| Article 1 |
These Rules are adopted pursuant to Article 89-1 of the Taipei Exchange Rules Governing Securities Trading on the TPEx ("the Rules").
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| Article 2 |
In these Rules, "book-entry central government bond lending transaction" refers to the borrowing and lending of book-entry central government bonds between a borrower and a lender through the TPEx Book-Entry Central Government Bond Lending System ("the Lending System"), and the return by the borrower of the same type and quantity of book-entry central government bonds.
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| Article 3 |
A Lender may collect lending fees for the lending of book-entry central government bonds to the Borrower.
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| Article 4 |
A Lender shall warrant that the book-entry central government bonds it provides for lending are free and clear of all liens, claims, and encumbrances of any nature whatsoever, and the Borrower shall warrant that any guaranteed government bonds and bank guarantees it provides are free and clear of all liens, claims, and encumbrances of any nature whatsoever. If any defect is discovered or legal dispute arises, the bonds or guarantees shall be replaced on the first business day following notification.
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| Article 5 |
A Borrower shall enter into a Book-Entry Central Government Bond Lending Transaction Authorization Agreement and open a book-entry central government bond lending account with a securities firm or a futures commission merchant, and open a bond account and a deposit account at a TPEx-designated clearing bank. A Lender shall sign a Book-Entry Central Government Bond Lending Transaction Authorization Agreement with the clearing bank with which it does business and open a book-entry central government bond lending account, a bond account, and a deposit account with the same bank. The Borrower and Lender shall report to and receive TPEx approval before engaging in the borrowing or lending of book-entry central government bonds.
The Book-Entry Central Government Bond Lending Transaction Authorization Agreement shall be drafted in the format in Attachment 1, and shall contain the following terms:
- Borrower and Lender agree to abide by the terms of the Book-Entry Central Government Bond Lending Transaction Authorization Agreement and the Master Contract for Book-Entry Central Government Bond Lending Transactions signed by the securities firm, the futures commission merchant, and the clearing bank with the TPEx, in addition to the TPEx Rules Governing Lending of Book-Entry Central Government Bonds by Securities Firms and related TPEx rules or bylaws when engaging in the borrowing or lending of book-entry central government bonds.
- The securities firm, the futures commission merchant, and the clearing bank may at any time disclose Borrower and Lender information such as account profiles, transaction histories, or securities inventories to the TPEx, or make such information available for inquiry.
- The securities firm, the futures commission merchant, and the clearing bank shall report in writing to the TPEx on any breach by the Borrower or Lender of their obligations or declarations with regards to their borrowing and lending of book-entry central government bonds, and shall act according to TPEx instructions in handling related matters. In such event, the securities firm, the futures commission merchant, and the clearing bank may also rescind or terminate the Book-Entry Central Government Bond Lending Transaction Authorization Agreement.
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| Article 6 |
The securities firm, the futures commission merchant, and the clearing bank shall each sign a Master Contract for Book-Entry Central Government Bond Lending Transactions with the TPEx before accepting a Borrower's or Lender's request to borrow or lend book-entry central government bonds.
The Master Contract for Book-Entry Central Government Bond Lending Transactions shall be drafted in the format in Attachment 2, and shall contain the following terms:
- All book-entry central government bond lending transactions between the securities firm, the futures commission merchant, the clearing bank and the TPEx, and between the TPEx and a Borrower or Lender, and between a Borrower and Lender, shall be governed by the Master Contract for Book-Entry Central Government Bond Lending Transactions, the TPEx Rules Governing Lending of Book-Entry Central Government Bonds by Securities Firms, and related TPEx rules and bylaws.
- A Book-Entry Central Government Bond Lending Transaction Authorization Agreement shall be signed by the securities firm or the futures commission merchant with the Borrower before accepting the Borrower's request, or by the clearing bank with the Lender before accepting the Lender's request, , for lending of book-entry central government bonds. In addition, the continued effect and existence of the Authorization Agreement is a precondition for the acceptance and processing of borrowing or lending orders by the securities firm, the futures commission merchant, and the clearing bank.
- The securities firm or the futures commission merchant, when accepting a Borrower's request, and the clearing bank, when accepting a Lender's request, for lending of book-entry central government bonds, shall exercise the duty of care of a prudent manager. The securities firm, the futures commission merchant, and the clearing bank shall exercise the same degree of care in handling the lending of book-entry central government bonds in accordance with TPEx instructions as they would in their own affairs.
- A securities firm, a futures commission merchant, or a clearing bank, when engaged to handle an order for a book-entry central government bond lending transaction, shall confirm and collect in advance the loan collateral or shall earmark the subject bonds of the lending application, based on the details of the order. Except in the event of a failure to execute a lending transaction, neither the collateral already collected nor the earmarked subject bonds may be used as an offset or made the subject of an attachment, lien, or other claim or action that could compromise payment and settlement of the lending transaction.
- Once trade matching or successful comparison in a fixed-price or negotiated lending transaction through the TPEx has taken place, the relationship between the Borrower and Lender is established and takes effect. A Borrower or Lender that fails to fulfill a performance obligation or declaration shall as stipulated pay a penalty to the TPEx and be liable for damages, and the TPEx shall assume rights and obligations such as pursuing payment due for the default or advancing the reimbursement.
- Once a customized lending transaction has been negotiated and executed between the borrower and lender, the Borrower and Lender are solely responsible for any rights and obligations arising out of the lending relationship, and bear the risk for recovery of damages in any event of default; the TPEx is not liable for guaranteeing the performance of obligations. In addition, the Lender and Borrower shall each immediately report to the TPEx the terms of each customized lending transaction through their respective clearing banks; the same applies when the borrowed securities are returned.
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| Article 7 |
The period during which the TPEx Lending System provides lending service is from 9 a.m. to 11 a.m. each business day.
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| Article 8 |
In lending transactions, the volume of any application for borrowing or any application for lending shall be NTD5 million or an integer multiple of NTD5 million.
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| Article 9 |
Lending transactions through the Lending System are divided into the following three types:
- Fixed-price transactions: Borrowers and Lenders submit applications at the TPEx's published rates, and transactions are matched and executed according to Article 12.
- Negotiated price transactions: After the Borrower and Lender have on their own stipulated the execution of a transaction, they will each input the details of the transaction into the TPEx Lending System through their respective securities firm, futures commission merchant, or clearing bank. The transaction will be confirmed after the Lending System has compared and verified as correct the subject bonds of the transaction, the quantity lent, the agreed rate, the trading counterparties, and the date of return as reported by the two parties to the transaction.
- Customized lending transactions: The Borrower and Lender determine all transaction terms on their own, including the subject bonds, their quantity, the transaction fee rate, collateral ratio, and date of return, and the funds and securities are transferred as stipulated by the two parties. The Lender will bear all risk if the Borrower defaults on returning the securities, and the TPEx is not liable for guaranteeing the performance of obligations.
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| Article 10 |
Borrowing applications are valid only for the day of application; lending applications remain in effect until canceled.
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| Article 11 |
In fixed-price lending transactions, the lending application, borrowing application, and any change in or cancellation of those applications, and the delivery of the subject bonds, shall be conducted in the following manner:
- Application, change, cancellation, and book-entry transfer:
- Before submitting a lending application, the Lender shall have a quantity of the subject bonds equal to the quantity of the application earmarked by its clearing bank.
- After the clearing bank has earmarked the bonds, it shall input the details of the Lender's application into the TPEx Lending System, including the account number, the name of the subject government bonds, the quantity lent, and the return date.
- If a lending application provides for a loan at a fixed rate, it will continue to be valid until modified, cancelled, or executed. If an application is only partially executed, the unexecuted portion will continue to be valid.
- A Lender, with respect to the unexecuted portion of an application, may at any time request its clearing bank to reduce the quantity of bonds available for lending through the Lending System, and the clearing bank shall adjust the quantity of earmarked bonds accordingly.
- A Lender may at any time request its clearing bank to cancel any unexecuted portion of an application through the TPEx Lending System, and the clearing bank shall release the earmarked bonds accordingly.
- Once an application has been matched and executed, the TPEx will notify the clearing bank to transfer the Lender's subject bonds into the TPEx Book-Entry Government Bond Lending Account, and the TPEx will transfer them into the Borrower's bond account at the designated clearing bank before 1:30 p.m. on the same day.
- Application, change, and cancellation of borrowing offers:
- Before applying to borrow bonds, the Borrower is required to deposit the cash portion of the collateral into the Cash Collateral Account opened by the TPEx at its designated clearing bank. The Borrower shall contact the TPEx to arrange pledging or delivery of the non-cash portion of the collateral, and after verification by the Borrower's securities firm or futures commission merchant, the account numbers, the name of the subject government bonds, the quantity borrowed, the return date, and an itemized list of the collateral shall be input into the TPEx Lending System.
- Once the TPEx has verified the accuracy of all collateral information and confirms that the collateral requirement has been satisfied, the borrowing application will take effect.
- After providing adequate collateral, a Borrower may at any time request its securities firm or futures commission merchant to modify, through the TPEx Lending System, the quantity borrowed or the date of return for any portion not yet executed, or to cancel the borrowing application for that portion.
- If a Borrower cancels an unexecuted portion of a borrowing application, the corresponding collateral shall be returned in accordance with Article 28.
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| Article 12 |
Fixed-price borrowing and lending applications are matched consecutively in an order of priority determined as follows:
- Borrowing applications
- When the quantities specified in lending applications do not exceed the quantities specified in the borrowing applications, all lending applications will be executed.
- When the quantities specified in lending applications exceed the quantities specified in the borrowing applications, the computer will match lending applications consecutively in random order.
- Lending applications
- When the total quantities specified in borrowing applications do not exceed the quantities specified in the lending offers, all borrowing applications will be executed.
- When the total quantities specified in borrowing applications exceed the quantities specified in the lending applications, borrowing applications will be matched based on the time they were entered into the system.
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| Article 13 |
In negotiated lending transactions, the lending application, borrowing application, and any change in or cancellation of those applications, and delivery of the subject bonds, shall be conducted in the following manner:
- Lending applications:
- The clearing bank shall earmark the quantity of the subject government bonds in accordance with the quantity specified in the lending application.
- After the clearing bank has completed the earmarking process, it shall input the account number, name of the subject government bonds, the quantity lent, the return date, the lending rate, and the name of the counterparty, as given in the lending application, into the TPEx Lending System.
- Borrowing applications:
- Before submitting a borrowing application, a Borrower is required to first deposit the cash portion of the collateral into the Cash Collateral Account opened by the TPEx at its designated clearing bank. The Borrower shall contact the TPEx to arrange pledging or delivery of the non-cash portion of the collateral, and after verification by the Borrower's securities firm or futures commission merchant, the Borrower's account number, the name of subject government bonds, the borrowing rate, the quantity borrowed, the return date, the name of the counterparty, and an itemized list of collateral shall be input into the TPEx Lending System.
- Once the TPEx has verified the accuracy of all collateral information and confirms that the collateral requirement has been satisfied, the borrowing application will take effect.
- Modifications to lending or borrowing applications can only be made by canceling the existing application and replacing it with a new one, and may only be done before the Lending System has made a successful comparison.
- Once lending and borrowing applications have been compared and verified as accurate, the TPEx will notify the clearing bank to transfer the subject government bonds of the Lender into the Book-Entry Government Bond Lending Account opened by the TPEx at the designated clearing bank, and will transfer them into the Borrower's book-entry central government bond account at the designated clearing bank before 1:30 p.m. on the same day.
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| Article 14 |
Customized lending transactions shall be conducted in the following manner:
- The Borrower and Lender shall negotiate and agree between themselves the terms of the loan, including the name and quantity of government bonds to be lent and the lending rate, duration, and collateral conditions. The two parties shall also sign a Book-Entry Central Government Bond Customized Lending Agreement (see Attachment 3 for a sample format), and the Borrower shall provide the collateral directly to the Lender.
- Both Borrower and Lender shall engage their clearing banks to report execution of the customized lending transaction through the TPEx Lending System; the same applies upon the return of the bonds (see Attachment 4 for a sample format). The reported information shall include the name of the subject bond, the quantity lent, the agreed rate, and the return date.
- Upon receiving notice that the borrowing and lending has been executed, the TPEx will first verify that the two parties' conditions are consistent, then proceed to disclose the transaction information in accordance with Article 17.
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| Article 15 |
The duration of a loan may not exceed six months beginning from the date of execution, and may not include the two business days preceding the interest payment date.
Neither a Borrower nor a Lender may request early rescission, provided that this restriction shall not apply when mutually agreed between the parties.
Lenders and Borrowers in fixed-price or negotiated price transactions may apply to the TPEx for early return of the bonds only when 10 business days have elapsed since the execution date. The TPEx will forward the request to the respective counterparty, and if both parties agree, the TPEx will proceed with the early return procedures in accordance with Article 16.
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| Article 16 |
The method for return of the subject government bonds in fixed-price and negotiated price transactions shall proceed in the manner below. In customized lending transactions, however, the return of borrowed bonds is arranged between the two participants, and the TPEx is not liable for guaranteeing performance of obligations:
- Return of bonds at the maturity date: The TPEx will notify the Borrower through its securities firm or futures commission merchant two business days in advance of the stipulated date of return of the bonds .
- Early return of bonds: When both parties have agreed to an early return of the borrowed bonds pursuant to the proviso to paragraph 2 of the preceding article, the Lender and the Borrower, on the date of return of the bonds, shall respectively, through the clearing bank and the securities firm or futures commission merchant, input the two parties' account numbers, the name of the subject bond, and the quantity returned into the TPEx Lending System for comparison.
The Borrower shall engage its securities firm or futures commission merchant to return the bonds through the TPEx Lending System. The TPEx will notify the clearing bank to transfer the returned bonds from the Borrower's book-entry central government bond lending account into the TPEx Book-Entry Government Bond Lending Account opened at the designated clearing bank, and the TPEx will transfer them to the Lender's book-entry central government bond lending account before 1:30 p.m. on the same day.
Borrowers shall return at one time the full quantity of all bonds borrowed in any one transaction; returns in separate installments or partial returns are not permitted.
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| Article 17 |
The TPEx shall make the following information available for query over a computer connection or the Internet:
- Fixed-price transactions:
- The fixed rate.
- Transaction information: showing the total volume of transactions in each government bond.
- Lending information: showing the total volume of lending applications not transacted for each government bond.
- Borrowing information: showing the total volume of borrowing applications not transacted for each government bond.
- Negotiated price transactions: showing, at the time each transaction is executed, the name of the bonds lent, their quantity, the agreed rate, and the total volume of transactions in the subject government bond.
- Customized lending transactions: the Lending Balance Report, showing the balances of bonds on loan. The TPEx publishes the Lending Balance Report on a daily basis. The balance of bonds lent through customized lending transactions may be calculated in the aggregate with those of fixed-price and negotiated price transactions.
The TPEx may adjust the content of published information depending on market conditions.
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| Article 18 |
Given any of the following circumstances on the part of a Borrower or Lender, the TPEx will refuse to open a bond lending account:
- The lending account is opened in the name of another party.
- The applicant previously violated the Master Contract for Book-Entry Central Government Bond Lending signed with the TPEx, and less than one full year has elapsed or the case is still pending.
- The applicant previously failed to fulfill settlement obligations, or previously violated the Contract for Use of the Centralized Securities Exchange Market, a brokerage contract, or the Account Opening Contract for Trading of Securities on the TPEx, and the case is still pending or less than one year has elapsed since closure.
A Borrower or Lender is restricted to opening only one lending account at any single securities firm, futures commission merchant, or clearing bank.
If, after a lending account has been opened, any of the circumstances under the subparagraphs of paragraph 1 are found to apply to a Borrower, the TPEx will notify the Borrower to settle the loans, and Article 35, Paragraph 2 will apply mutatis mutandis.
When the subject government bonds borrowed by the Borrower are subject to a court-ordered provisional attachment, provisional injunction, or compulsory execution, paragraph 3 applies mutatis mutandis.
If any of the circumstances of the preceding 2 paragraphs apply to the responsible person of a juristic person, the juristic person that the responsible person represents may not open a lending account. If such an account has already been opened, the provisions of paragraph 3 shall be followed.
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| Article 19 |
A Lender or a Borrower shall follow the procedures below when opening a lending account at a clearing bank, securities firm, or futures commission merchant:
- Natural persons: Application in person with valid identification documents.
- Corporate entity: The account may be opened by an authorized person with a letter of authorization issued from the corporate entity (the TPEx will confirm with the account holder in writing that the applicant has indeed been engaged or authorized to open the account).
The clearing bank, securities firm, or futures commission merchant shall approve and forward all documents for the account opening under the preceding paragraph to the TPEx. Any photocopied documents submitted by an applicant shall be stamped with the company seal and its representative's seal, and shall bear the phrase "True and Faithful Copy of the Original".
The clearing bank, securities firm, or futures commission merchant shall transmit information on account opening or closing by the Lender or Borrower. The same shall apply when any modification is made to the account profile.
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| Article 20 |
Any changes to the information contained in the account opening application, such as the account holder's name, company name, agent, responsible person's name, national ID No., business administration number or tax code number for withholding agencies, mailing or business address, shall be entered into the Lending System by the clearing bank, the securities firm, or the futures commission merchant, and the TPEx informed in writing.
If the applicant does not inform the TPEx of the latest changes, the TPEx will proceed based on the applicant's originally registered information. The applicant will be solely liable for any legal consequences arising as a result and shall have no recourse against the TPEx action.
If notices served by the TPEx via mail are not received by a Borrower or Lender due to a failure to notify the TPEx of a change in mailing or business address in accordance with the previous paragraph, or for any reason attributable to the Borrower or Lender, the notices will still be deemed effective from the day the postal service makes its first delivery attempt.
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| Article 21 |
Amounts payable by the TPEx to a Borrower or Lender shall be remitted into their deposit account at the clearing bank. For book-entry central government bonds, a transfer registration shall be made to their bond account at the clearing bank.
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| Article 22 |
In fixed-price and negotiated price lending transactions, for all lending applications for book-entry central government bonds made through a clearing bank, and for all borrowing applications made through a securities firm or futures commission merchant, an application shall be filled out with the word "Lending" or "Borrowing." After a transaction is executed, the clearing bank, securities firm, and futures commission merchant shall fill out and issue a Book-Entry Central Government Bond Lending Report printed with the word "Lending" or "Borrowing" on the basis of the TPEx transaction information, in the format in Attachment 5.
Article 82, Paragraph 3 of the TPEx Rules applies mutatis mutandis to the preceding paragraph.
The Book-Entry Central Government Bond Lending Report shall contain details such as the name of the Borrower and Lender, account numbers, transaction date, transaction reference number, application serial number, transaction type, name of the government bond, the quantity lent, the agreed rate, the lending fee, and the type and quantity of collateral.
The TPEx will notify the Borrower, through its securities firm or futures commission merchant, of the collateral requirement, the collateral maintenance ratio, and the minimum collateral ratio by means of file transfer.
The TPEx will prepare a statement of lending fees and service charges collectible by the TPEx after a lending transaction has been executed, which will be provided to the Lender and Borrower through their respective clearing bank, securities firm, or futures commission merchant. The Borrower shall deposit the above fees and charges into the TPEx Lending Fee Account no later than 12 noon on the transaction date. All lending proceeds receivable by the Lender and service charges payable to the TPEx by the Lender, will be settled by the TPEx on a monthly basis and remitted into the Lender's deposit account at the clearing bank.
The lending fees of the preceding paragraph are calculated by first multiplying the "total quantity of subject government bonds lent" by the "lending rate," then multiplying again by the "actual number of days lent divided by 365 days" (i.e., lending fees = total quantity of subject government bonds lent x Lending rate x Actual days lent / 365).
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| Article 23 |
The calculation and payment of lending fees for customized lending transactions shall be negotiated and agreed upon between the Borrower and the Lender, and are not subject to the provisions of the preceding Article.
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| Article 24 |
Clearing banks, securities firms, and futures commission merchants shall collect processing fees for lending transactions conducted through them; the TPEx shall also charge fees for the book-entry central government bond lending services it provides. The rates for the processing fees and lending services fees of the preceding paragraph will be publicly announced by the TPEx after submission to and approval by the competent authority.
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| Article 25 |
To terminate the bond lending account, a Borrower or Lender shall submit an Application for Termination of Book-Entry Central Government Bond Lending Account in the format in Attachment 6. Account closure may proceed only when the TPEx has verified that all lending transactions have been settled.
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| Article 26 |
Borrowers in fixed-price and negotiated price transactions shall provide collateral when making an application for borrowing. Collateral is limited to the following types:
- Cash.
- Guaranteed government bonds: Limited to book-entry central government bonds.
- Bank guarantees: Limited to guarantees issued by Taiwan banks with credit ratings at or above the TPEx publicly announced standard.
The collateral of the preceding paragraph is to be provided in the following manner:
- Cash: Remitted by the Borrower directly into the TPEx Cash Collateral Account opened at the designated clearing bank.
- Guaranteed government bonds:
- Assignment as security: The Borrower registers the transfer of the bonds to the TPEx Guaranteed Government Bond Account opened at the designated clearing bank.
- Pledge: The Borrower pledges the guaranteed government bonds to the TPEx, with a restrictive transfer registration to the TPEx Guaranteed Government Bond Account opened at a designated clearing bank.
- Bank guarantee: After the Borrower completes guarantee procedures with the bank, it applies to the TPEx through its securities firm or a futures commission merchant, and delivers the original letter of guarantee to the TPEx.
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| Article 27 |
The value of collateral provided at the time of borrowing by a Borrower in a fixed-price or negotiated price transaction must reach a certain percentage of the market value of the subject government bonds borrowed (the collateral requirement). After the transaction is executed, the TPEx will calculate the Borrower's overall account collateral maintenance ratio on a daily basis. If the Borrower's collateral maintenance ratio falls below the minimum collateral ratio, then upon TPEx notification to the Borrower's securities firm or futures commission merchant, the Borrower shall provide additional collateral on the first business day after the notification, to return the collateral maintenance ratio to the required ratio.
The collateral maintenance ratio is calculated as follows:
- The collateral maintenance ratio equals the total value of collateral provided divided by the market value of the borrowed government bonds, multiplied by 100 percent.
- The total value of collateral provided equals the market value of the guaranteed government bonds provided as collateral plus the total value of cash collateral and the total value of bank guarantees.
The market value of the subject bonds lent and the guaranteed government bonds described in paragraphs 1 and 2 are calculated using the weighted average price of bonds traded through the TPEx Electronic Bond Trading System on the business day preceding the calculation date. In the event that no trades were recorded on that day, the market value will be determined by the TPEx.
The collateral requirement and the minimum collateral ratio will be publicly announced by the TPEx following its determination of the ratios on the basis of actual market conditions.
After a public announcement under the preceding paragraph takes effect, it applies to all new lending transactions and also may be applied to existing collateral for outstanding bond loans.
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| Article 28 |
When borrowing applications are not executed, the TPEx will return collateral to the Borrower in the following manner:
- Cash collateral will be remitted into the Borrower's deposit account at the designated clearing bank before 1:30 pm on the same day.
- For guaranteed government bonds, the clearing bank will be notified to carry out registration of transfer of the bonds, or to cancel the pledge and register the return of the bonds back to the Borrower's bond account at its designated clearing bank before 1:30 p.m. on the same day.
- In the case of a bank guarantee, the original letter of guarantee will be returned to the Borrower on the next business day.
A Borrower may declare in advance when applying for a loan of bonds that the guaranteed government bonds and bank guarantees of the preceding paragraph are to be retained at the TPEx in the event the loan transaction is not executed.
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| Article 29 |
A Borrower's request to withdraw and replace collateral is subject to the following rules:
- In the event that partial execution of a borrowing application results in the provision of collateral in excess of the amount required, the Borrower may engage its securities firm or futures commission merchant to apply through the TPEx Lending System to withdraw the portion of collateral that exceeds the collateral requirement.
- If the TPEx receives an application for withdrawal of collateral and the Borrower has not specified the type of collateral to be withdrawn, the TPEx will decide on the Borrower's behalf. For cash and guaranteed government bonds, the TPEx will instruct the clearing bank to transfer them back to the Borrower's accounts. For bank guarantees, the Borrower may apply to the TPEx for their withdrawal.
- Once the Borrower has returned all the bonds borrowed in one transaction, the Borrower may apply at any time to withdraw all the collateral pledged for that transaction. If the borrowing was executed in multiple transactions, then when a return of bonds is made for only one of those transactions, an application for withdrawal of collateral on that same day may only be made within the value of the returned bonds.
- The Borrower may engage its securities firm or futures commission merchant to replace collateral through the TPEx Lending System. The procedure for replacement is to first provide extra collateral and then apply for withdrawal of an amount of the original collateral within the value of the extra collateral provided.
- If the guaranteed government bonds or bank guarantees are appraised and are no longer deemed eligible collateral, the TPEx will notify the Borrower to make a replacement by the next business day.
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| Article 30 |
Except as provided in Articles 28 and 29, when fluctuations in market price produce an increase in the net value of the collateral provided by a Borrower after deduction of the Borrower's obligations from the value of the collateral, the Borrower may not request the return of the excess portion resulting from the increase, nor can it be used to replace collateral in the form of cash or a bank guarantee.
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| Article 31 |
The TPEx shall pay interest on a Borrower's cash collateral at the demand deposit rate of the TPEx's partner bank.
When the interest rate of the preceding paragraph is adjusted, the interest rate after adjustment shall be used, as of the date of adjustment, to calculate the interest payable with respect to the then outstanding portion of the borrowing transaction.
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| Article 32 |
In customized lending transactions, the Lender and the Borrower shall determine on their own the terms and conditions applying to the collateral, the collateral requirement, collateral maintenance ratio, and the minimum collateral ratio, and shall handle transfer of the collateral themselves.
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| Article 33 |
In fixed-price and negotiated price transactions, the Borrower will be deemed to have defaulted under the circumstances below. The TPEx will begin disposing the Borrower's collateral on the next business day, and will buy back or borrow the subject government bonds from the exchange market to return to the Lender. If the TPEx is unable to buy back or borrow the subject government bonds from the market within three business days from the date of default, the Lender will be repaid with a cash equivalent, calculated using the weighted average price of bonds traded through the TPEx Electronic Bond Trading System on the third business day:
- Failure to return the subject bonds upon maturity, or by an earlier return date negotiated with the Lender.
- Failure to supplement collateral to a satisfactory level or replace with eligible collateral by a given date or within a given period of time.
- Failure to pay required fees within the deadline.
Any expenses arising from the disposal of collateral pursuant to the preceding paragraph shall be borne by the Borrower.
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| Article 34 |
The disposal of guaranteed government bonds will proceed by means of sale in the market by the TPEx; cash collateral will be disposed of by being used to buy back the subject government bonds from the market or to pay related fees; disposal of bank guarantees will proceed by a direct claim by the TPEx for redemption with the guaranteeing bank.
The TPEx will seek recovery from the Borrower of any shortfall after all collateral has been disposed, as well as any outstanding charges resulting from handling of the default.
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| Article 35 |
If a Borrower in fixed-price and negotiated price borrowing transactions has any circumstance described in any subparagraph of Article 33, Paragraph 1, or if there are insufficient funds to pay its obligations after it fails to supplement a collateral shortfall and its collateral has been disposed, the TPEx may suspend the Borrower's participation in bond lending transactions.
The TPEx may retain settlement proceeds from the settlement of any other outstanding bond lending transactions to the extent necessary to settle debts owed to it, and shall refund any remaining surplus. However, if the settlement proceeds are insufficient, and the shortfall is not settled within the period notified by the TPEx, the TPEx may cancel the defaulting party's lending account.
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| Article 36 |
If the Borrower in a customized lending transaction exhibits any conduct described in any subparagraph of Article 33, Paragraph 1, then the TPEx, in view of its severity, may suspend the Borrower's participation in bond lending transactions or cancel its bond lending account.
Parties to customized lending transactions shall bear all related risks; the TPEx bears no liability whatsoever.
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| Article 37 |
If a Borrower or a Lender defaults on their obligations, the TPEx may collect a penalty for breach calculated at 10 percent of the lending fee, in addition to handling the matter in accordance with these Rules.
A late interest penalty of 5 percent per annum will be charged on any funds that the TPEx is required to advance in handling a default, calculated from the date of payment by the TPEx until the funds are repaid in full.
A Borrower that is a qualified securities firm or futures commission merchant may be exempted from providing collateral at the time of application for borrowing as required in Articles 11 and 13, provided that the collateral must be provided in full no later than 12 noon on the date of the transaction.
Failure to provide sufficient collateral within the prescribed time will be handled as described in paragraph 1, and a further default penalty of 10 percent of the lending fee will be imposed as compensation to the Lender. In addition, the TPEx will transfer the subject government bonds back to the Lender's bond account.
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| Article 38 |
In addition to the provisions of Articles 35 and 36, when a party to a book-entry central government bond lending transaction violates these Rules, the Master Contract for Book-Entry Central Government Bond Lending, the Book-Entry Central Government Bond Lending Transaction Authorization Agreement, or any relevant rule, bylaw, public announcement or circular letter, the TPEx, in view of the severity of the violation, may suspend that party from further participation in book-entry central government bond lending or notify it to make an improvement.
If a party to a book-entry central government bond lending transaction fails to make an improvement after notification, the TPEx may terminate further participation by that party in book-entry central government bond lending transactions.
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| Article 39 |
A party whose participation in book-entry central government bond lending transactions has been terminated by the TPEx in accordance with Articles 35, 36, or 38 may resume participation in book-entry central government bond lending transactions no sooner than one year after settling outstanding debts, making payment in full, or making the necessary improvement.
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| Article 40 |
The TPEx, in accordance with Article 34, will set aside a certain percentage of the service fees it collects for lending transactions as a reserve to meet possible losses. If the reserve is inadequate, the TPEx shall pay for such losses out of its own funds.
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| Article 41 |
Any matter for which these Rules make no provision shall be governed by applicable laws and regulations and the rules and bylaws of the TPEx.
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| Article 42 |
These Rules, and any amendments hereto, will be publicly announced and implemented by the TPEx after submission to and approval by the competent authority. Additions, deletions, and modifications made to the Appendices will be publicly announced and implemented after approval by the President of the TPEx.
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