Key Takeaways
Online deposit trading allows customers to select a price on a company’s online platform and pay a pre-purchase deposit. Once the system executes the order, the customer obtains a buy order and must complete one of the following actions within 30 days:
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Physical delivery: Pay the remaining balance and pick up the physical gold at the company’s retail location (full payment upon delivery)
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Order offset: Instead of taking physical delivery, place a reverse order to settle the price difference
Is this a deposit transaction or a leveraged margin transaction?
This walks a fine legal line. Although it is packaged in spot-trading terminology such as “pre-purchase deposits” and “pre-sale security deposits,” court rulings focus on the transaction’s structure. When customers are allowed to trade with less than the full amount as margin, settle by price difference before maturity, and bear floating profits and losses — this substantively constitutes a leveraged margin contract as defined under Article 3, Paragraph 1, Subparagraph 4 of Taiwan’s Futures Trading Act. Operating this business without authorization from the competent authority may further violate the Futures Trading Act — conducting leveraged trading business without a license — resulting in criminal liability.
The Story’s Premise
Pre-Purchase Deposit: The Buy-Side Trading Model
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The customer selects a price on the company’s online platform
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The customer pays a pre-purchase deposit: e.g., NT$10,000 per tael of gold, or NT$3,000 per 10 grams of gold
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Once the system executes the order, the customer obtains a buy order
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The customer must complete one of the following within 30 days:
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Physical delivery: Pay the remaining balance and pick up the physical gold at the company’s retail location (full payment upon delivery)
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Order offset: Instead of taking physical delivery, place a reverse order to settle the price difference
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Pre-Sale Security Deposit: The Sell-Side Trading Model
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The customer selects a price on the company’s online platform
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The customer pays a pre-sale security deposit: e.g., NT$10,000 per tael of gold, or NT$3,000 per 10 grams of gold
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Once the system executes the order, the customer obtains a sell order
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The customer must complete one of the following within 30 days:
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Physical delivery: Prepare the gold and deliver the physical gold at the company’s retail location to receive payment
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Order offset: Instead of delivering physical gold, place a reverse order to settle the price difference
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The Leverage Effect of Deposits/Margins
Using the estimated gold market price in April 2026 (approximately over NT$100,000 per tael) as an example:
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The customer’s “pre-purchase deposit” = NT$10,000 per tael
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Full gold market price ≈ over NT$100,000 per tael
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Actual payment ratio ≈ under 10%, leverage ratio of approximately 10x or more
Profit/Loss Bearing and Delayed Delivery
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From order execution until physical delivery or order offset, the floating difference caused by gold market price fluctuations is borne entirely by the customer
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For deliveries not completed within 30 days, the company charges a “late delivery fee”: NT$3 per tael per day, or NT$1 per 10 grams per day
Key Legal Analysis
Core Issue: Pre-Purchase Deposit vs. Leveraged Margin
A “leveraged margin contract” under Article 3, Paragraph 1, Subparagraph 4 of the Futures Trading Act has the following constituent elements:
| Element | Legal Requirement | Facts of This Case | Satisfied? |
|---|---|---|---|
| ① Agreement between parties | Both parties enter into a contract | Customer signs an online trading agreement with the company | ✓ |
| ② One party pays a proportional amount of the price | Not full payment, but proportional payment | Customer pays NT$10,000 per tael (approximately under 10% of market price) | ✓ |
| ③ Within a specified future period | Time-limited | Must complete delivery or offset within 30 days | ✓ |
| ④ Settlement of price difference per agreed method | Can settle by price difference rather than physical delivery | Customer can “offset the order on their own (i.e., settle the price difference)“ | ✓ |
Possible Company Defenses and Rebuttals
Defense 1: This transaction is a spot gold purchase; the deposit is an earnest money payment under civil law
Rebuttal:
“Earnest money” under Article 248 of the Civil Code is a payment made for the purpose of concluding a contract, usually constituting a small portion of the total purchase price, with the ultimate goal of completing physical delivery. However:
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If the deposit is uniformly set at NT$10,000 per tael regardless of gold price fluctuations, this differs from the norm of setting earnest money proportionally to the total price
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More critically: after paying the deposit, the customer is institutionally permitted to forgo physical delivery and settle by price difference directly. The existence of this order offset mechanism shifts the center of gravity of the entire transaction structure away from buying and selling gold and toward profiting from price differences. If the company’s sales personnel encourage customers to choose settlement delivery, it is even more likely to be viewed as not centered on gold trading.
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If this were a genuine spot-trading deposit, the “order offset” mechanism should not exist — because the purpose of earnest money is to ensure transaction performance, not to provide an alternative settlement method.
Defense 2: Customers can choose physical delivery, so this is not purely a margin contract
Rebuttal: The wording of Article 3, Paragraph 1, Subparagraph 4 of the Futures Trading Act states: “settle the price difference or deliver the agreed-upon item per the agreed method.” The statute uses the word “or,” clearly indicating that: even if the contract includes a physical delivery option, as long as a price-difference settlement mechanism simultaneously exists, it satisfies the definition of a leveraged margin contract.
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Current regulations do not require “complete exclusion of the possibility of physical delivery” to constitute a leveraged margin contract
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In practice, most leveraged margin contracts simultaneously retain both physical delivery and price-difference settlement options
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In judicial practice, courts have held: when the design of a trading mechanism enables customers to forgo physical delivery and settle by price difference, this is sufficient to classify it as a leveraged margin contract
Defense 3: Gold dealers buying and selling gold is a general commercial activity, not futures trading
Rebuttal: Traditional gold dealers’ spot trading (over-the-counter, full payment upon delivery) indeed does not constitute futures trading. However, this case’s transaction structure has departed from the core characteristics of traditional spot trading:
| Comparison | Traditional Spot Trading | This Case’s Trading Model |
|---|---|---|
| Payment method | Full payment | Only approximately 10% “deposit” |
| Delivery method | Payment and pickup simultaneously | Can be delayed up to 30 days, and can forgo pickup |
| Settlement method | None (because it’s physical delivery) | Can settle by price difference (order offset) |
| Price risk | Borne by buyer after purchase | Floating P&L begins upon deposit payment |
| Late fees | No such concept | ”Late delivery fee” exists (similar to carry cost) |
Late Delivery Fees as De Facto Carry Costs
The company charges late delivery fees to customers who fail to complete delivery on time (NT$3 per tael per day). The nature of this fee more closely resembles:
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Carry costs in leveraged trading (carry cost / overnight financing fee), rather than default interest under civil law
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Its calculation method — per day, per weight unit, proportional to the contract’s underlying quantity — is the typical fee structure for derivative financial product position-holding costs
Legality Analysis
High Probability of Being Classified as a Leveraged Margin Contract
The core structure of this trading mechanism — partial payment, price-difference settlement, floating P&L — fully satisfies the definition under Article 3, Paragraph 1, Subparagraph 4 of the Futures Trading Act. Using terms like “pre-purchase deposit” or “pre-sale security deposit” does not affect the substantive classification. If the system design also encourages users to choose non-physical delivery, it is even more likely to be classified as a leveraged margin contract.
If one truly wishes to adopt a deposit model, the order offset mechanism must be eliminated, the price-difference settlement option must be completely removed, and all transactions must be completed through physical delivery. For further confirmation on how to adjust this mechanism, a more detailed discussion is warranted — this article only addresses general hypothetical scenarios.