| Article 5 |
The securities lending system of the TWSE provides a facility for securities borrowing and lending transactions, in which only the following designated institutional participants may be the borrower or lender:
1. Lenders: insurance companies, banks, trust investment companies, securities firms, securities investment trust enterprises (funds publicly offered or privately placed thereby), exclusively operated futures commission merchants, securities finance enterprises, designated offshore foreign institutional investors, government funds, trust enterprises (designated trust agreements thereof), and such others as approved by the competent authority.
2. Borrowers: banks, securities firms, securities investment trust enterprises (funds publicly offered or privately placed thereby), futures dealers, securities finance enterprises, designated offshore foreign institutional investors, and such others as approved by the competent authority. |
| Article 6 |
Borrowers and lenders shall sign a Securities Borrowing and Lending Authorization Agreement with a securities firm, open a securities borrowing and lending account, a central securities depository account, and a financial institution deposit account, and report to and obtain approval from the TWSE before they may engage the securities firm to execute securities borrowing and lending transactions.
A Securities Borrowing and Lending Authorization Agreement, the format of which is shown in Appendix 1 hereto, shall contain the following particulars:
1. The borrower or lender agrees that securities borrowing and lending transactions shall be made under the Securities Borrowing and Lending Authorization Agreement, the Master Securities Borrowing and Lending Agreement signed between the securities firm and the TWSE, as well as the TWSE Securities Borrowing and Lending Rules and other applicable regulatory stipulations and rules.
2. The securities firm may from time to time submit information on the accounts opened by the borrower or lender, statements of transactions and inventory of securities, securities borrowing and lending positions, or any other relevant information to, or make it available for review by, the TWSE.
3. The securities firm shall report to the TWSE by mail if the borrower or lender defaults on any obligation required under a securities borrowing or lending transaction or breaches any representations, and in such an event shall take such actions as may be instructed by the TWSE and may rescind or terminate the Authorization Agreement. |
| Article 6-1 |
|
| Article 7 |
A securities firm or securities finance enterprise intending to carry on securities borrowing and lending business pursuant to the Regulations Governing Securities Lending by Securities Firms or the Regulations Governing Securities Finance Enterprises, shall sign a Securities Borrowing and Lending Agreement with the TWSE and open a securities borrowing and lending account before it may carry out securities borrowing and lending transactions through the TWSE securities lending system. |
| Article 8 |
The underlying securities in securities borrowing and lending transactions means the securities eligible for margin purchase and short sale transactions; the securities eligible to be underlying securities in the issuance of call (put) warrants; and the underlying securities on which any of the following derivative instruments have been issued where such securities are listed on Taiwan's exchange or OTC market:
1. Equity options.
2. Exchange traded funds (ETFs).
3. Domestic and overseas convertible and exchangeable corporate bonds
4. Overseas depositary receipts.
The underlying securities in securities borrowing and lending transactions, as described in the preceding paragraph, shall be as publicly announced by the TWSE and subject to any further adjustment by the TWSE having regard to market conditions. |
| Article 9 |
The business hours in which securities borrowing and lending services are available through the TWSE securities lending system shall start from 9 am and end at 3 pm. |
| Article 10 |
The quantity specified in an application for a securities borrowing or lending transaction shall be as follows:
1. Lending quantity: 10 or more trading units of the underlying securities.
2. Borrowing quantity: at least one trading unit of the underlying securities. |
| Article 11 |
Before 2:00 PM of the day on which an application for a lending auction is made, the Securities Finance Enterprise shall submit to the Exchange as collateral an amount equal to 120 percent of the closing price of the security that day multiplied by the volume of the successful bids.
Once the Securities Finance Enterprise has delivered the collateral to the Exchange, the Exchange shall instruct the TSCD to make an account transfer of the loaned securities for which successful bids were submitted into the account of the Securities Finance Enterprise at the TSCD on the business day (the lending day) following the day on which the application for a stock auction was filed.
The collateral in the preceding paragraph may be offset with unregistered government bonds or unregistered negotiable certificates of deposit. The face value of the collateral shall be discounted 10 percent.
The securities lent by the lender shall be returned through the TSCD on the next day of business. The Securities Finance Enterprise shall pay the stock loan fee to the lender through lender's consigned securities firm by 10:00 AM on the business day (the stock loan fee = the unit price of the loaned securities * volume). The Exchange shall also return the collateral to the Securities Finance Enterprise.
The securities firm receiving the consignment may charge the lender a processing fee. This fee shall not exceed 10 percent of the stock loan fee. |
| Article 12 |
When a Securities Finance Enterprise is unable to return the securities loaned to it by their owner, the Exchange shall utilize the collateral to replace the securities and return them to the lenders. Should a balance remain, the Exchange shall return it to the Securities Finance Enterprise. Should the collateral be insufficient to recover the securities, the Exchange shall deliver the collateral to the lenders. |
| Article 13 |
When two or more Securities Finance Enterprises hold a lending auction for the same security, the total volume shall be auctioned simultaneously. After the lending auction fee has been derived by calculating the average fee of the total successful bids, the lending auction fee shall be collected based on the total number of successful bids that each Securities Finance Enterprise has received.
If the securities lent by auction under the preceding paragraph are insufficient, the securities shall be allocated based on the percentage of the total volume of securities that each Securities Finance Enterprise applied to borrow by auction until no whole lots remain. If there is a remainder, it shall be allocated according to the fractional remainder of shares that each Securities Finance Enterprise still requires ordered from greatest to least. If the fractional remainders are equal, the remainder shall be divided by lots. |
| Article 14 |
In fixed-price transactions, borrowing applications are matched against lending applications that state the same terms and conditions with respect to the recall notification period, on a transaction-by-transaction basis and in an order of priority determined as follows:
1. With respect to applications for securities borrowing:
(1) Where the quantity from all lending applications does not exceed that from all borrowing applications, transactions will be executed for all lending applications.
(2) Where the quantity from all lending applications exceeds that from all borrowing applications, the lending applications will be matched in a random order determined by computer.
2. With respect to applications for securities lending:
(1) Where the quantity from all borrowing applications does not exceed that from all lending applications, transactions will be executed for all borrowing applications.
(2) Where the quantity from all borrowing applications exceeds that from all lending applications, the borrowing applications will be matched in the order of the time they are entered. |
| Article 15 |
An application to lend or borrow securities through a competitive bid transaction, any change or withdrawal of such an application, and the book-entry transfer of securities shall be handled in the following manner:
1. In the case of an application to lend securities, change or withdrawal thereof, and book-entry transfer of securities:
(1) A lender applying to lend securities shall first through a securities firm enter the account number, title of securities, quantity, recall notification period, and lending quote into the TWSE securities lending system.
(2) Upon receipt of the application, the TWSE will notify a central securities depository over a computer network to check the securities in the lender's central securities depository account and put the securities on hold to make them available for lending; the application will be invalid if the lender does not have enough securities in its central securities depository account.
(3) An application that is valid will make the securities available for lending at the rate specified in the lending quote and shall remain valid until executed, changed, or withdrawn, or if partially executed, remain valid with respect to the unexecuted portion.
(4) With respect to any unexecuted portion of the application, the lender may at any time, through the securities firm, reduce the lending quantity or the rate in the lending quote through the TWSE securities lending system, whereupon the TWSE will give notice of the reduction in lending quantity to the central securities depository to make a corresponding change to the quantity of securities put on hold in the lender's central securities depository account.
(5) With respect to the unexecuted portion of the application, the lender may at any time, through the securities firm, withdraw its application through the TWSE securities lending system, whereupon the TWSE will forthwith notify the central securities depository to release the securities on hold pending lending in the lender's central securities depository account.
(6) Upon execution of a transaction through a matching process with respect to the application, the TWSE will forthwith notify the central securities depository to transfer the securities by book-entry from the central securities depository account of the lender into that of the borrower.
2. In the case of an application to borrow securities, or change or withdrawal of such an application:
(1) A borrower applying to borrow securities shall first through a securities firm enter the account number, title of securities, borrowing quote, quantity, return date, recall notification period, and statement of collateral to be provided, into the TWSE securities lending system.
(2) The application will become effective upon confirmation by the TWSE of the accuracy of the information on collateral entered for the application and of the satisfaction of the required collateral percentage of 140 percent, and upon successful putting of securities collateral on hold.
(3) Upon posting of collateral in a sufficient amount, the borrower may at any time through the securities firm apply to change the quantity, rate specified in the borrowing quote (the time of change is deemed the new order time), return date, or to withdraw the application through the TWSE securities lending system with respect to any unexecuted portion of the application.
(4) Upon the borrower's withdrawal of an application with respect to the unexecuted portion, the TWSE will forthwith notify the central securities depository to release the securities collateral on hold in the borrower's central securities depository account. |
| Article 16 |
In competitive bid transactions, borrowing applications are matched against lending applications that state the same terms and conditions with respect to the recall notification period, on a transaction-by-transaction basis and in an order of priority determined according to the following principles:
1. In the case of an application to borrow securities, if the borrowing quote entered is at a rate higher than or equal to the lowest rate among all lending quotes, the borrowing quantity will be matched against one or more of the lending quotes available from among the lenders, determined in ascending order of rate, until the borrowing quantity is reached; if the borrowing quantity is reached at a rate at which the total quantity from all lending quotes at that rate is higher than the quantity needed to be borrowed, one or more of those lending quotes will be selected on a random basis for matching, until the needed quantity is reached.
2. In the case of an application to lend securities, if the lending quote entered is at a rate lower than or equal to the highest rate among all borrowing quotes, the lending quantity will be matched against one or more of the borrowing quotes available from among the borrowers, determined in descending order of rate, until the lending quantity is reached; if the lending quantity is reached at a rate at which the total quantity from all borrowing quotes at that rate is higher than the quantity offered for lending, one or more of those borrowing quotes will be selected for matching, on a transaction-by-transaction basis and in the order of the time they are entered, until the needed quantity is reached. |
| Article 16-1 |
|
| Article 17 |
A negotiated transaction shall be conducted in the following manner:
1. A borrower and a lender shall between themselves negotiate and agree on the terms and conditions of a securities loan that cover, with respect to the securities to be loaned, the type, quantity, lending rate, loan period, and with respect to the collateral to be provided, the type, terms and conditions, and how entitlement compensation will be made, and shall enter into a Negotiated Securities Loan Transaction Agreement (format as shown in Appendix 3 hereto), under which the borrower shall provide collateral to the lender.
2. The borrower and the lender shall respectively request a securities firm to enter on their behalf a report on the execution of the borrowing transaction and a report on the execution of the lending transaction through the TWSE securities lending system, specifying therein such information as the title of the securities, borrowing/lending quantity, rate for the transaction, return date, securities book-entry transfer date, collateral percentage, the borrower's securities borrowing and lending account and that of the lender, where the securities book-entry transfer date may be either the report date or the next following business day; and the borrower and the lender may file their respective reports through the same or through different securities firms.
3. Where the report date is specified as the securities book-entry transfer date in the lending transaction report, the TWSE will thereupon notify the central securities depository to put the securities on hold to make them available for lending; the lending transaction report will be invalid if the lender does not have sufficient securities on deposit in its central securities depository account.
4. No change may be made to the borrowing/lending terms and conditions once the TWSE confirms that those in the borrowing transaction report are consistent with those in the lending transaction report. If the securities book-entry transfer date is the next business day following the report date, the lender and the borrower may, acting jointly, apply to withdraw that negotiated transaction report at any time from the TWSE's confirmation until before 10 a.m. on the securities book-entry transfer date.
5. Where the securities book-entry transfer date is the report date, the TWSE upon confirmation will notify the central securities depository to transfer the securities.
6. Where the securities book-entry date is the next business day following the report date, the TWSE will issue a notice to the central securities depository at 10:30 a.m. on that day, advising it to transfer the securities; the negotiated transaction report will be invalid if the lender does not have sufficient securities on deposit in its central securities depository account, in which case the TWSE will not execute the transaction and will thereupon issue a notice to the lender and borrower through their securities firm(s). |
| Article 17-1 |
|
| Article 18 |
The maximum period of a securities loan may not exceed 6 months starting from the date of execution of the loan transaction.
The borrower may return the borrowed securities any time during the agreed period.
If the lender does not make a recall request during the term of the loan, the borrower may, at any time during the period from the tenth business day before expiration of the loan term to the expiration date, submit a notice through the TWSE to the lender requesting renewal of the loan; the lender shall be deemed to have refused to grant consent if it does not otherwise indicate upon receipt of the notice.
The request for renewal of a loan under the preceding paragraph may be granted with one and only one extension of not more than 6 months, and with no term or condition of the loan changed except for the loan period. |
| Article 19 |
A borrower in a fixed-price or competitive bid transaction shall return the securities in the following manner:
1. Return of the securities on the due date: the TWSE will, ten business days prior to the scheduled return date, notify the borrower through the securities firm to return the securities.
2. Return of the securities before the due date: the borrower may return the securities, in whole or in part, at any time from the next business day following the borrowing date to the due date.
3. Request by the lender for early return of securities: the lender, if it wishes to request early return of the securities, shall give notice to the borrower through the TWSE no later than one, three, or ten business days before the early return date, in accordance with the terms and conditions under which the borrowing/lending application is made; the borrower may return the securities, in whole or in part, at any time from the next business day following the receipt of the notice to the early return date.
Upon notification from the borrower through the securities firm via the TWSE securities lending system, the TWSE will notify the central securities depository to effect a book-entry transfer of the securities to be returned, from the central securities depository account of the borrower back to that of the lender, with a notice to the borrower and the lender through their securities firms.
The borrower's obligation to return the securities ends only when the borrowed securities and any rights arising from such securities during the borrowing period have all been returned or paid to the lender. |
| Article 20 |
A borrower in a negotiated transaction shall return the securities in the following manner:
1. Return of the securities on the due date: the TWSE will, ten business days before the scheduled return date, notify the borrower through the securities firm to return the securities.
2. Return of the securities before the due date: the borrower and the lender may between themselves agree on the return of securities at any time before the due date, and the two parties shall through their securities firms report to the TWSE on the change of return date.
Upon notification from the borrower through the securities firm via the TWSE securities lending system, the TWSE will notify the central securities depository to effect a book-entry transfer of the securities to be returned, from the central securities depository account of the borrower back to that of the lender, with a notice to the borrower and the lender through their securities firms. |
| Article 21 |
The TWSE shall make the following information available for query over a computer network or the Internet:
1. With respect to fixed-price transactions:
(1) The fixed rate.
(2) Execution information: display the total volume of executed transactions in each security.
(3) Lending information: display the total volume of unexecuted lending orders for each security.
(4) Borrowing information: display the total volume of unexecuted borrowing orders for each security.
2. With respect to competitive bid transactions:
(1) Execution information: upon order matching and execution of each transaction, display the title of the security, quantity, and rate, and the total volume of executed transactions in that security.
(2) Lending information: display the lending quantity and rate of the best five lending quotes in each security, and the total lending volume in that security.
(3) Borrowing information: display the borrowing quantity and rate of the best five borrowing quotes in each security, and the total borrowing volume in that security.
3. With respect to negotiated borrowing transactions: a balance table of securities on loan.
The TWSE will publish the balance table of securities on loan on a daily basis, wherein the balances of securities on loan in fixed-price and competitive bid transactions may be calculated in aggregate with the balances in the balance table of securities on loan for negotiated transactions.
The TWSE may adjust the information items as necessary based on market conditions. |
| Article 22 |
The securities collateral received by the TWSE in conducting securities borrowing and lending transaction business shall be delivered to the custody of the central securities depository.
Upon the execution of a securities loan transaction, the central securities depository shall make a notation specifying how the borrowed securities may be used. However, the same shall not apply to securities borrowed through a securities borrowing and lending account of a securities firm or of a securities finance enterprise.
No securities with respect to which a notation has been made under the preceding paragraph may be transferred or withdrawn, except for the following purposes:
1. For sale through a securities firm so authorized.
2. For returning securities borrowed or for compensating for securities entitlements.
3. For returning spot securities borrowed in short sales.
4. For purposes associated with the exercise of call (put) warrants, equity options, and other equity-type financial instruments.
5. For use in the in-kind creation or redemption of exchange traded fund (ETF) units.
6. For such other purposes as may be approved by the TWSE. |
| Article 23 |
The TWSE shall not entertain an application to open a securities borrowing and lending account if any of the following circumstances applies to the lender or borrower:
1. Noncompliance with the provisions of Article 5 or 49.
2. Opening of the securities borrowing and lending account under the name of another person.
3. Termination of the securities trading brokerage contract entered into with the securities firm.
A borrower or lender may open only one securities borrowing and lending account at a single business place of a securities firm. However, this restriction does not apply where it is provided the borrower or lender is allowed to open two or more trading accounts at a single place of business of a securities broker.
Where any circumstance set forth in the subparagraphs of paragraph 1 applies after a securities borrowing and lending account has been opened, the TWSE shall forthwith suspend that party's participation in securities borrowing and lending transactions and notify it to satisfy all outstanding obligations, upon closing of which the TWSE shall cancel that securities borrowing and lending account.
Where securities borrowed by a borrower are subject to a court ruling for provisional attachment, provisional injunction, or compulsory execution, the provisions of Article 41, paragraph 2 shall apply mutatis mutandis, and upon closing of all transactions, the TWSE may cancel its securities borrowing and lending account. |
| Article 24 |
A borrower or lender applying to open a securities borrowing and lending account shall complete the account opening process through an authorized person as specified in an attached letter of authorization, and the securities firm receiving the application shall forward the relevant documents to the TWSE. Upon the photocopies thereof shall be affixed the corporate seal and the seal of the statutory representative of the applicant company and be inserted the words "Identical to the Original". The TWSE shall additionally send a written request to the account applicant for confirmation that the account is being opened on the applicant's behalf under the power of attorney or authorization.
The securities firm shall transmit to the computer system of the TWSE any information with respect to the account opened by the lender or borrower, or cancellation of the account, or any changes therein. |
| Article 25 |
If there is any change to the information contained in a Securities Borrowing and Lending Account Application Form with respect to the company's name, name or national ID number of its agent or responsible person, government uniform invoice number of a profit-seeking enterprise or tax withholding agent, withholding tax rate, bank account number, address or mailing address, contact telephone number, or e-mail address, such change shall be entered, through the securities firm, into the TWSE securities lending system, with a written notice to the TWSE.
If the applicant for conducting securities borrowing and lending transactions fails to give such a notice, the TWSE shall proceed using the original recorded information, and the applicant shall be solely responsible for any legal issues that may arise and may not raise any objection whatsoever afterwards.
Where the TWSE gives a notice by postal mail, if the notice is unable to be served due to a change of address or mailing address for which the borrower or lender fails to give notice under the provisions above, or otherwise due to a reason attributable to the borrower or the lender, such notice shall become effective as of the date of the first delivery attempt by the post office. |
| Article 26 |
Any money or securities due from the TWSE to a borrower or lender shall be delivered by book-entry transfer, among which the money, except for cash collateral, which shall be handled pursuant to Article 31, shall be transferred by the TWSE to the financial institution account designated by the securities firm and then retransferred by the securities firm into the deposit account opened by the lender or borrower with a financial institution, whereas the securities shall be transferred by the central securities depository directly to the central securities depository account of the borrower or lender. |
| Article 27 |
A lender or borrower giving an order to a securities firm to lend, borrow, or return securities shall fill out an order ticket marked "LEND", "BORROW", or "RETURN", and upon successful execution of the borrowing or lending transaction, the securities firm shall, based upon the transaction information on record with the TWSE, prepare and issue a securities borrowing/lending report marked "LEND", "BORROW", or "RETURN" and any other supporting documents, in the form and content as separately announced by the TWSE.
The provisions of Article 75 of the TWSE Operating Rules shall apply mutatis mutandis with respect to the preceding paragraph.
The TWSE shall, by means of file transfer, notify the securities firm of the borrower regarding the required collateral percentage, collateral maintenance ratio, and minimum collateral percentage.
In the case of any ex-rights or ex-dividend notification or any relevant calculation statements, the TWSE shall deliver a copy to all related borrowers and lenders through their respective securities firms.
Upon repayment and closing of a securities loan transaction, the TWSE shall, after settlement of accounts, prepare statements of the lending fee, lending income, return of collateral, and net receipt or payment of money, and deliver a copy thereof to the borrower and the lender through their securities firms. |
| Article 28 |
A borrower or lender applying to terminate its securities borrowing and lending account shall fill out an Application for Termination of Securities Borrowing and Lending Account, the format of which is shown in Appendix 5 hereto, and the TWSE may not consent to process the account cancellation unless it has confirmed that all of the borrower or lender's securities borrowing and lending transactions have been closed out and settled. |
| Article 29 |
A borrower applying to borrow securities in a fixed-price or competitive bid transaction shall provide collateral, which may take the following forms only:
1. Cash.
2. Securities eligible for margin purchases and short sales.
3. Bank guarantee.
4. Book-entry central government bonds.
The collateral referred to in the preceding paragraph shall be provided in the following manner:
1. Cash: to be transferred directly by the borrower to a cash collateral account at a bank as designated by the TWSE.
2. Securities eligible for margin purchases and short sales: upon application by the borrower through the securities firm, the TWSE will notify the central securities depository to put the securities collateral on hold.
3. Bank guarantee: upon completion of guarantee procedures with a bank, the borrower shall file an application through the securities firm and submit the original bank letter of guarantee to the TWSE.
4. Book-entry central government bonds: the borrower shall create and register a pledge on the bonds in favor of the TWSE.
Upon execution of the securities loan transaction, the TWSE shall notify the central securities depository to transfer the borrower's securities collateral to the TWSE as security for the loan.
The TWSE may refuse to accept any collateral enumerated in subparagraph 2 of paragraph 1 if it deems appropriate to do so having considered the market liquidity or risk status of such collateral. |
| Article 30 |
At the time of filing an application to borrow securities through fixed-price or competitive bid transaction, a borrower shall provide collateral to the TWSE in an amount of no less than a required collateral percentage of the market value of the securities to be borrowed, calculated based upon the opening reference price of those securities on the then current day, and upon execution of the transaction, the collateral maintenance ratio for that transaction, along with that for any other securities borrowing transactions of the borrower, shall be calculated on a daily marked-to-market and transaction-by-transaction basis; if any collateral maintenance ratio falls below the minimum collateral percentage of 120 percent, then upon notification from the TWSE to the securities firm acting on behalf of the borrower, the borrower shall provide additional collateral on the next business day following the notification date to bring the collateral maintenance ratio back to the required collateral percentage.
The collateral maintenance ratio shall be calculated as follows:
1. The collateral maintenance ratio is equal to the total collateral value of the collateral minus the securities lending fees payable, then divided by the total value covered by the collateral, and then multiplied by 100 percent.
2. The total collateral value of the collateral is equal to the most recent closing price or most recent next-day's reference price of the securities collateral, or the par value of the book-entry central government bonds, as the case may be, multiplied by the quantity and further by a valuation percentage, then plus the total cash collateral and total bank guarantee.
3. The total value covered by the collateral is equal to the most recent closing price or most recent next-day's reference price of the securities borrowed multiplied by the quantity covered by the collateral, plus total cash dividends to be returned.
4. The quantity covered by the collateral is equal to the quantity of securities borrowed, plus the quantity of stock dividends to be returned after the ex-rights date.
The market value of securities referred to in the preceding paragraph shall be calculated based on the most recent closing price or most recent next-day's reference price, provided that for the three business days prior to any ex-dividend or ex-rights date for a security that is provided as collateral, its market value shall be calculated based upon the respective current day's closing price or next day's reference price, minus the value of the dividend, or minus the value of the right determined based on the current day's closing price or the next day's reference price.
The collateral valuation percentage for securities eligible for margin purchases and short sales shall be 70 percent if they are exchange-listed securities, or 60 percent if they are over-the-counter securities; it shall be 90 percent for book-entry central government bonds.
The collateral valuation percentages described in the preceding paragraph may be subject to adjustment by the TWSE having regard to the market liquidity or risk status of the collateral. |
| Article 31 |
If the fixed-price or competitive bid transaction contemplated by an application for securities borrowing is not executed, then upon application by the borrower, the TWSE shall return the collateral provided by the borrower in the following manner:
1. In the case of cash, a transfer will be made on the next business day directly into a bank account designated by the borrower.
2. In the case of stock exchange-listed or OTC-listed securities, a notice will be issued directly to the central securities depository to remove the "on hold" status.
3. In the case of a bank guarantee, the original guarantee documentation will be returned to the borrower on the next business day.
4. In the case of book-entry central government bonds, a registration will be made on the current day canceling the creation of the pledge. |
| Article 32 |
A borrower in a fixed-price or competitive bid transaction may apply to withdraw any portion of the provided collateral that is in excess of the required collateral percentage.
When applying to make such a withdrawal, the borrower shall submit an application through its securities firm via the TWSE securities lending system; upon receipt of the application, the TWSE shall process it pursuant to Article 31 applied mutatis mutandis. |
| Article 33 |
A borrower in a fixed-price or competitive bid transaction applying to replace collateral shall do so through its securities firm via the TWSE securities lending system, and shall provide the additional collateral before applying to withdraw the originally posted collateral of equivalent or lower value (in the case of securities collateral, the value shall be discounted at the collateral valuation percentage based upon the opening reference price for the current day on the exchange market).
Where upon review the securities collateral or bank guarantee provided by the borrower is found no longer qualified as eligible collateral, the TWSE shall forthwith notify the borrower to replace it on the next business day. |
| Article 34 |
The TWSE shall pay interest on the cash collateral provided by a borrower in a fixed-price or competitive bid transaction, at an interest rate determined based upon the demand deposit interest rate of the bank of the TWSE.
When the interest rate described in the preceding paragraph is adjusted, the adjusted interest rate 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. |
| Article 35 |
A borrower in a fixed-price or competitive bid transaction shall, through a securities firm and through the TWSE securities lending system, repay the lender in the following manner any cash dividends, stock dividends, or other benefits that the lender would have received if it had not lent the securities:
1. In the case of cash entitlements:
(1) The TWSE will, no later than five business days before the distribution date, notify the borrower through its securities firm.
(2) The borrower shall through its securities firm deposit cash into a bank account designated by the TWSE and enter the information into the TWSE securities lending system for confirmation purposes on the distribution day, and the TWSE will afterwards, on that day or on the next business day, transfer the money to the lender through its securities firm.
2. In the case of securities entitlements:
(1) The TWSE will notify the lender through its securities firm after the holder-of-record date, and the lender shall, within three business days starting from the date of the notice from the TWSE, decide at its option whether securities or cash of equivalent value shall be returned, and then enter the information into the TWSE securities lending system, whereupon the TWSE will notify the borrower through its securities firm advising of the fact, and give further notice to the borrower through the securities firm three business days prior to the distribution date, advising that the TWSE will cause securities to be returned if the lender fails to exercise that option within the time limit.
(2) The borrower shall, in the case of returning securities, give a notice through its securities firm and through the TWSE securities lending system, to the central securities depository within three business days starting from the distribution date, instructing it to effect a book-entry transfer of the securities to the lender from the borrower's central securities depository account, or in the case of returning cash of equivalent value, make the return on the distribution date in the same manner as cash entitlements, in an amount determined based upon the ex-rights reference price.
3. In the case of rights to subscribe to newly issued securities:
(1) The TWSE will, five business days prior to the end of the period for subscribing to securities in a new issue, notify the lender through its securities firm, and the lender shall, three business days prior to the end of the subscription period, declare its intention to subscribe, if so desired, by giving notice through its securities firm to the TWSE and, also through its securities firm, deposit the money into the TWSE-designated bank account, to be transferred through the TWSE securities lending system to the borrower to subscribe to the securities, or to buy in the securities in the market, for the account of the lender.
(2) The TWSE will, no later than three business days prior to the distribution date for the newly issued securities, give a notice to the borrower through its securities firm advising that the borrower must, within three business days starting from the distribution date, give a notice through the securities firm via the TWSE securities lending system to the central securities depository to effect a book-entry transfer of the securities to the lender from the borrower's central securities depository account.
(3) The lender shall be deemed as having waived the right to subscribe to the newly issued shares if it tardily declares its intention to subscribe, or fails to declare its intention to subscribe, or if it, having so declared, fails to pay the subscription price within the time limit.
In a negotiated transaction, the borrower and the lender shall between themselves negotiate and agree on how to deal with any cash entitlements, securities entitlements, subscription rights for newly issued securities, and other benefits that the lender would have received if it had not lent the securities, as well as on the exercise of any rights on the shares. In the case of securities entitlements that require a book-entry transfer, the transfer shall be made through the TWSE securities lending system. |
| Article 36 |
A borrower shall through its securities firm enter into the TWSE securities lending system the information on any unsold portion of securities it has borrowed, within 10 business days after the holder-of-record date for any distribution of cash or securities entitlements on such securities. |
| Article 37 |
The TWSE shall, on the business day preceding an issuing company's book closure date, prepare a title transfer list and electronic data file incorporating information on the securities of that issuing company that have been posted as collateral, and deliver the same to the central securities depository to effect the title transfers with the issuing company or its stock registrar and transfer agent on behalf of the relevant parties.
A securities firm or securities finance enterprise that has posted as collateral for a securities borrowing transaction made through the TWSE securities lending system the collateral securities it had previously received, shall replace the same four business days before the book closure date, so that the operations described in the preceding paragraph may be carried out accurately; the securities firm or securities finance enterprise shall be solely held responsible for any dispute regarding shareholders' rights that may arise if it fails to make such replacement.
A lender in a fixed-price or competitive bid transaction wishing to exercise the voting rights attached shall make a recall request prior to the holder-of-record date for the shareholders' meeting and in accordance with the recall notification period under the original lending terms; the TWSE will forward the request to the borrower through the securities firm. |
| Article 38 |
The terms and conditions, required collateral percentage, collateral maintenance ratio, and minimum collateral percentage with respect to the collateral for a negotiated transaction shall be negotiated and agreed, and the collateral transferred, between the lender and the borrower themselves. |
| Article 39 |
If any of the following circumstances applies to the borrower in a fixed-price or competitive bid transaction, the TWSE shall, as from the next business day, dispose of the collateral and buy back or borrow securities in the market to return the securities for the account of the borrower, or if having failed to buy back or borrow the securities within three business days starting from the date of the circumstance, repay the loan by paying cash of equivalent value determined based upon the closing price on the exchange market on the third business day:
1. Where the borrower fails to return the securities within the specified time limit when the loan matures or when the lender makes a recall request.
2. Where the borrower fails to pay entitlement compensation to the lender by the payment date for such entitlement compensation.
3. Where the borrower fails to cover any collateral shortfall or to provide eligible collateral in a replacement by the specified date and time.
4. Where the borrower fails to pay any fee by the due date.
Any processing fees incurred in connection with a disposition under the preceding paragraph shall be borne by the borrower. |
| Article 40 |
In the case of disposition of securities collateral, the TWSE may instruct a securities firm to place a sell quote on the TWSE market or on an OTC market, and if the quote is not executed, to keep quoting until execution.
In the case of disposition of cash collateral, the money will be used to buy back the securities or to offset against related expenses, whereas, in the case of a bank guarantee, the TWSE shall directly seek recovery from the guaranteeing bank.
In the case of disposition of securities collateral, the disposition shall be made through the Taiwan Stock Exchange Corporation Account for Events of Default opened by the TWSE with a securities firm.
The borrower may not raise any objection as to the time and price at which the TWSE disposes of the collateral.
The TWSE shall seek recovery from the borrower for any portion of the amount in arrears that is not covered after the disposition of the collateral, as well as for any fees and costs arising from or in connection with the handling of related matters. |
| Article 41 |
If in a fixed-price or competitive bid transaction any circumstance described in the subparagraphs of Article 39, paragraph 1 applies to the borrower, or the circumstance described in Article 39, paragraph 1, subparagraph 4 applies to the lender, the TWSE may suspend that party's participation in securities borrowing and lending transactions.
If upon disposition by the TWSE of the borrower's collateral, the borrower's obligation is still not fully satisfied, the TWSE may close out any other securities borrowing and lending transaction(s) of the borrower and use the resultant proceeds to cover the shortfall, with any amount remaining thereafter to be returned to the borrower; if the borrower's obligation is still not fully satisfied, and if the borrower fails to fully satisfy the obligation within the time limit specified in a notice from the TWSE, such failure shall constitute an event of default, in which case the TWSE shall terminate the borrower's participation in securities borrowing and lending transactions. |
| Article 42 |
If in a negotiated transaction the circumstance described in Article 39, paragraph 1, subparagraph 1 or 4 of these Rules applies to the borrower, or the circumstance described in subparagraph 4 thereof applies to the lender, the TWSE may suspend that party's participation in securities borrowing and lending transactions; if that party fails to perform the obligation upon notification from the TWSE, the TWSE may terminate that party's participation in securities borrowing and lending transactions.
Where a borrower in a negotiated transaction is unable, even at a limit-up price, to buy securities in the market to return the borrowed securities when required, or in the case of such a borrower being an offshore foreign institutional investor, the borrowed securities are subject to a ratio cap on foreign capital investments as fixed by the competent authority in charge of the relevant industry, such that the circumstance in Article 39, paragraph 1, subparagraph 1 of these Rules applies, the loan may be repaid in cash if so agreed between the lender and the borrower, in which case they shall forthwith file a report, accompanied by relevant factual evidence, to the TWSE to close out the securities loan.
Upon any event of default in a negotiated transaction, the parties shall forthwith report to the TWSE on the handling of the event of default. |
| Article 43 |
If any of the circumstances described in Article 39, paragraph 1 applies to the borrower or lender in a fixed-price or competitive bid transaction, the TWSE, in addition to taking any action in a prescribed manner, may charge an additional loan service fee in the amount of 10 percent of the securities lending fee. The TWSE will be entitled to an additional delay interest on any advances made by the TWSE arising from the taking of relevant actions, calculated at the rate of 5 percent per annum for the period from the advance payment date to the date the advance is repaid. |
| Article 44 |
The securities lending fee for a fixed-price or competitive bid transaction, to be collected/paid through the securities firm upon returning of borrowed securities and closing of the transaction, shall be calculated on a daily marked-to-market and on a transaction-by-transaction basis as the sum of the products obtained by multiplying the daily closing price of the underlying securities by the quantity covered by the collateral and then further multiplying by the lending rate. If no closing price is available, the most recent closing price shall be used in the calculation.
The borrowing period shall begin on the date the securities are borrowed and end on the day preceding the date they are returned. If the return date does not fall on a business day, the next business day shall be treated as the return date. The preceding paragraph shall apply mutatis mutandis to the calculation of securities lending fees for holidays.
Where in the fixed-price or competitive bid transaction the lender agrees to renew the loan, the securities lending fee shall continue to accrue until, and be collected/paid upon, closing of the transaction by return of the securities.
Where the borrower in a fixed-price or competitive bid transaction returns early a portion of the borrowed securities during the life of the loan, it shall on the next business day settle all lending fees and charges already incurred in relation to the securities borrowing transaction. Where the borrower in a negotiated transaction returns early a portion of the borrowed securities during the life of the loan, it shall on the next business day settle all processing fees and loan service fees in relation to the securities returned.
The calculation and payment of the securities lending fee on a negotiated transaction shall be negotiated and agreed upon between the borrower and the lender themselves, notwithstanding the provisions of Article 27, paragraph 5. |
| Article 45 |
A securities firm shall charge processing fees for providing securities borrowing and lending transaction services, while the TWSE shall charge loan service fees for providing borrowing and lending services on the securities market.
The processing fees and loan service fees, and their rates, for securities borrowing and lending transactions shall be determined by the TWSE in conjunction with the securities association and shall be adopted upon submission to and approval by the competent authority. |
| Article 46 |
The TWSE, in view of the risk of loss that it may incur as a result of handling matters related to Article 39, shall set aside a reserve fund from, and of a certain percentage of the loan service fee received; in the event of any shortfall, it shall be paid from the TWSE's own funds. |
| Article 47 |
Where upon review an underlying security is no longer found eligible, the TWSE may demand all borrowers with respect to that security to close out their transactions by returning the securities.
Where an underlying security is determined as being subject to suspension of trading, delisting from an exchange/OTC market, merger or consolidation, capital reduction, or any other cause that may affect the lender's shareholder rights, the TWSE may demand the borrower to close out the transaction by returning the securities by the sixth business day following the book closure date or the date the cause takes effect.
If during the life of a securities loan agreement, because of a natural disaster or other emergency, trading on the securities market is suspended across the board or is suspended for a security underlying the agreement, and the time for resumption of trading has not been determined, the TWSE may notify the borrower to return the borrowed security within a stated period of time, failing which the securities loan transaction may be closed out in any of the following manners:
1. The borrower submits an application to the TWSE, which, together with all such applications from other borrowers of the same security, will then be collectively forwarded by the TWSE to a securities firm engaged by the TWSE to apply for purchase of the underlying security through a reverse auction, with any expenses arising from the reverse auction to be borne on a pro rata basis by all applicant borrowers.
2. The lender and borrower may agree to close out the transaction by payment of cash. |
| Article 48 |
Except as otherwise stated in Article 41or 42, where a party to a securities loan transaction violates or breaches these Rules, the Master Securities Borrowing and Lending Agreement, the Securities Borrowing and Lending Authorization Letter, or any applicable regulations, rules, announcements, or circular letters, the TWSE may suspend that party's participation in securities borrowing and lending transactions or notify it to make corrections, depending upon the seriousness of the matter.
If the party to the securities loan transaction fails to make corrections as instructed by the TWSE in the notice, the TWSE may terminate that party's participation in securities borrowing and lending transactions. |
| Article 49 |
A party whose participation in securities borrowing and lending transactions is terminated by the TWSE pursuant to Article 41, 42, or 48, may resume its participation in securities borrowing and lending transactions only after the lapse of one year following the full satisfaction or performance of its obligations or completion of corrections. |