| Article 86-1 |
If the OTC-listed securities delivered by a securities broker selling OTC-listed securities through the automated trade matching system of the GreTai fall under any of the circumstances listed below, causing the securities broker to be unable to fulfill settlement, the securities broker may apply to borrow securities in accordance with the GreTai's Securities Lending and Borrowing Rules:
1. Where the securities are damaged, incomplete, or soiled;
2. Where the securities are not certified by the certifying agency;
3. Where the right in the securities of the same OTC company is different;
4. Where the denomination does not conform to the trading unit;
5. Where an application for title transfer is not attached;
6. Where the transferor fails to affix seal on the securities or application for title transfer, or where the seal impression is illegible;
7. Where the seal impression of the transferor affixed on the securities is inconsistent with that on the application for title transfer;
8. Where the OTC company's seal impression for transfer registration is missing;
9. Where the securities firm discovered that the delivered securities may be forged;
10. Where the securities firm is unable to deliver the securities due to natural or man-made disaster;
11. Where the securities firm is unable to make delivery due to loss or damage of postal parcel caused by traffic accident or fault of the messenger in the course of delivery.
If the securities firm representing the seller is unable to perform settlement obligations because of default by the seller, out-trade, or other legitimate reason, it likewise may apply to borrow securities. If the securities firm representing the seller fails to redeliver securities after borrowing them to perform settlement obligations, the GreTai will continue the borrowing on its behalf.
If the amount of securities borrowed is insufficient, the GreTai will fill out and forward an "OTC Securities Delivery Voucher" to the securities central depository enterprise for the portion falling short for safekeeping on behalf of the securities firm representing the purchaser. The securities firm representing the seller shall, within the committed time limit, deliver the securities in exchange for the return of the aforesaid "OTC Securities Delivery Voucher" and the refund of the collateral.
When the securities firm representing the seller applies to borrow securities or to continue borrowing of securities, it shall by means of electronic account transfer within the time limit provided by the GreTai's Securities Lending and Borrowing Rules, pay the collateral for the securities borrowing or the amount of any shortfall in the collateral required for continued securities borrowing. After the close of banking hours, it may be paid over the counter at the GreTai by a check payable at sight issued by a bank designated by the GreTai or in cash (for an amount not more than NT$100,000).
The collateral or shortfall in the collateral for securities borrowing referred to in the preceding paragraph may be offset by a bank guarantee or a pledged central book-entry bond. The limit on such offset is 90 percent of the amount of the collateral. Where the offset is made by a central book-entry bond, the offset value will be 90 percent of the face value of the bond.
If the securities firm representing the seller fails to deposit securities borrowing collateral funds or provide offsetting collateral within the time limit provided in the GreTai's Securities Lending and Borrowing Rules, or to make up a shortfall in the amount of collateral, or its check for the collateral funds cannot be cashed, it is in default of its settlement obligations; the GreTai may tentatively retain a portion of the proceeds and securities equivalent in value to the settlement price payable for that settlement period.
When the selling securities firm arranges stock loans or handles rectification procedures, it shall key in relevant information for each and all items as requested on the GreTai web pages, and forward security fund to the GreTai in the amount of 120% of the closing price on the same business day of trading the same type of the said securities through the automated trade matching system in the following manner:
1. A sight check issued by a bank designated by the GreTai or cash (no more than NT$100,000).
2. A securities firm to forward security fund through remittance shall handle the matters in accordance with relevant regulations.
The GreTai shall, after verifying the aforesaid rectification procedures, issue a Certificate of Payment of Securities Traded on the OTC Market and transmit it to the account of the buying securities firm through Taiwan Securities Central Depository Co., Ltd. as temporary payment and for the future exchange of such certificates against the securities.
After the buying securities firm receives the Certificate of Payment of Securities Traded on the OTC Market, it shall make necessary notation on the payment settlement slip delivered to the customer. The selling securities firm shall, within the commitment period, rectify and deliver the stocks to exchange for the Certificate of Payment of Securities Traded on the OTC Market and return of security fund. Where the securities firm, after completion of payment by arranged stock loan, fails to duly return the borrowed stocks on the next business day due to failed arrangement of continual stock loan, the GreTai may issue a Certificate of Payment of Securities Traded on the OTC Market as temporary payment.
Where delivery of securities is not completed due to application for handling out-trade or other justifiable reasons, supporting documents shall be submitted to the GreTai for approval, after which the provisions in the preceding Paparagraphs one through four shall apply mutatis mutandis.
Where a securities firm fails to furnish security fund by remittance or valid check, the GreTai may tentatively retain the portion equivalent to the security fund from the payment settlement to be completed by such securities firm. If the check referred to in the preceding Paparagraph is not honored after the business hours of the bank on the day it is presented, the securities firm shall be deemed in breach of its payment settlement obligation.
When a securities broker sells corporate bonds or financial bonds through the GreTai fixed income securities trading system, if payment and settlement cannot be completed because of any of the circumstances enumerated in paragraph 1, or because of an application for handling of an out-trade, a report of customer breach, or other justifiable reason, the securities broker shall apply to the GreTai for rectification, and the provisions of paragraph 2, paragraph 3, the fore part of paragraph 4, and paragraph 6 shall apply mutatis mutandis. Where a Certificate of Payment of Securities Traded on the OTC Market is issued as temporary payment, the selling securities firm shall make up the delivery of the bonds within five business days, and shall not exceed the third business day prior to the repayment date of the principal and interest. If the selling securities firm fails to make up the delivery of the bonds by that time, the selling securities firm shall buy them back from the buying securities firm in
possession of the Certificate of Payment of Securities Traded on the OTC Market, or be compelled to buy them back at 115 percent of the original transaction trade price.
Lending auctions, negotiated lending, and tender offers carried out to cover short-sale stock loan shortfalls of experienced by securities finance enterprises in securities required for short sales shall be conducted in compliance with the GreTai's Securities Lending and Borrowing Rules.
The Securities Lending and Borrowing Rules and the Certificate of Payment of Securities Traded on the OTC Market respectively referred to in Paparagraph 1 and Paparagraph 3 above shall be separately prescribed by the GreTai. |