FINANCING BY SECURITIES COMPANIES FOR CLIENTS AND SECURITIES SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES BY THE GRACE OF GOD THE ALMIGHTY THE COMMISSIONERS OF THE FINANCIAL SERVICES AUTHORITY,

Considering:
a. that with the transfer of functions, duties, and authorities for the regulation and supervision of financial services activities in the capital market sector, including regulations regarding securities transaction financing by securities companies for clients and securities short selling transactions by securities companies, from the Capital Market Supervisory Agency and Financial Institutions to the Financial Services Authority; b. that to provide clarity and certainty regarding securities transaction financing by securities companies for clients and securities short selling transactions by securities companies, existing legislation in the capital market sector regarding such financing and transactions issued prior to the establishment of the Financial Services Authority needs to be amended into a Financial Services Authority Regulation;
c. that based on the considerations as referred to in letters a and b, it is necessary to establish a Financial Services Authority Regulation concerning Securities Transaction Financing by Securities Companies for Clients and Securities 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);
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);

DECIDING:
To Establish: FINANCIAL SERVICES AUTHORITY REGULATION CONCERNING SECURITIES TRANSACTION FINANCING BY SECURITIES COMPANIES FOR CLIENTS AND SECURITIES 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 business activities as a Securities Underwriter, Securities Broker, and/or Investment Manager.
2. Securities are negotiable instruments, namely debt acknowledgment instruments, commercial paper, shares, bonds, debt certificates, Participation Units of Collective Investment Contracts, futures contracts over Securities, and any derivatives of Securities.
3. Party is an individual, company, joint venture, association, or organized group.
4. Clearing and Guaranteeing Institution is a Party that provides clearing and guaranteeing services for the settlement of exchange transactions.
5. Margin Transaction is a transaction to purchase Securities for the benefit of a client that is 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 belonging to the client that are 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. Margin Call 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 that contains 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 that shows 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 that shows 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 have not yet been 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 the Short Selling Transaction Financing Securities Account that shows the amount of money that must be paid by the client to the Securities Company.
16. Credit Balance is the fund balance in the client's Securities account that shows the obligation of the Securities Company to the client and/or shows collateral including Financing Collateral in the Margin Transaction Financing Securities Account or the Short Selling Transaction Financing Securities Account.
17. Stock Exchange is a party that organizes and provides systems and/or facilities to match buy and sell offers of Securities from other parties with the aim of trading Securities among them.
18. Adjusted Working Capital is the amount of the Securities Company's current assets minus all liabilities of the Securities Company and ranking liabilities, plus subordinated debt, and other adjustments.
19. Trading Day is the day when Securities trading is held at the Stock Exchange, namely Monday through Friday, unless that day is a national holiday or declared as a Stock Exchange holiday by the Stock Exchange.

CHAPTER II
REQUIREMENTS FOR SECURITIES COMPANIES THAT CAN PROVIDE FINANCING FOR THE SETTLEMENT OF SECURITIES TRANSACTIONS

Article 2
Securities Companies that carry out financing for the settlement of Margin Transactions and/or Short Selling Transactions 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 Working Capital as required in the Financial Services Authority Regulation regarding the maintenance and reporting of adjusted working capital; and
c. have approval from the Stock Exchange to conduct Margin Transactions and/or Short Selling Transactions.

Article 3
In the event that a Securities Company provides fund financing through Margin Transactions, the Securities Company must have sufficient financing sources to finance the settlement of Securities purchase transactions.

Article 4
In the event that a Securities Company provides securities financing through Short Selling Transactions, the Securities Company must have an agreement with a Clearing and Guaranteeing Institution, another Securities Company, a custodian bank, and/or another Party approved by the Financial Services Authority to borrow the Securities needed for the settlement of Securities sale transactions.

CHAPTER III
OBLIGATIONS OF THE STOCK EXCHANGE REGARDING SECURITIES COMPANIES THAT PROVIDE FINANCING FOR THE SETTLEMENT OF SECURITIES TRANSACTIONS

Article 5
Before granting approval as referred to in Article 2 letter c, the Stock Exchange must examine the operational system of the Securities Company at least regarding the risk management system for financing the settlement of securities transactions for clients.

Article 6
The Stock Exchange that has granted approval must conduct examinations of the operational system as referred to in Article 5 periodically at least once a year.

CHAPTER IV
CLIENT REQUIREMENTS THAT CAN RECEIVE FINANCING FOR THE SETTLEMENT OF SECURITIES TRANSACTIONS

Article 7
(1) Financing for the settlement of Margin Transactions or Short Selling Transactions may be provided to clients who meet the following requirements:
a. have a regular Securities account, to know the client's 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 the Securities Company based on a Financing Agreement and still have a regular Securities account as referred to in letter a to accommodate Securities transactions not financed by the Securities Company; 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.
(2) Securities Companies are prohibited from providing financing for the settlement of Margin Transactions or Short Selling Transactions to clients who do not meet the requirements as referred to in paragraph (1).

CHAPTER V
ESSENTIAL CLAUSES OF THE FINANCING AGREEMENT FOR CLIENTS' SECURITIES TRANSACTIONS

Article 8
The Financing Agreement as referred to in Article 7 paragraph (1) letter b must contain at least the following clauses:
a. the level of the client's investment risk; b. the policy for valuing Financing Collateral in the form of Securities, including the types of Securities that can be accepted as Financing Collateral, the determination of fair market value, and the determination of haircut, if a haircut is determined;
c. the client's obligation to meet the Securities Company's requests at any time;
d. the Securities Company's obligation to notify the client of Margin Calls; e. the Securities Company's right, in the event that the client does not meet the Margin Call, 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 in order to meet:

1. the Financing Collateral value requirements determined in the Financing Agreement; and
2. the client's obligations in the settlement of Securities transactions;
   f. the client of the Securities Company cannot choose the Securities to be liquidated or sold to meet their obligations; g. the maximum limit of the client's Securities that can be sold or bought by the Securities Company as Financing Collateral in the event of a Margin Call, the settlement of Margin Transactions, and/or Short Selling Transactions; h. matters that cause the Securities Company to be able to close the Margin Transaction Financing Securities Account or the Short Selling Transaction Financing Securities Account at any time;
   i. financing provisions including the financing period, calculation of the financing interest rate, and the method of calculating financing interest; and
   j. provisions regarding the securities lending and borrowing agreement between the client and the Securities Company in the client's Short Selling Transactions.

CHAPTER VI
REQUIREMENTS FOR SECURITIES THAT CAN BE TRADED IN CLIENTS' SECURITIES TRANSACTION FINANCING

Article 9
Securities Companies are prohibited from conducting Margin Transactions and/or Short Selling Transactions on Securities that are not listed on the Stock Exchange unless otherwise determined by the Financial Services Authority.

Article 10
(1) The requirements for Securities that can be traded with financing for the settlement of securities transactions and that can be used as Financing Collateral are determined by the Stock Exchange in the Stock Exchange regulations. (2) In determining the Securities requirements as referred to in paragraph (1), the Stock Exchange must consider at least:
a. the minimum average daily transaction value in a certain period; b. the minimum number of Parties holding the Securities in a certain period;
c. the fundamental factors of the Securities; and
d. special criteria for Securities on which Short Selling Transactions can be conducted, including the limit on the percentage of the maximum number of Securities from the total outstanding Securities that can be traded.

Article 11
(1) The Stock Exchange must announce Securities that meet the requirements as referred to in Article 10 paragraph (1) to the public and report them to the Financial Services Authority on the last working day of each month. (2) In the event of material information, the Stock Exchange must review the fulfillment of the Securities requirements as referred to in Article 10 paragraph (1). (3) The Stock Exchange must announce the results of the review as referred to in paragraph (2) to the public and report them to the Financial Services Authority on the same day.

Article 12
If Securities no longer meet the requirements established by the Stock Exchange as Securities that can be traded with financing for the settlement of securities transactions and that can be used as Financing Collateral, financing for ongoing client Securities transactions must be settled no later than 5 (five) Trading Days since the Securities no longer meet the requirements established by the Stock Exchange.

CHAPTER VII
MECHANISM FOR FINANCING CLIENTS' SECURITIES TRANSACTIONS

First Section
General Provisions

Article 13
Before financing the settlement of Margin Transactions and/or Short Selling Transactions, the Securities Company must examine the following:
a. the client has met the requirements as referred to in Article 7 paragraph (1); and b. the Securities Company has met the requirements as referred to in Article 3 and Article 4.

Article 14
The value of Financing Collateral for the client's obligations in the Margin Transaction Financing Securities Account or the Short Selling Transaction Financing Securities Account includes:
a. the amount of money recorded in the Credit Balance as collateral in the Margin Transaction Financing Securities Account or the 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 the Short Selling Transaction Financing Securities Account in the Securities subsidiary ledger after considering the haircut.

Article 15
Securities Companies must record Margin Transactions and Short Selling Transactions in accordance with Financial Accounting Standards.

Article 16
Securities Companies are prohibited from providing financing for Margin Transactions and/or Short Selling Transactions to clients of the Securities Company who are commissioners, directors, or employees of the said Securities Company.

Second Section
Margin Transactions

Article 17
Before approving the financing for the settlement of Margin Transactions, the credit officer in the order and trading department of the Securities Company must ensure that a sum of funds and/or Securities is available in the Margin Transaction Financing Securities Account as Initial Collateral.

Article 18
The value of fund financing for Margin Transactions is equal to the amount of receivables for Margin Transactions provided by the Securities Company to the client of the Securities Company and is recorded as a Debit Balance in the Margin Transaction Financing Securities Account.

Article 19
The value of Initial Collateral is at least:
a. 50% (fifty percent) of the value of the Securities purchase at the time of the transaction; or b. IDR 200,000,000.00 (two hundred million rupiah), whichever is higher.

Article 20
The value of fund financing for Margin Transactions that can be provided by the Securities Company to the client is at most 65% (sixty-five percent) of the value of the Financing Collateral.

Article 21
(1) If the value of the Financing Collateral decreases such that the financing value as referred to in Article 18 exceeds 65% (sixty-five percent) of the value of the Financing Collateral, the Securities Company must issue a Margin Call to the client of the Securities Company. (2) The client as referred to in paragraph (1) must fulfill the Margin Call, so that the financing value does not exceed 65% (sixty-five percent) of the value of the Financing Collateral as referred to in Article 20.

Article 22
If the client does not fulfill the Margin Call as referred to in Article 21 no later than 3 (three) Trading Days, the Securities Company on the 4th (fourth) Trading Day must immediately sell Securities in the Financing Collateral by making a sell offer so that the financing value does not exceed 65% (sixty-five percent) of the value of the Financing Collateral.

Article 23
If the financing value reaches 80% (eighty percent) of the value of the Financing Collateral, the Securities Company, with or without notification to the client of the Securities Company, must immediately sell Securities in the Financing Collateral by making a sell offer so that the financing value does not exceed 65% (sixty-five percent) of the value of the Financing Collateral.

Article 24
The Securities Company must provide written confirmation to the client of the Securities Company regarding the sale transaction as referred to in Article 22 and Article 23, which is distinguished from written confirmation of transactions based on client orders on the same day as the sale of the client's Securities by the Securities Company as referred to in Article 22 and Article 23.

Third Section
Short Selling Transactions

Article 25
Before approving the financing for the settlement of Short Selling Transactions, the credit officer in the order and trading department of the Securities Company must:
a. ensure that a sum 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 and borrowing agreement with the Securities Company; and
   d. ensure that the client understands the rights and obligations regarding the Short Selling Transaction.

Article 26
The value of securities financing 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 is recorded in the Short Position balance of the Short Selling Transaction Financing Securities Account in the Securities subsidiary ledger.

Article 27
The value of Initial Collateral is at least:
a. 50% (fifty percent) of the value of the Short Selling Transaction; or b. IDR 200,000,000.00 (two hundred million rupiah), whichever is higher.

Article 28
The value of Financing Collateral is 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 in question consists of at least Initial Collateral and funds received from the sale of Securities through the said Short Selling Transaction.

Article 29
The value of Financing Collateral for Short Selling Transactions that must be maintained by the client is at least 135% (one hundred thirty-five percent) of the fair market value of the Securities in the Short Position.

Article 30
(1) If the value of the Financing Collateral decreases and/or the fair market value of the Securities in the Short Position increases such that the value of the Financing Collateral as referred to in Article 14 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 Margin Call to the client of the Securities Company. (2) The client as referred to in paragraph (1) must fulfill the Margin Call, so that the value of the 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 29.

Article 31
If the client does not fulfill the Margin Call as referred to in Article 30 no later than 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 by making a buy offer so that the value of the 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 32
If the value of the 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 by making a buy offer so that the value of the 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 33
(1) The Securities Company must provide written confirmation to the client of the Securities Company regarding the purchase transaction as referred to in Article 31 and Article 32.
(2) The written confirmation as referred to in paragraph (1) must be distinguished from written confirmation of transactions based on client orders on the same day as the purchase of the client's Securities by the Securities Company as referred to in Article 31 and Article 32.

Article 34
Short Selling Transactions are limited by the following provisions:
a. the sell offer price entered into the Stock Exchange trading system must be above the last traded price at the Stock Exchange; and b. the Securities Company must mark "short" when executing the sell order in the Stock Exchange trading system.

Fourth Section
Securities Lending and Borrowing Agreements in Financing Clients' Short Selling Transactions.

Article 35
Securities Companies may finance clients' Short Selling Transactions as long as the Securities used by the Securities Company for the settlement of the Securities transaction are obtained by the Securities Company borrowing Securities from and/or through:
a. Clearing and Guaranteeing Institutions; b. other Securities Companies;
c. custodian banks; and/or
d. other Parties.

Article 36
Standard securities lending and borrowing contracts must contain details including:
a. the amount and type of Securities; b. the duration of the lending and borrowing;
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 related to lending and borrowing; g. default; h. the method of valuing the lent Securities and collateral; and
i. the dispute resolution mechanism.

Article 37
(1) In carrying out its functions, the Clearing and Guaranteeing Institution must create a standard securities lending and borrowing contract whose content complies with the provisions as referred to in Article 36. (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 35.

Article 38
(1) In the event that the Parties as referred to in Article 35 do not use the standard securities lending and borrowing contract as referred to in Article 37, the said Party must create a securities lending and borrowing contract whose content complies with this regulation, accompanied by a legal opinion from 2 (two) legal consultants registered with the Financial Services Authority. (2) The securities lending and borrowing contract as referred to in paragraph (1) must be submitted to the Financial Services Authority to obtain approval before it becomes effective.

CHAPTER VIII
SECURITIES SHORT SELLING BY SECURITIES COMPANIES

Article 39
Securities Companies that conduct 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 number 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 the risk of Short Selling Transactions; and
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 to settle the Short Selling Transaction; b) having exercised rights under options or warrants to obtain the Securities used to settle the Short Selling Transaction; and/or c) having entered into a Securities lending/borrowing agreement in the Short Selling Transaction from and/or through parties as referred to in Article 35. The Securities lending/borrowing agreement is made using a contract as referred to in Article 36 through Article 38; b. at the time the first Short Selling Transaction occurs, the value of assets segregated as referred to in letter a number 2 plus the funds received from the sale of Securities through the Short Selling Transaction is at least 150% (one hundred fifty percent) of the value of the Short Selling Transaction;
c. the value of assets segregated plus the funds received from the sale of Securities through the Short Selling Transaction as referred to in letter b is 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 segregated plus the 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 segregated 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, the Securities Company must add segregated assets and/or buy Securities traded via short selling no later than 3 (three) Exchange Days, so that the value of assets segregated 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 letter c; and
2. 120% (one hundred twenty percent) of the fair market value of the Securities in the Short Position, the Securities Company must immediately add segregated assets and/or buy Securities traded via short selling, so that the value of assets segregated 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 letter c;
   e. Short Selling Transactions by Securities Companies are limited by the following provisions:
3. the sell offer price entered into the Stock Exchange trading system must be above the last traded price on the Stock Exchange; and
4. the Securities Company must mark "short" when executing the sell order in the Stock Exchange trading system;
   f. Securities Companies are prohibited from conducting Short Selling Transactions on Securities other than those designated by the Stock Exchange as Securities eligible for short selling; and g. if Securities no longer meet the conditions set by the Stock Exchange as eligible for short selling, ongoing Short Selling Transactions by Securities Companies must be settled no later than 5 (five) Exchange Days from the date the Securities no longer meet the conditions set by the Stock Exchange.

CHAPTER IX
ADMINISTRATIVE SANCTIONS
Article 40
(1) Any party that violates the provisions as referred to in Article 2, Article 3, Article 4, Article 5, Article 6, Article 7 paragraph (2), Article 8, Article 9, Article 10 paragraph (2), Article 11, Article 12, Article 13, Article 15, Article 16, Article 21, Article 22, Article 23, Article 24, Article 25, Article 29, Article 30, Article 31, Article 32, Article 33, Article 34 letter b, Article 36, Article 37, Article 38, and Article 39, 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) are 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) letters b, c, d, e, f, or 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) letters c, d, e, f, or g.

(7) The procedure for imposing sanctions as referred to in paragraph (3) is carried out in accordance with applicable legislation.
Article 41
In addition to administrative sanctions as referred to in Article 40 paragraph (4), the Financial Services Authority may take specific actions against any party that violates the provisions of this Financial Services Authority Regulation.
Article 42
The Financial Services Authority may announce the imposition of administrative sanctions as referred to in Article 40 paragraph (4) and specific actions as referred to in Article 41 to the public.

CHAPTER X
CLOSING PROVISIONS
Article 43
Upon the commencement of this Financial Services Authority Regulation, the Decision of the Head of the Capital Market Supervisory Agency and Financial Institutions No. KEP-258/BL/2008 dated June 30, 2008 regarding Regulation No. V.D.6 on Financing of Securities Transactions by Securities Companies for Clients and Short Selling Transactions by Securities Companies, along with Regulation No. V.D.6 which is its attachment, is repealed and declared invalid.
Article 44
This Financial Services Authority Regulation shall come into force upon its promulgation.

This copy is in accordance with the original
Director of Legal Affairs 1
Legal Department signed
Mufli Asmawidjaja

To ensure that everyone knows it, it is ordered to promulgate this Financial Services Authority Regulation by placing it in the State Gazette of the Republic of Indonesia.
Determined in Jakarta on December 3, 2020
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO
Promulgated in Jakarta on December 11, 2020
MINISTER OF LAW AND HUMAN RIGHTS
REPUBLIC OF INDONESIA, signed
YASONNA H. LAOLY
STATE GAZETTE OF THE REPUBLIC OF INDONESIA YEAR 2020 NUMBER 279

EXPLANATION
OF
FINANCIAL SERVICES AUTHORITY REGULATION
NO. 55 /POJK.04/2020
REGARDING
FINANCING OF SECURITIES TRANSACTIONS BY SECURITIES COMPANIES FOR CLIENTS AND SHORT SELLING TRANSACTIONS BY SECURITIES COMPANIES

I. GENERAL
That since December 31, 2012, the functions, duties, and authority for the regulation and supervision of financial services activities in the capital market, insurance, pension funds, financing institutions, and other financial service institutions have shifted from the Minister of Finance and the Capital Market Supervisory Agency and Financial Institutions to the Financial Services Authority. In light of the above, it is necessary to reorganize the existing regulatory structure, particularly those related to the capital market sector, by converting Capital Market Supervisory Agency and Financial Institutions regulations related to the capital market sector into Financial Services Authority Regulations. This reorganization is carried out so that there are Financial Services Authority Regulations related to the capital market sector that are consistent with Financial Services Authority Regulations in other sectors. Based on the background and aspects mentioned, it is necessary to replace the existing legislation in the capital market sector regulating the financing of Securities Transactions by Securities Companies for clients and Short Selling Transactions by Securities Companies, namely the Decision of the Head of the Capital Market Supervisory Agency and Financial Institutions No. KEP-258/BL/2008 dated June 30, 2008 regarding Regulation No. V.D.6 on Financing of Securities Transactions by Securities Companies for Clients and Short Selling Transactions by Securities Companies, along with Regulation No. V.D.6 which is its attachment, into a Financial Services Authority Regulation on Financing of Securities Transactions by Securities Companies for Clients and Short Selling Transactions by Securities Companies.

II. ARTICLE BY ARTICLE
Article 1
Clearly stated.
Article 2
Clearly stated.
Article 3
The term "having sufficient financing sources" includes, among others, having sufficient MKBD (Market Capitalization Based Capital) as required by the Stock Exchange.
Article 4
Clearly stated.
Article 5
Clearly stated.
Article 6
Clearly stated.
Article 7
Clearly stated.
Article 8
Letter a
The high level of client investment risk is caused by changes in Securities prices which may result in:

1. Client Collateral for Financing decreasing or being exhausted; or
2. Client Collateral for Financing becoming smaller than the Client's obligations to the Securities Company.

Letter b
Clearly stated.
Letter c
The term "Securities Company's request" includes, among others, Requests for Collateral Fulfillment for Margin Transactions and/or Short Selling Transactions.
Letter d
Clearly stated.
Letter e
Clearly stated.
Letter f
Clearly stated.
Letter g
Clearly stated.
Letter h
Clearly stated.
Letter i
Clearly stated.
Letter j
Clearly stated.
Article 9
Clearly stated.
Article 10
Clearly stated.
Article 11
Clearly stated.
Article 12
Clearly stated.
Article 13
Clearly stated.

Article 14
Clearly stated.
Article 15
Clearly stated.
Article 16
Clearly stated.
Article 17
Clearly stated.
Article 18
Clearly stated.
Article 19
Clearly stated.
Article 20
Clearly stated.
Article 21
Clearly stated.
Article 22
The term "immediately sell Securities in Collateral for Financing" means it is done by placing a sell order when trading opens in session 1.
Article 23
The term "immediately sell Securities in Collateral for Financing" means it is done by placing a sell order since the financing value has reached 80% (eighty percent).
Article 24
Clearly stated.

Article 25
Clearly stated.
Article 26
Clearly stated.
Article 27
Clearly stated.
Article 28
Clearly stated.
Article 29
Clearly stated.
Article 30
Clearly stated.
Article 31
The term "immediately buy Securities in short position" means it is done by placing a buy order when trading opens in session 1.
Article 32
The term "immediately buy Securities in short position" means it is done by placing a buy order since the financing collateral value is less than 120% (one hundred twenty percent) of the fair market value of the Securities in the Short Position.
Article 33
Clearly stated.
Article 34
Clearly stated.
Article 35
"Other parties" include, among others, insurance companies and pension funds in accordance with applicable legislation.
Article 36
Clearly stated.
Article 37
Clearly stated.
Article 38
Clearly stated.
Article 39
Letter a
Clearly stated.
Letter b
Clearly stated.
Letter c
Clearly stated.
Letter d
Number 1
Clearly stated.
Number 2
The term "immediately add segregated assets and/or buy Securities traded via short selling" means it is done by adding assets or placing a buy order since the value of assets segregated plus the funds received from the sale of Securities through the Short Selling Transaction is less than 120% (one hundred twenty percent) of the fair market value of the Securities in the Short Position. Letter e Clearly stated. Letter f Clearly stated. Letter g Clearly stated.

Article 40
Clearly stated.
Article 41
The term "specific actions" includes, among others, ordering Securities Companies to adjust their accounting records related to margin financing.
Article 42
Clearly stated.
Article 43
Clearly stated.
Article 44
Clearly stated.

SUPPLEMENT TO THE STATE GAZETTE OF THE REPUBLIC OF INDONESIA NUMBER 6592

APPENDIX
FINANCIAL SERVICES AUTHORITY REGULATION
REPUBLIC OF INDONESIA
NO. 55 /POJK.04/2020
REGARDING
FINANCING OF SECURITIES TRANSACTIONS BY
SECURITIES COMPANIES FOR CLIENTS AND
SHORT SELLING TRANSACTIONS BY
SECURITIES COMPANIES

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 worth Rp200,000,000.-. With the Margin facility, the Securities Company can finance Client A by Rp200,000,000,- [50% of the Margin Transaction Value, Article 19 provision] so that Client A can buy 400,000 shares worth Rp400,000,000,- (Rp1,000,- per share). At the time of transaction settlement, the Securities Company will pay Rp400,000,000,- to the Clearing and Guarantee Institution, where Rp200,000,000,- comes from the Client's Initial Collateral and Rp200,000,000,- is financing from the Securities Company. The purchased Shares subsequently become Collateral for Financing so that the total Collateral for Financing becomes worth 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 Collateral for Financing only covers those shares, the decrease will cause the Collateral for Financing to also decrease to Rp900 x 400,000 = Rp360,000,000.-. Meanwhile, the financing value that must be repaid by the client 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,- 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,- 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 is required to issue a Collateral Fulfillment Request 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 [the value of collateral x maximum financing limit] = Rp200,000,000 [ Rp280,000,000 (from Rp700x400,000 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% In this condition, the Securities Company is required to execute the collateral to improve the financing ratio to 65%. The amount of collateral that must be executed is:

(Rp200,000,000 minus X)
----------------------------------- = 65%
(Rp240,000,000 minus X)

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 Rp74,297,121
---------------------------------------------------------- = ----------------------------- = 65% Rp240,000,000 - Rp125,702,879 Rp114,297,121

Margin Transaction Illustration Table:
Shares 400,000
Stock Price (Rp) 1,000 900 769 700 600
Financing Value (Rp) 200,000,000
Collateral for Financing 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

Illustration of Client Short Selling Transactions:
Client B opens a Short Selling Transaction Financing Securities Account by depositing Initial Collateral to the Securities Company worth Rp200,000,000. With the Short Selling Transaction, the Securities Company can provide financing for Securities for the Short Selling Transaction equal to the value of Securities traded via short selling by the client. The financing provided by the Securities Company is recorded in the Short Position balance of the Short Selling Transaction Financing Securities Account in the Securities subsidiary ledger. With collateral worth Rp200,000,000 [50% of the Short Selling Transaction Value, Article 27 provision], the client can conduct a Short Selling Transaction worth Rp400,000,000 (assuming the stock price is Rp1,000,- per share and the number of shares is 400,000 shares). At the time of transaction settlement, the Securities Company will receive funds worth Rp400,000,000,- from the Clearing and Guarantee Institution. The funds received from the sale subsequently become Collateral for Financing, so the Collateral for Financing ratio to the Short Position is:
(Rp200,000,000 (Initial Collateral) + Rp400,000,000 (funds from short selling)) ---------------------------------------------------------------------------------------------------------------------------------------------- = 150% Rp400,000,000 (fair market value of Securities in Short Position)

Stock price increase condition

• If the fair market value of shares in the Short Position increases to Rp 1,100, this 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 Collateral for Financing 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,- the Collateral for Financing 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, the Collateral for Financing ratio to the Short Position becomes:
  Rp600,000,000 : Rp480,000,000
  (i.e., from Rp1,200 x 400,000 shares) = 125%

When the Collateral for Financing ratio to the Short Position is less than 135%, the Securities Company is required to issue a Collateral Fulfillment Request to the client to submit additional funds or Securities to the Short Selling Transaction Financing Securities Account so that the Collateral for Financing 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 Collateral for Financing should be Rp480,000,000 x 135% = Rp.648,000,000. Since 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, the Collateral for Financing 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 is required to execute the collateral to buy shares in the Short Position in order to improve the ratio between Collateral for Financing and 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 minus X)
-------------------------------------------------------- = 135% (Rp520,000,000 minus X)

Note: X is the shares in the Short Position that must be bought The shares in the Short Position that must be bought by the Securities Company are worth Rp 291,077,467 or as many as Rp 291,077,467 : Rp1,300 = 223,923 shares so that the ratio between Collateral for Financing and the fair market value of shares in the Short Position is 135% (one hundred thirty-five percent) with the following calculation:
(Rp600,000,000 - Rp291,077,467)
-------------------------------------------------------------- = 135% (Rp520,000,000 - Rp291,077,467)

This copy is in accordance with the original
Director of Legal Affairs 1
Legal Department signed
Mufli Asmawidjaja

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 Collateral for Financing 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 Account.
If Client B intends to close the Short Selling Transaction Financing Securities Account when the price reaches Rp 1,300, the Securities Company will purchase the shares in the Short Position worth Rp1,300 x 400,000 = Rp520,000,000. With this purchase, the remaining Collateral for Financing 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 worth Rp520,000,000 and the Client receives the remaining Collateral for Financing worth Rp80,000,000.-

Determined in Jakarta on December 3, 2020
CHAIRMAN OF THE BOARD OF COMMISSIONERS
FINANCIAL SERVICES AUTHORITY
REPUBLIC OF INDONESIA, signed
WIMBOH SANTOSO