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Title Taiwan Depository & Clearing Corporation Directions for Payment and Delivery of Funds and Securities for Fixed-Income Securities CH
Date 2024.07.22 ( Amended )

Article Content

Chapter 1 General Principles
Article 1     These Directions are adopted pursuant to Articles 55, 57, 62-1, 91, 100 and 101 of the Operating Rules of the Taiwan Depository & Clearing Corporation (TDCC).
Article 2     "Fixed-income securities" in these Directions includes New Taiwan dollar denominated corporate bonds, financial bonds, debt-type beneficial securities and asset-backed securities, municipal bonds, bonds issued in Taiwan by foreign issuers, principal-only or interest-only government strip bonds, securities governed by the Taipei Exchange (TPEx) Rules Governing Management of Foreign Currency Denominated International Bonds, and foreign currency denominated bonds issued overseas and approved by the TPEx for registration.
Article 3     The terms used in these Directions shall be defined as follows:
  1. Investor custodian bank: defined as a bank that is entrusted by an investor to handle clearing and settlement of funds and securities for bonds.
  2. Redemption management bank: defined as a bank designated by the TDCC to handle operations for the payment and receipt of funds in connection with bond issuance, call back, and redemption and interest payment at maturity.
  3. Agent clearing bank: defined as a bank entrusted by a dealer that has not opened a deposit account with the Central Bank's Department of Banking, or entrusted by a dealer or a foreign depository or clearing institution that has not joined the Foreign Exchange Clearing System of the Financial Information Service Co., Ltd. (FISC), to open a deposit account and to handle payment and receipt of funds on its behalf.
  4. Batch net settlement (BNS): defined as netting the funds of multiple settlement instructions between two settlement counterparties.
  5. Proprietary position: defined as the balance of bonds purchased by a dealer, investor custodian bank, customer, or foreign depository or clearing institution through outright purchase transactions and recorded on a proprietary account or a customer account.
  6. Reverse repo position: defined as the balance of bonds purchased by a dealer, investor custodian bank, customer, or foreign depository or clearing institution through reverse repo transactions and recorded on a proprietary account or a customer account.
  7. Repo position: defined as the balance of bonds sold by a dealer, investor custodian bank, customer, or foreign depository or clearing institution through repo transactions and recorded under a proprietary account or a customer account.
  8. Restricted position: defined as the balance of bonds held by a dealer, investor custodian bank, customer, or foreign depository or clearing institution for which it has not received the redemption of the principal upon maturity, and which is recorded under a proprietary account or a customer account.
  9. One-time repo transaction: defined as an agreement for a transaction between a buyer and seller in which a dealer or a foreign depository or clearing institution sells bonds from its proprietary position to an investor, investor custodian bank, or another dealer, and repurchases the bonds on a stipulated date at a stipulated price.
  10. Multi-step repo transaction: defined as an agreement for a transaction between a buyer and seller in which a dealer or a foreign depository or clearing institution sells bonds from its reverse repo position to an investor, investor custodian bank, or another dealer, and repurchases the bonds on a stipulated date at a stipulated price.
  11. One-time reverse repo transaction: defined as an agreement for a transaction between a buyer and seller in which a dealer or a foreign depository or clearing institution buys bonds from the proprietary position of an investor, investor custodian bank, or another dealer and sells the bonds back on a stipulated date at a stipulated price.
  12. Multi-step reverse repo transaction: defined as an agreement for a transaction between a buyer and seller in which it is agreed that a dealer or a foreign depository or clearing institution buys bonds from the reverse repo position of an investor, investor custodian bank, or another dealer and sells the bonds back on a stipulated date at a stipulated price.
Article 4     A dealer that has not opened a deposit account with the Central Bank's Department of Banking, or a dealer or a foreign depository or clearing institution that does not take part in the FISC Foreign Exchange Interbank Clearing System shall engage an agent clearing bank to carry out payment and receipt of funds on its behalf; when it is the party liable for payment, the TDCC shall first notify the agent clearing bank to confirm the deduction of funds.
    The customer shall confirm the settlement with the investor custodian bank, and shall engage the investor custodian bank to send confirmation messages.
Article 5     For the purpose of handling payment and receipt of funds for foreign-currency-denominated bonds, a dealer, investor custodian bank, or agent clearing bank shall jointly open an interbank fund transfer guarantee exclusive account at a foreign currency clearing bank, and agree to engage the FISC as its agent to use that account.
Chapter 2 Business Hours
Article 6     The TDCC's business hours for receiving settlement notices from issuers, dealers, investor custodian banks, and foreign depository or clearing institutions, for receiving settlement confirmations from dealers, investor custodian banks, and foreign depository or clearing institutions, for receiving fund deduction confirmations from agent clearing banks, and for receiving fund remittance notices from issuers, are from 9 a.m. to 4:30 p.m. on business days.
Article 7     Each business day at 4:30 p.m. the TDCC shall cancel all uncompleted trades pending settlement and then settle accounts.
    After completing the operations of the preceding paragraph, the TDCC shall notify the dealers, investor custodian banks, and foreign depository or clearing institutions.
Chapter 3 Operations for Book-entry Delivery and Payment and Receipt of Funds for Dematerialized Bonds
Article 8     When an issuer engages the TDCC to handle on its behalf the payment and receipt of funds in connection with an offering and issuance of bonds, the following procedure shall be observed:
  1. Before the book-entry delivery date, the issuer shall execute a Bond Delivery Application (transaction code H011, option: New) to notify the TDCC to carry out detection operations.
  2. If the issuer wishes to modify the content of the bond holder lists for book-entry delivery, it shall execute a Bond Delivery Application (transaction code H011, option: Revision) before the book-entry delivery date to notify the TDCC of the modified data.
  3. On the designated book-entry delivery date, the issuer shall execute a Bond Delivery Application (transaction code H011, option: Bond Transfer Application) and a Bond Delivery Verification (transaction code H012, option: Bond Transfer Execution) to notify TDCC of the data of the bond holder list for book-entry delivery.
  4. On the book-entry delivery date, the TDCC, based on the information of the bond holder list transmitted from the issuer, shall send distribution messages to notify the dealer, investor custodian bank, or foreign depository or clearing institution to conduct confirmation.
  5. After receiving the confirmation message from the dealer, investor custodian bank, or foreign depository or clearing institution, the TDCC shall send a message to notify the Central Bank's Department of Banking or the FISC to transfer the funds receivable from the deposit account of the dealer, agent clearing bank, or investor custodian bank to the redemption management bank, unless the dealer, agent clearing bank, or investor custodian bank is the same bank as the redemption management bank.
  6. When the TDCC receives an "unconfirmed" message from the dealer, investor custodian bank, or foreign depository or clearing institution, it shall notify the issuer to determine the reason and address the problem.
  7. After the procedures for payment and receipt of funds have been completed, the issuer shall transfer the distribution quantity to the proprietary position of the proprietary account or customer account of the dealer, investor custodian bank, or foreign depository or clearing institution, and send a message notifying the dealer, investor custodian bank, or foreign depository or clearing institution.
  8. After the procedures under the preceding subparagraph have been completed, the issuer shall execute a Notice of Issuer DVP Fund Remittance (transaction code B45) to notify the TDCC, and the TDCC shall send a message notifying the redemption management bank to transfer the issuer's funds receivable to the receiving bank deposit account designated by the issuer.
  9. If the issuer has not executed the transaction under the preceding subparagraph, the TDCC shall wait until the full quantity of the book-entry delivery corresponding to the payment and receipt of funds is completed and then immediately notify the redemption management bank to transfer the issuer's funds receivable to the receiving bank deposit account designated by the issuer.
Article 9     When an issuer engages the TDCC to handle on its behalf the payment and receipt of funds in connection with an offering and issuance of bonds, the issuer may execute a Notice of Suspension of Clearing of Accounts of Funds/Securities DVP (transaction code 463) to unilaterally cancel the settlement before the dealer, investor custodian bank, customer, or foreign depository or clearing institution conducts settlement confirmation under subparagraph 4 of the preceding Article.
    Once the dealer, investor custodian bank, customer, or foreign depository or clearing institution has completed confirmation of settlement, the issuer may not carry out the cancellation procedure under the preceding paragraph.
Chapter 4 Operations for Over-the-Counter Negotiated Trades
Section 1 Dealer Operations
Article 10     When a dealer engages in an over-the-counter negotiated bond trade with a customer or an investor custodian bank, and the buying and selling parties engage the TDCC to handle the payment and receipt of funds, the following procedure shall be observed:
  1. The dealer shall send to the TDCC a settlement instruction for an outright transaction, a repo-style transaction, or the second leg of a repo-style transaction.
  2. When the TDCC receives a "settlement confirmed" message from the customer or the investor custodian bank, the TDCC shall immediately notify the Central Bank's Department of Banking or the FISC to handle the payment and receipt of funds between the deposit accounts of the dealer or agent clearing bank and the investor custodian bank, unless the dealer or agent clearing bank is the same bank as the investor custodian bank.
  3. After the procedure under the preceding subparagraph is completed, the TDCC shall immediately conduct book-entry operations for settlement of the outright trade, repo-style transaction, or second leg of a repo-style transaction and notify the dealer of settlement completion.
  4. If the dealer receives a "settlement unconfirmed" message forwarded by the TDCC from the customer or the investor custodian bank, the dealer shall immediately investigate and determine the reason and address the problem.
Article 11     When a dealer engages in an over-the-counter negotiated bond trade with another dealer, and the buying and selling parties engage the TDCC to handle the payment and receipt of funds, the following procedure shall be observed:
  1. Both the buying and selling dealers shall send to the TDCC a settlement instruction for an outright trade, repo-style transaction, or second leg of a repo-style transaction.
  2. After the TDCC receives the settlement instructions sent by the buying and selling dealers, it shall immediately match the instructions against each other.
  3. After the TDCC completes the matching procedure, except in the case of internal payment and receipt of funds by the agent clearing bank, it will immediately notify the Central Bank's Department of Banking or the FISC to handle the payment and receipt of funds between the deposit accounts of the buying and selling dealers or the dealers and the agent clearing banks.
  4. After the procedure under the preceding subparagraph is completed, the TDCC shall immediately conduct book-entry operations for the outright trade, repo-style transaction, or second leg of a repo-style transaction, and notify the buying and selling dealers of settlement completion.
  5. When a dealer receives a "matching failed" message from the TDCC, it shall immediately determine the reason and address the problem.
Article 12     When a dealer conducts a trade with a customer or investor custodian bank under Article 10, if BNS settlement is employed, the following procedure shall be observed:
  1. The dealer shall separately send the TDCC each instruction in the batch of settlement instructions. The aforementioned settlement instructions shall specify the BNS settlement code and the total number of transactions.
  2. When the TDCC receives a "settlement confirmed" message from the customer or the investor custodian bank, the TDCC shall immediately notify the Central Bank's Department of Banking or the FISC to conduct payment and receipt of net funds due between the deposit accounts of the dealer or the agent clearing bank and the investor custodian bank, unless the dealer or the agent clearing bank and the investor custodian bank are the same bank or the net amount of funds due is zero.
  3. After the procedure under the preceding subparagraph is completed, the TDCC shall immediately conduct the book-entry operations for BNS settlement and notify the dealer of settlement completion.
  4. If the dealer receives a "settlement unconfirmed" message forwarded by the TDCC from the customer or the investor custodian bank, the dealer shall immediately determine the reason and address the problem.
Article 13     When a dealer engages in a trade with another dealer under Article 11, if BNS settlement is employed, the following procedure shall be observed:
  1. Both the buying and selling dealers shall send to the TDCC instructions of the batch settlement. The aforementioned settlement instructions shall specify the BNS settlement code and the total number of transactions.
  2. After the TDCC receives the batches of settlement instructions sent by the buying and selling dealers, it shall immediately match each pair of settlement instructions.
  3. After the TDCC completes the matching procedure, it shall immediately notify the Central Bank's Department of Banking or the FISC to handle payment and receipt of net funds due between the deposit accounts of the buying and selling dealers or the dealers and the agent clearing banks, unless it is an internal payment and receipt of funds within the agent clearing bank or the net amount of funds due is zero.
  4. After the procedure under the preceding subparagraph is completed, the TDCC shall immediately conduct the book-entry operations for BNS settlement, and notify the buying and selling dealers of settlement completion.
  5. When a dealer receives a "matching failed" message from the TDCC, it shall immediately determine the reason and address the problem.
Article 14     When a dealer handles early termination of a repo-style transaction (termination of an in-progress repo-style transaction) between itself and a customer or an investor custodian bank under Article 10, the following procedure shall be observed:
  1. The dealer shall send a "terminating repo-style transaction in progress" instruction to the TDCC.
  2. When the TDCC receives a "procedure confirmed" message from the customer or the investor custodian bank, after completing the procedure for termination of the repo-style transaction in progress, it will notify the dealer that the procedure has been completed.
  3. If the dealer receives a "non-confirmation" message forwarded by the TDCC from a customer or the investor custodian bank, it shall determine the reason and address the problem.
  4. Follow-up performance and settlement after the termination of a repo-style transaction between the dealer and the customer shall be handled by the mutatis mutandis application of the provisions of Articles 10 and 12.
Article 15     When a dealer handles termination of a repo-style transaction in progress between itself and another dealer under Article 11, the following procedure shall be observed:
  1. The dealers shall each send a "terminating repo-style transaction in progress" instruction to the TDCC
  2. After the TDCC receives the instructions from both dealers, it will match the two parties' instructions.
  3. After the TDCC completes the procedure for termination of the repo-style transaction in progress, it will notify the two parties that the procedure has been completed.
  4. When a dealer receives a "matching failed" message from the TDCC, it shall determine the reason and address the problem.
  5. Follow-up performance and settlement after the termination of a repo-style transaction in progress between a dealer and another dealer shall be handled by the mutatis mutandis application of the provisions of Articles 11 and 13.
Article 16     When a dealer engages in an over-the-counter negotiated bond trade, and the TDCC is engaged to handle the payment and receipt of funds for both the buying and selling parties, if the settlement of the second leg of a repo-style transaction is invalidated, the TDCC shall proceed directly to initiate settlement of the second leg of the repo-style transaction. If it is still not possible to complete settlement, the TDCC shall do the following:
  1. When settlement cannot be completed because a party to the repo-style transaction is unable to pay the funds to settle the second leg of the transaction, the TDCC shall transfer the bonds for settlement of the second leg into the other party's proprietary position.
  2. When settlement cannot be completed because a party to the repo-style transaction is unable to deliver the bonds to settle the second leg of the transaction, the TDCC shall not make any book-entry transfer.
Article 17     When a dealer purchases bonds from a customer or investor custodian bank in an over-the-counter negotiated trade, and the parties engage the TDCC to handle the payment and receipt of funds, the procedures and methods for cancellation shall be as follows:
  1. Before the customer or investor custodian bank confirms settlement, the dealer may send a cancellation instruction to the TDCC, to unilaterally cancel settlement.
  2. When the customer or investor custodian bank has confirmed settlement, but has not yet completed the transfer of funds or securities, the dealer shall do as follows:
    1. The dealer shall send a cancellation instruction to the TDCC.
    2. After the TDCC has received a confirmation message from the customer or investor custodian bank and completed the settlement cancellation procedure, it will notify the dealer of completion of settlement cancellation.
    3. When the dealer receives a "non-confirmation" message forwarded by the TDCC from the customer or investor custodian bank, it shall determine the reason and address the problem.
Article 18     When a dealer sells bonds to a customer or investor custodian bank in an over-the-counter negotiated trade, and the parties engage the TDCC to handle the payment and receipt of funds, the dealer may send a cancellation instruction to the TDCC to unilaterally cancel settlement at any time before the customer or investor custodian bank has confirmed settlement.
    After the customer or investor custodian bank completes settlement confirmation, the dealer may not carry out the settlement cancellation of the preceding paragraph.
Article 19     The procedure for canceling a trade between a dealer and another dealer under Article 11 shall be handled as follows:
  1. Before the TDCC completes its matching of the instructions, the dealer may send a cancellation instruction to the TDCC to unilaterally cancel settlement.
  2. When the TDCC has completed its matching of instructions, but the transfer of funds and securities has not yet been completed, the dealer shall observe the following procedure:
    1. The two dealers shall each send cancellation instructions.
    2. After the TDCC receives the cancellation instructions from both parties, it will immediately match the parties' instructions against each other.
    3. After the TDCC completes its matching of the instructions, it will immediately cancel the settlement and notify both parties of completion of cancellation.
    4. When the dealer receives a "matching failed" message from the TDCC, it shall immediately determine the reason and address the problem.
Article 20     When a dealer handles cancellation of a BNS settlement procedure under Article 12, the following procedure shall be observed:
  1. If neither the customer nor the investor custodian bank has yet completed settlement confirmation, the dealer may send a cancellation instruction to the TDCC to unilaterally cancel BNS settlement.
  2. When the customer or the investor custodian bank has already confirmed settlement, but the transfer of funds and securities has not yet been completed, the dealer shall handle the matter in the following manner:
    1. The dealer shall send a cancellation instruction to the TDCC.
    2. After the TDCC has received a confirmation message from the customer or investor custodian bank, and completed the settlement cancellation procedure, it shall immediately notify the dealer of the completion of settlement cancellation.
    3. If the dealer receives a "non-confirmation" message forwarded by the TDCC from the customer or investor custodian bank, it shall immediately determine the reason and address the problem.
Article 21     When a dealer handles cancellation of a BNS settlement procedure under Article 13, the following procedure shall be observed:
  1. Before the TDCC has completed its matching of all the settlement instructions in the batch, the dealer may send cancellation instructions to the TDCC to cancel each of the settlements individually.
  2. When the TDCC has completed its matching of instructions but the transfer of funds and securities has not yet been completed, the dealer shall observe the following procedure:
    1. The two dealers shall each send cancellation instructions.
    2. After the TDCC receives the settlement instructions from the two parties, it shall immediately match the settlement instructions against each other.
    3. After the TDCC completes its matching of the instructions, it shall immediately cancel the settlement and notify both parties of completion of settlement cancellation.
    4. When the dealer receives a "matching failed" message from the TDCC, it shall immediately determine the reason and address the problem.
Article 22     To revoke a termination of repo-style transaction in progress under Article 14, the dealer may send a cancellation instruction to the TDCC to unilaterally cancel settlement at any time before the customer or investor custodian bank has confirmed settlement.
    After the customer or investor custodian bank completes settlement confirmation, the dealer may not carry out the settlement cancellation of the preceding paragraph.
Article 23     To revoke a termination of repo-style transaction in progress under Article 15, the dealer may, before the TDCC has completed its matching of the instructions, send a cancellation instruction to the TDCC to unilaterally cancel the settlement.
Section 2 Investor custodian bank Operations
Article 24     When an investor custodian bank handles an over-the-counter negotiated bond trade in which a customer purchases bonds from a dealer, and the TDCC is engaged to handle the payment and receipt of funds for both parties, the following procedure shall be observed:
  1. When the investor custodian bank receives a settlement confirmation notice from the TDCC for an outright trade or reverse repo transaction, it shall provide the content of the notice to the customer for settlement confirmation.
  2. When the customer completes settlement confirmation, the investor custodian bank, after deducting the amount of funds payable by the customer, shall return a "settlement confirmed" message. When the investor custodian bank handles settlement confirmations on behalf of the customer, the procedure is the same.
  3. When the investor custodian bank receives notice that the customer has a doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the TDCC shall in turn notify the dealer to handle the matter.
  4. When the investor custodian bank receives a settlement confirmation notice from the TDCC for the second leg of a customer's one-time or multi-step repo transaction, after proceeding forthwith to deduct the funds for settlement of the second leg from the customer's funds account, it shall return a "settlement confirmed" message.
  5. Unless the same bank serves as both the investor custodian bank and the dealer or agent clearing bank, when the TDCC receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to handle payment and receipt of funds between deposit accounts of the investor custodian bank and the dealer or agent clearing bank.
  6. After the procedure under the preceding subparagraph is completed, the TDCC shall immediately conduct the book-entry operations for the settlement of the outright trade, repo-style transaction, or second leg of a repo-style transaction, and notify the investor custodian bank of settlement completion.
  7. When the investor custodian bank receives a "settlement completed" message from the TDCC, it shall handle the book-entry operations as follows:
    1. In the case of an outright purchase, the bank shall transfer the purchased quantity into the proprietary position in the customer account.
    2. In the case of settlement of the second leg of a one-time repo transaction, the bank shall deduct the purchased quantity from the customer account's repo position and transfer it into the proprietary position.
    3. In the case of a reverse repo transaction, the bank shall transfer the purchased quantity into the reverse repo position in the customer account.
    4. In the case of settlement of the second leg of a multi-step repo transaction, the bank shall deduct the purchased quantity from the customer account's repo position and transfer it into the reverse repo position.
Article 25     When an investor custodian bank handles an over-the-counter negotiated trade in which a customer sells bonds to a dealer, and the TDCC is engaged to handle payment and receipt of funds for both parties, the following procedure shall be observed:
  1. When the investor custodian bank receives a settlement confirmation notice from the TDCC for an outright sale or a one-time or multi-step repo transaction, it shall provide the content of the notice to the customer for settlement confirmation.
  2. After the customer completes settlement confirmation, the investor custodian bank shall return a "settlement confirmed" message. When the investor custodian bank confirms settlement on behalf of the customer, the procedure is the same.
  3. When the investor custodian bank receives notice that the customer has a doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the TDCC shall in turn notify the dealer to handle the matter.
  4. Unless the same bank serves as both the investor custodian bank and the dealer or agent clearing bank, when the TDCC receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to handle payment and receipt of funds between deposit accounts at the investor custodian bank and the dealer or agent clearing bank
  5. After the procedure under the preceding subparagraph is completed, the TDCC shall immediately conduct the book-entry operations for the settlement of the outright trade, repo-style transaction, or second leg of a repo-style transaction, and notify the investor custodian bank of settlement completion.
  6. When the investor custodian bank receives a "settlement completed" message from the TDCC, it shall transfer the customer's funds receivable into the customer's funds account, and shall handle the book-entry operations as follows:
    1. In the case of an outright sale, the bank shall deduct the sold quantity from the proprietary position in the customer account.
    2. In the case of a one-time repo transaction, the bank shall deduct the sold quantity from the proprietary position in the customer account and transfer it into the repo position.
    3. In the case of a multi-step repo transaction, the bank shall deduct the sold quantity from the reverse repo position in the customer account and transfer it into the repo position.
    4. In the case of settlement of the second leg of a reverse repo transaction, the bank shall deduct the sold quantity from the reverse repo position in the customer account.
Article 26     Where an investor custodian bank uses its proprietary account to engage in an over-the-counter negotiated bond trade with a dealer, and the TDCC is engaged to handle the payment and receipt of funds for both parties, the following procedure shall be observed:
  1. When the investor custodian bank receives a settlement confirmation notice from the TDCC for an outright transaction, a repo-style transaction, or the second leg of a repo transaction, it shall handle settlement confirmation in accordance with the content of the notice.
  2. After the investor custodian bank completes settlement confirmation, it shall return a "settlement confirmed" message.
  3. If the investor custodian bank has any doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the TDCC shall in turn notify the dealer to handle the matter.
  4. Unless the same bank serves as both investor custodian bank and dealer or agent clearing bank, when the TDCC receives a "settlement confirmed" message it shall promptly notify either the Central Bank's Department of Banking or the FISC to handle payment and receipt of funds between deposit accounts at the investor custodian bank and the dealer or agent clearing bank
  5. After the procedure under the preceding subparagraph is completed, the TDCC shall immediately conduct the book-entry operations for the settlement of the outright trade, repo-style transaction, or second leg of a repo-style transaction, and notify the investor custodian bank of settlement completion.
Article 27     When an investor custodian bank handles the settlement of a transaction between a customer and a dealer under Article 24 or 25 by BNS settlement, the following procedure shall be observed:
  1. When the investor custodian bank receives a confirmation notice for BNS settlement (including settlement of the second leg of a repo transaction or reverse repo transaction), it shall provide the content of the notice to the customer for settlement confirmation.
  2. When the customer completes settlement confirmation, if the customer is the party liable for payment in the BNS process, the investor custodian bank, after deducting the funds payable by the customer, shall return a "settlement confirmed" message. When the investor custodian bank handles settlement confirmations on behalf of the customer, the procedure is the same.
  3. When the investor custodian bank receives notice that the customer has a doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the TDCC will in turn notify the dealer to handle the matter.
  4. Unless the same bank serves as both investor custodian bank and the dealer or agent clearing bank, or unless the net amount of funds due is zero, when the TDCC receives a "settlement confirmed" message it shall promptly notify either the Central Bank's Department of Banking or the FISC to handle payment and receipt of net funds due between deposit accounts at the investor custodian bank and the dealer or agent clearing bank.
  5. After the procedure under the preceding subparagraph is completed, the TDCC shall promptly conduct book-entry operations for the BNS settlement and notify the investor custodian bank of settlement completion.
  6. When the investor custodian bank receives a BNS "settlement completed" message from the TDCC, the provisions of Articles 24 and 25 will apply mutatis mutandis to the bank's handling of book-entry operations for each settlement.
Article 28     When an investor custodian bank handles the settlement of a transaction under Article 26, if BNS is employed, the following procedure shall be observed:
  1. When the investor custodian bank receives a BNS settlement confirmation notice, it shall handle settlement confirmation in accordance with the content of the notice.
  2. After the investor custodian bank completes settlement confirmation, it shall return a "settlement confirmed" message.
  3. When the investor custodian bank has any doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the TDCC shall in turn notify the dealer to handle the matter.
  4. Unless the same bank serves as both investor custodian bank and dealer or agent clearing bank, or unless the net amount of funds due is zero, when the TDCC receives a "settlement confirmed" message it shall promptly notify either the Central Bank's Department of Banking or the FISC to handle payment and receipt of net funds due between deposit accounts at the investor custodian bank and the dealer or agent clearing bank.
  5. After the procedure under the preceding subparagraph is completed, the TDCC shall promptly conduct book-entry operations for the BNS settlement and notify the investor custodian bank of settlement completion.
Article 29     When an investor custodian bank handles termination of a customer's repo-style transaction in progress under Article 24 or 25, the following procedure shall be observed:
  1. When the investor custodian bank receives a procedure confirmation notice from the TDCC, it shall provide the content of the notice to the customer for confirmation.
  2. After the customer completes confirmation, the investor custodian bank shall return a "procedure confirmed" message. When the investor custodian bank handles confirmations on behalf of the customer, the procedure is the same.
  3. When the investor custodian bank receives notice that the customer has a doubt about the content of the procedure confirmation notice, it shall return a "non-confirmation" message, and the TDCC shall in turn notify the dealer to handle the matter.
  4. When the investor custodian bank receives a "procedure completed" message from the TDCC, it shall record the termination information in the customer account.
  5. The provisions of Articles 24, 25, and 27 will apply mutatis mutandis to the follow-up performance and settlement of repo-style transactions in progress that are terminated by the customer.
Article 30     When an investor custodian bank terminates a repo-style transaction in progress that is conducted through its proprietary account under Article 26, the following procedure shall be observed:
  1. When the investor custodian bank receives a procedure confirmation notice from the TDCC, it shall handle confirmation in accordance with the content of the notice.
  2. After the investor custodian bank completes confirmation, it shall return a "procedure confirmed" message.
  3. If the investor custodian bank has any doubt about the content of the procedure confirmation notice, it shall return a "non-confirmation" message, and the TDCC will in turn notify the dealer to handle the matter.
  4. After the TDCC completes the procedure for termination of the repo-style transaction in progress, it will notify the investor custodian bank that the procedure has been completed.
  5. The provisions of Articles 26 and 28 will apply mutatis mutandis to the follow-up performance and settlement after the termination of a repo-style transaction in progress through an investor custodian bank's proprietary account.
Article 31     When a customer or investor custodian bank engages in an over-the-counter negotiated bond trade and the TDCC is engaged to handle the payment and receipt of funds for both the buying and selling parties, if the settlement of the second leg of a repo-style transaction is invalidated, the TDCC shall proceed directly to initiate settlement of the second leg of the repo-style transaction. When the investor custodian bank receives a message of the completion of settlement of the second leg of the repo-style transaction, the provisions of Article 24 and Article 25 shall apply mutatis mutandis to the book-entry operations for the customer's account.
    If it is still not possible to complete settlement, the TDCC shall handle the matter in accordance with the following procedure, and shall notify the investor custodian bank:
  1. When settlement cannot be completed because a party to the repo-style transaction is unable to pay the funds to settle the second leg of the transaction, the TDCC shall transfer the bonds for settlement of the second leg into the other party's proprietary position.
  2. If settlement cannot be completed because a party to the repo-style transaction is unable to deliver the bonds to settle the second leg of the transaction, the TDCC shall not make any book-entry transfer.
    After the investor custodian bank receives the TDCC's notice of the procedure under subparagraph 1 of the preceding paragraph, the investor custodian bank shall deduct the quantity of the bonds for settlement of the second leg from the repo position in the customer account, or deduct the quantity of the bonds for settlement of the second leg from the reverse repo position in the customer account and transfer the quantity into the proprietary position.
    After the investor custodian bank receives the TDCC's notice of the procedure under paragraph 2, subparagraph 2, it also does not need to make any book-entry transfer.
Article 32     When an investor custodian bank handles the settlement procedure under Article 24 or 25, or it handles the BNS settlement procedure under Article 27, if, before returning a "settlement confirmed" message to the customer, the bank receives the dealer's settlement cancellation notice forwarded by the TDCC, it shall cancel the settlement confirmation notice previously delivered by the TDCC.
    If the investor custodian bank, after returning the "settlement confirmed" message to the customer, receives the dealer's settlement cancellation notice forwarded by the TDCC, it shall handle the matter in accordance with the following procedure:
  1. The investor custodian bank shall provide the content of the notice to the customer for settlement cancellation confirmation.
  2. After the customer completes confirmation of settlement cancellation, the investor custodian bank shall return a "confirmation of settlement cancellation" message.
  3. When the investor custodian bank receives notice that the customer has a doubt about the content of the confirmation of settlement cancellation, it shall return a "non-confirmation of cancellation" message, and the TDCC will in turn notify the dealer to handle the matter.
  4. After the TDCC receives a "confirmation of settlement cancellation" message, it shall promptly cancel the settlement (or BNS settlement).
  5. After the investor custodian bank receives a "settlement cancellation" message from the TDCC, if the customer is the party liable for payment, the bank shall transfer the funds already paid by the customer back into the customer's funds account.
Article 33     When an investor custodian bank handles the settlement procedure under Article 26, or it handles the BNS settlement procedure under Article 28, if, before returning a "settlement confirmed" message, the bank receives the dealer's settlement cancellation notice forwarded by the TDCC, it shall cancel the settlement confirmation notice previously delivered by the TDCC.
    If the investor custodian bank, after returning the "settlement confirmed" message, receives the dealer's settlement cancellation notice forwarded by the TDCC, it shall handle the matter in accordance with the following procedure:
  1. The investor custodian bank shall confirm settlement cancellation in accordance with the content of the notice.
  2. After the investor custodian bank confirms settlement cancellation, it shall return a "confirmation of settlement cancellation" message.
  3. When the investor custodian bank has a doubt about the content of the confirmation of settlement cancellation, it shall return a "non-confirmation of cancellation" message, and the TDCC will in turn notify the dealer to handle the matter.
  4. After the TDCC receives a "confirmation of settlement cancellation" message, it will cancel the settlement (or BNS settlement) operations and notify the investor custodian bank to complete settlement cancellation.
Article 34     The provisions of the preceding two articles will apply mutatis mutandis to the procedures for termination by an investor custodian bank of a repo-style transaction in progress under Article 29 or 30.
Article 35     The provisions of Articles 10 to 30 and Articles 32 to 34 will apply mutatis mutandis to the operational procedures for a foreign depository or clearing institution engaging in bond trading through price negotiation.
Chapter 5 Operations for Principal and Interest Payments and Call of Bonds
Article 36     When an issuer designates the TDCC as the institution in charge of principal redemption and interest payment, and engages it to handle principal redemption and interest payment operations, the principal and interest payments operations will be as follows:
  1. On the last business day prior to the date of redemption and interest payments, the TDCC shall calculate the principal and interest due to bondholders based on the balances of bonds in the accounts of the bondholders, and compile a register of bondholders. Unless otherwise provided in the bond issuance rules, the amounts of principal and interest due, if in New Taiwan dollars, shall be calculated to the New Taiwan dollar, and if in a foreign currency, shall be calculated to the smallest unit in the foreign currency to be paid. If there is any remainder, the bondholders may be ranked in sequential order from largest to smallest based on the amount of their unpaid portion of less than 1 New Taiwan dollar or 1 smallest unit, and will receive 1 New Taiwan dollar or one smallest unit each in order of their ranking until all of the remainders has been distributed. If two or more bondholders are owed an equal portion, one of them will be randomly selected to receive distribution.
  2. On the date of redemption and interest payments, the TDCC shall notify the redemption management bank of the register of securities account bondholders, and deduct the quantities for which the principal has been redeemed from the balances in the securities accounts.
  3. An issuer shall deposit (remit) the principal and interest payable into the segregated account opened by the TDCC in a redemption management bank (the "redemption account"). The deadline for the deposit (remittance) shall be the date of redemption and interest payment if the payment is made in New Taiwan dollars, and one business day before the date of redemption and interest payment if the payment is made in a foreign currency.
  4. The redemption management bank shall notify the TDCC after it has paid the principal and interest in full. In addition, before transferring the funds, the redemption management bank shall directly deduct taxes, additional premiums for National Health Insurance ("additional insurance premiums") and remittance fees from the principal and interest payable according to the list of bondholders with securities accounts. It then shall carry out the fund transfer operations.
  5. When the TDCC receives the notice from the redemption management bank in the preceding subparagraph, in the case of a bondholder that is a bills and bonds custody account customer, unless the dealer or agent clearing bank or investor custodian bank is the same bank as the redemption management bank, the TDCC shall send a message notifying the Central Bank's Department of Banking or the FISC to transfer the amount of the principal and interest, after deduction of taxes and additional insurance premiums, from the redemption management bank into the deposit account of the dealer, agent clearing bank, or investor custodian bank, and shall deduct the quantity for which the principal has been redeemed from the bondholder's proprietary position, and notify the redemption management bank and the dealer, agent clearing bank, investor custodian bank, or foreign depository or clearing institution of the relevant information.
  6. If any bonds have been placed under attachment by an executing authority or under a preservation disposition by a competent authority, the TDCC shall deposit the amount of principal and interest therefor, after deduction of taxes and additional insurance premiums, in the court attachment account and the redemption account, respectively, opened by the TDCC in the redemption management bank, and compile a statement to notify each and all executing authorities and competent authorities of the information relating to any principal that has been redeemed for any bonds originally under attachment or preservation, and await notice from those authorities before taking further measures.
    After the completion of the operation under the preceding paragraph, the TDCC shall notify the issuer of information relating to the bondholders and the status of principal redemption and interest payment.
    When a tax-exempt agency or group applies for exemption from withholding of tax on bond interest income for the holding period, it shall submit its identity document, notice of tax-exempt agency or group's exemption from tax on bond interest income, and an itemized list of bond trades of the tax-exempt agency or group, before the end of the business day before the interest payment date. After the TDCC has confirmed the accuracy of the information, the TDCC shall pay the bond interest without withholding taxes.
Article 37     When an issuer engages the TDCC to handle principal redemption and interest payment operations, in the event of principal and interest payment failure, the TDCC shall conduct the procedures for re-remittance as follows:
  1. Principal and interest in New Taiwan dollars.
    1. After a dealer or participant has queried the reason for the failure of remittance by executing a Principal Redemption and Interest Payment Result Query (transaction code B48), a dealer shall apply for re-remittance on its own, while a participant shall notify its customer to apply for re-remittance.
    2. A dealer or participant shall execute a Notice of Information about Customer's Bank Account (transaction code B49) to notify the TDCC of the correct information for the receiving account, and the redemption management bank shall transfer the funds once again.
  2. Principal and interest in a foreign currency.
    1. After a dealer, a foreign depository or clearing institution, or a participant has queried the reason for the failure of remittance by executing a Foreign Currency Denominated Bond Principal and Interest Payment Remittance Failure Query (transaction code A93), a dealer or foreign depository, book-entry, or clearing institution shall apply for re-remittance on its own, while a participant shall notify its customers to apply for re-remittance.
    2. When carrying out re-remittance under the preceding item, it is necessary to submit a photocopy of the foreign currency deposit account passbook and fill out an Application for Re-Remittance of Foreign Currency Denominated Bond Principal and Interest Payment. The dealer, or the foreign depository or clearing institution, or the participant's employee in charge shall execute an Application for Re-Remittance of Foreign Currency Denominated Bond Principal and Interest Payment (transaction code A94), and input the participant number, account serial number, bond identification code, principal and interest payment date, and system reference number to notify the TDCC, and print the information in the certification column of the Application and submit it to his/her supervisor for approval.
    3. The dealer, foreign depository or clearing institution, or the participant's supervisory personnel shall execute a Foreign Currency Denominated Bond Principal and Interest Payment Re-Remittance Release Operation (transaction code A95), and input the participant number, account serial number, and re-remittance serial number to notify the TDCC to carry out the re-remittance.
Article 38     After completion of the operation under Article 36, the redemption management bank shall remit the taxes and additional insurance premiums deducted to the National Tax Administration and Bureau of National Health Insurance by the 10th day of the following month and the end of the following month respectively.
Article 39     When the TDCC is designated by the issuer to conduct principal redemption and interest payment, the TDCC shall prepare tax withholding statements according to the bondholder list, and send the tax withholding statements to the bondholders within the time provided by regulations.
Article 40     When an issuer exercises its call right to call its bonds, and engages the TDCC to handle the payment of funds, the TDCC shall handle the operation on the designated payment date in accordance with the provisions of Article 36.
Article 41     When an issuer has designated the TDCC as the institution for principal redemption and interest payment, and payment of the funds is not received on the principal redemption and interest payment date for bonds issued by the issuer, the TDCC shall debit the quantity for which principal has not been received from the balance of the depository account of the bondholder, and notify the dealer, investor custodian bank, or foreign depository or clearing institution.
    When a bondholder under the preceding paragraph is a bills and bonds custody account customer, the investor custodian bank shall debit the quantity for which principal has not been received from the customer's proprietary position, transfer that quantity into the customer's restricted position, and print the information relating to the non-payment and give it to the customer, and then conduct removing of the balance and notify the TDCC.
    When a bondholder under paragraph 1 is a securities account customer, the participant with which the customer deals shall execute a Principal Redemption and Interest Payment Result Query (transaction code B48), and shall print the Information on the Principal Redemption and Interest Payment Result Information Query Form, double-check it, and notify the customer.
Article 42     To withdraw funds from its redemption account, an issuer shall submit an Issuer's Application for Withdrawal of Funds from Redemption Account and photocopies of documentation of related deposits or remittances of funds or other documentation to the TDCC.
Chapter 6 Bond Settlement Reconciliation Operations
Article 43     The TDCC shall produce reconciliation statements for a dealer, investor custodian bank, or foreign depository or clearing institution and the redemption management bank to conduct reconciliation.
    When a dealer, investor custodian bank, foreign depository or clearing institution, or the redemption management bank has any doubts about the reconciliation statement information of the preceding paragraph, it shall notify the TDCC and investigate the reason jointly with the TDCC, after which a correction will be made.
Article 44     When performing daily account settlements, the TDCC shall provide data on the current day's account transfers of funds at the Central Bank's Department of Banking and data on handling of fund payment and receipt at the FISC to dealers, investor custodian banks, agent clearing banks, and redemption management banks for purposes of verification of deposit accounts at the Central Bank's Department of Banking and foreign currency clearing banks.
    When a dealer, investor custodian bank, agent clearing bank, or redemption management bank has any question regarding the account transfer data of the preceding paragraph, it shall notify the TDCC to contact the Central Bank's Department of Banking or the FISC to investigate the reason, and take necessary measures.
Chapter 7 Extensions of Business Hours and Unscheduled Business Closures
Section 1 Operations for Extension of Business Hours
Article 45     When the TDCC receives an application from a dealer, investor custodian bank, agent clearing bank, or foreign depository or clearing institution to extend the business hours of the Bills Clearing and Settlement System ("extension of business hours"), the TDCC shall process the application after examination. However, if New Taiwan Dollar fund settlement is involved, and the business hours of the Central Bank Interbank Funds Transfers and Settlements System need to be extended accordingly, after the applying entity applies to the TDCC under the provisions of Article 46, the TDCC shall follow the provisions in the Application Procedure for Extension of Business Hours of Central Bank Interbank Funds Transfers and Settlements System for Connecting Institution, and apply for approval by the Central Bank's Department of Banking. If payment or receipt of funds in a foreign currency is involved and the business hours of the FISC Foreign Exchange Interbank Clearing System need to be extended accordingly, the TDCC shall notify the FISC to conduct the extension.
    After the completion of the operations for extension of business hours, the TDCC shall publicly announce via its computer system the extended business hours on the current day, and notify all participants as quickly as possible.
Article 46     When the TDCC monitors and discovers any irregularity in any of the operations of a dealer, investor custodian bank, agent clearing bank, or foreign depository or clearing institution in connection with the Bills Clearing and Settlement System, it shall take necessary measures in a timely manner. To apply for extension of business hours, it shall first notify the TDCC by 4:10 p.m. on the application day, and on the same day, after the TDCC's approval, complete an Application Form for Extension of the Business Hours of the Bills Clearing and Settlement System, and have it signed by the applying entity's person with responsibility for the business and the person's supervisory personnel. In the event of system malfunction, the form shall be further signed by the head of the information department, stamped with the company's authorized seal filed with the TDCC, and sent via fax to the TDCC. If notice is given later than the specified time, or the application does not comply with the requirements of the preceding Article regarding applications, the TDCC will not process the application.
Article 47     After the TDCC has received approval by the Central Bank's Department of Banking to extend business hours, the dealer, investor custodian bank, or agent clearing bank shall send the TDCC a detailed written statement of the reasons for the application, the status of handling of the matter, and specific future improvement measures in an official letter, and shall copy the Central Bank.
Article 48     When a dealer, investor custodian bank, agent clearing bank, or foreign depository or clearing institution applies for an extension of business hours because of a system malfunction, if it is unable to recover normal function in time, it shall send a representative to activate the disconnection backup mechanism and arrive at the TDCC no later than 4 p.m. on the current day.
Article 49     The TDCC must keep detailed records of the circumstances of all extensions of business hours and the times of settlement of accounts, and compile records of extensions of business hours with respect to the Central Bank Interbank Funds Transfers and Settlements System and submit them in reports, which shall specify the entities that applied for extensions of business hours in the preceding month, the reasons for the applications, the number of times business hours were extended, and the results of improvement measures, to the Competent Authority and the Central Bank by the 10th day of each calendar month.
Article 50     The TDCC shall send an official letter to notify dealers, investor custodian banks, or agent clearing banks that apply for an extension of business hours more than three times per quarter, or that have a system malfunction and fail to activate the disconnection backup mechanism in time, to propose improvement measures, and shall track the progression of improvement results, and shall report in an official letter to the Competent Authority and the Central Bank of the Republic of China (Taiwan).
Article 50-1     When a material contingency or a natural disaster or other force majeure event occurs to the financial market, the TDCC may publicly announce an extension of business hours via its computer system, as dictated by the circumstances and with the approval of the Central Bank or the FISC.
Section 2 Handling of Unscheduled Business Closures
Article 51     In the event of a natural disaster, an election of public officials, or other force majeure event, the TDCC shall follow the Taipei City government's announcement about whether business will be closed, and the TDCC shall handle any such closure as follows:
  1. In the event of an all-day closure of business, the TDCC shall suspend operations for settlement of funds and securities.
  2. In the event of normal business operation in the morning and closure of business in the afternoon, the TDCC shall still complete the current day's operations for settlement of funds and securities.
  3. In the event of closure of business in the morning and normal business operation in the afternoon, the TDCC shall carry out operations for settlement of funds and securities from 1:30 p.m. on the current day.
Article 52     In the event of an all-day closure of business, the settlement operations for dealers, investor custodian banks, and foreign depository or clearing institutions will all be suspended, and will be postponed to the next business day.
Article 53     In the event of a natural disaster, an election of public officials, or other force majeure event in an area outside of Taipei City, resulting in all-day closure of business of the local government and educational institutions, all operations will proceed as usual, except in cases in which the handling branch of a dealer or an investor custodian bank is located in a city or county in which business is closed, in which case the operations for the settlement of the second legs of repo-style transactions handled thereby will be postponed to the next business day.
Article 54     In the event of postponement of the operations for settlement of the second leg of a repo transaction because of a natural disaster or unscheduled business closure day, the TDCC shall calculate daily interest based on the formerly agreed interest rate and the number of days of postponement.
Chapter 8 Supplementary Provisions
Article 55     When a dealer conducts BNS settlement under Article 12, 13, 27, or 28 with another dealer, a customer, or an investor custodian bank, the deliverables for settlement may include bonds and short-term bills.
Article 56     When a dealer or investor custodian bank violates these Directions, consequently hindering the normal functioning of the Central Bank's electronic payment system or the TDCC's operations for the payment and receipt of funds and securities for fixed-income securities from functioning normally, the TDCC may take necessary measures as merited by the circumstances of the violation.
Article 57     The TDCC shall provide comprehensive market information and statistics based on the demands, effective periods, and required format prescribed by the Central Bank and the Competent Authority.
Article 58     Any matter not set forth herein shall be governed by the TDCC Operating Rules and other applicable regulations.
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