III. Book-Entry Transfers For Short-Term Bills Settlement
Article 14 |
The hours for inputting instructions related to business that an investor custodian bank conducts for its own account or on behalf of investors, and the hours for carrying out settlement confirmations for its own account or on behalf of investors, shall be from 9 a.m. to 4:30 p.m. on each business day.
TDCC may, as necessary for business purposes, extend the time periods set out in the preceding paragraph, and investor custodian banks shall make accommodations in accordance with TDCC notification.
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Article 15 |
An investor custodian bank shall provide investors with methods for making confirmations of settlements and of cancellations of settlements, such as handling confirmations at a service counter, via telephone voice menu system, online, or other methods.
An investor may, with the consent of the investor custodian bank, sign a Power of Attorney for Short-term Bill Settlements to authorize the investor custodian bank to make settlement confirmations on its behalf.
The specifications of the form used by an investor to confirm settlements or cancellations of settlements at a service counter shall accord with the Directions for Handling by Investors of Settlement Confirmations at a Service Counter.
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Article 16 |
When payment and receipt of settlement funds is not completed prior to the close of a business day, with the result that an investor custodian bank receives a "settlement incomplete" message from the BCSS, that settlement shall be invalid. If the investor is the party liable for payment, the investor custodian bank shall transfer the funds already paid by the investor back into the investor's funds settlement account.
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Article 17 |
When an investor custodian bank conducts an investor's purchase of short-term bills underwritten by a bills dealer on a best efforts basis, the settlement method shall be as follows:
- When the investor custodian bank receives a notice of the best-efforts underwritten sale from the BCSS, it shall provide the content of the notice to the investor for confirmation.
- When the investor custodian bank receives notice that the investor has a doubt about the content of the notice of the best-efforts underwritten sale, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- When the investor confirms settlement, the investor custodian bank, after deducting the funds payable by the investor, shall return a "settlement confirmed" message. When the investor custodian bank confirms settlement on behalf of the investor, the procedure is the same.
- Unless the same bank serves as both physical securities deposit bank and investor custodian bank, when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of funds between deposit accounts at the physical securities deposit bank and the investor custodian bank.
- When the investor custodian bank receives a "settlement completed" message from the BCSS, it shall transfer the purchased quantity into the proprietary position in the investor account.
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Article 18 |
When an investor custodian bank uses its proprietary depository account to purchase short-term bills underwritten by a bills dealer on a best efforts basis, the settlement method shall be as follows:
- When the investor custodian bank receives a notice of the best-efforts underwritten sale from the BCSS, it shall confirm the settlement instructions in accordance with the content of the notice.
- If the investor custodian bank has any doubt about the content of the notice of the best-efforts underwritten sale, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- After the investor custodian bank confirms settlement, it shall return a "settlement confirmed" message.
- Unless the same bank serves as both physical securities deposit bank and investor custodian bank, when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of funds between deposit accounts at the physical securities deposit bank and the investor custodian bank.
- After the BCSS completes the book-entry operation for a best-efforts underwritten sale, it will notify the investor custodian bank of settlement completion.
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Article 19 |
When an investor custodian bank conducts an investor's purchase of short-term bills from a bills dealer, the settlement method shall be as follows:
- When the investor custodian bank receives a settlement confirmation notice from the BCSS for an outright purchase or a reverse repo transaction, it shall provide the content of the notice to the investor for confirmation.
- When the investor custodian bank receives notice that the investor has a doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- When the investor confirms settlement, the investor custodian bank, after deducting the amount payable by the investor, shall return a "settlement confirmed" message. When the investor custodian bank confirms settlement on behalf of the investor, the procedure is the same.
- When the investor custodian bank receives a settlement confirmation notice from the BCSS regarding settlement by the investor of the second leg of a one-time repo transaction or a multi-step repo transaction, after proceeding forthwith to deduct the funds for the settlement of the second leg from the investor's funds settlement account, it shall return a "settlement confirmed" message.
- Unless the same bank serves as both investor custodian bank and bills dealer (or agent clearing bank), when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of funds between deposit accounts at the investor custodian bank and the bills dealer (or the agent clearing bank).
- When the investor custodian bank receives a "settlement completed" message from the BCSS, it shall conduct the book-entry procedure in accordance with the following procedure:
- In the case of an outright purchase, the bank shall transfer the purchased quantity into the proprietary position in the investor account.
- In the case of settlement of the second leg of a one-time repo transaction, the bank shall deduct the purchased quantity from the repo position of investor's account and transfer it into the proprietary position.
- In the case of a reverse repo transaction, the bank shall transfer the purchased quantity into the reverse repo position in the investor account.
- In the case of settlement of the second leg of a multi-step repo transaction, the bank shall deduct the purchased quantity from the investor account repo position and transfer it into the reverse repo position.
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Article 20 |
When an investor custodian bank conducts an investor's sale of short-term bills to a bills dealer, the settlement method shall be as follows:
- When the investor custodian bank receives a settlement confirmation notice from the BCSS for an outright sale, a one-time repo transaction, or a multi-step repo transaction, it shall provide the content of the notice to the investor for confirmation.
- When the investor custodian bank receives notice that the investor has a doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- After the investor confirms settlement, the investor custodian bank shall return a "settlement confirmed" message. When the investor custodian bank confirms settlement on behalf of the investor, the procedure is the same.
- Unless the same bank serves as both investor custodian bank and bills dealer (or agent clearing bank), when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of funds between deposit accounts at the investor custodian bank and the bills dealer (or the agent clearing bank).
- When the investor custodian bank receives a "settlement completed" message from the BCSS, it shall transfer the investor's transaction proceeds into the investor's funds settlement account, and shall conduct the book-entry procedure in accordance with the following procedure:
- In the case of an outright sale, the bank shall deduct the sold quantity from the proprietary position in the investor account.
- In the case of a one-time repo transaction, the bank shall deduct the sold quantity from the proprietary position in the investor account and transfer it into the repo position.
- In the case of a multi-step repo transaction, the bank shall deduct the sold quantity from the reverse repo position in the investor account and transfer it into the repo position.
- 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 investor account.
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Article 21 |
When an investor custodian bank conducts the settlement of a short-term bills trade between investors, the following procedure shall be observed:
- When the investor custodian bank receives a settlement confirmation notice from the BCSS for a brokered transaction it shall provide the content of the notice to the investor for confirmation.
- When the investor custodian bank receives notice that the investor has a doubt about the content of the settlement confirmation notice, the bank shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- When the purchasing investor confirms settlement, its investor custodian bank, after deducting the amount payable by the investor, shall return a "settlement confirmed" message. When the investor custodian bank conducts settlement confirmations on behalf of the purchasing investor, the procedure is the same.
- Unless the same bank serves as the investor custodian bank for both the purchasing and selling investors, when the BCSS receives a "settlement confirmed" message, it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of funds between the investor custodian bank deposit accounts of the purchasing and selling investors.
- When the investor custodian banks of the purchasing and selling investors receive "settlement completed" messages from the BCSS, the following procedure shall be observed:
- The selling investor's custodian bank shall transfer the investor's transaction proceeds into the investor's funds settlement account, and shall deduct the sold quantity from the proprietary position in the investor account.
- The purchasing investor's custodian bank shall transfer the purchased quantity into the proprietary position in the investor account.
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Article 22 |
When an investor custodian bank uses its proprietary depository account to purchase/sell short-term bills from/to a bills dealer, the settlement method shall be as follows:
- When the investor custodian bank receives a settlement confirmation notice from the BCSS for settlement of an outright transaction, a repo-style transaction, or the second leg of a repo transaction, it shall confirm settlement in accordance with the content of the notice.
- 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 BCSS will in turn notify the bills dealer to conduct the matter.
- After the investor custodian bank confirms settlement, it shall send a "settlement confirmed" message.
- Unless the same bank serves as both investor custodian bank and bills dealer (or agent clearing bank), when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or a foreign currency clearing bank to conduct payment and receipt of funds between deposit accounts at the investor custodian bank and the bills dealer (or the agent clearing bank).
- After the BCSS completes the book-entry operation for an outright transaction, a repo-style transaction, or the second leg of a repo-style transaction, it will notify the investor custodian bank of settlement completion.
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Article 23 |
When an investor custodian bank conducts the settlement of a transaction between an investor and a bills dealer under Article 19 or 20, or it conducts settlement when that investor engages a bills dealer to conduct firm commitment underwriting or initial purchase of short-term bills issued or held by the investor, if batch net settlement (BNS) is employed, the following procedure shall be observed:
- When the investor custodian bank receives a BNS confirmation notice (including the settlement of the second leg of a repo or reverse repo transaction), it shall provide the content of the notice to the investor for confirmation.
- When the investor custodian bank receives notice that the investor has a doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- When the investor confirms settlement, if the investor is the party liable for payment in the BNS process, the investor custodian bank, after deducting the amount payable by the investor, shall return a "settlement confirmed" message. When the investor custodian bank conducts settlement confirmations on behalf of the investor, the procedure is the same.
- Unless the same bank serves as both investor custodian bank and bills dealer (or agent clearing bank), or unless the net amount of funds due is zero, when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of net funds due between deposit accounts of the investor custodian bank and the bills dealer (or the agent clearing bank).
- When the investor custodian bank receives a BNS "settlement completed" message from the BCSS, the provisions of Articles 19 and 20 will apply mutatis mutandis to the bank's handling of book-entry operations for each settlement.
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Article 24 |
When an investor custodian bank conducts the settlement of a transaction under Article 22, if BNS is employed, the following procedure shall be observed:
- When the investor custodian bank receives a BNS settlement confirmation notice, it shall confirm settlement in accordance with the content of the notice.
- 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 BCSS will in turn notify the bills dealer to handle the matter.
- After the investor custodian bank confirms settlement, it shall return a "settlement confirmed" message.
- Unless the same bank serves as both investor custodian bank and bills dealer (or agent clearing bank), or unless the net amount of funds due is zero, when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of net funds due between deposit accounts at the investor custodian bank and the bills dealer (or the agent clearing bank).
- After the BCSS completes the book-entry operations for BNS settlement, it will promptly notify the investor custodian bank of settlement completion.
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Article 25 |
When an investor custodian bank conducts an investor's early termination of a repo-style transaction, the following procedure shall be observed:
- When the investor custodian bank receives a procedure confirmation notice from the BCSS, it shall provide the content of the notice to the investor so the investor can conduct confirmation.
- When the investor custodian bank receives notice that the investor has a doubt about the content of the procedure confirmation notice, it shall return an "unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- After the investor completes confirmation, the investor custodian bank shall return a "procedure confirmed" message. When the investor custodian bank conducts confirmations on behalf of the investor, the procedure is the same.
- When the investor custodian bank receives a "procedure completed" message from the BCSS, it shall record the terminated quantity in the investor account.
- The provisions of Articles 19, 20, and 23 will apply mutatis mutandis to the follow-up performance and settlement of repo-style transactions that are terminated early by the investor.
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Article 26 |
When a repo-style transaction involving short-term bills in an investor custodian bank's proprietary depository account is terminated early, the following procedure shall be observed:
- When the investor custodian bank receives a procedure confirmation notice from the BCSS, it shall conduct confirmation in accordance with the content of the notice.
- If the investor custodian bank has any doubt about the content of the procedure confirmation notice, it shall return an "unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- After the investor custodian bank completes confirmation, it shall return a "procedure confirmed" message.
- After the BCSS completes the procedure for early termination of the repo-style transaction, it will notify the investor custodian bank that the procedure has been completed.
- The provisions of Articles 22 and 24 will apply mutatis mutandis to the follow-up performance and settlement after the early termination of a repo-style transaction involving short-term bills in an investor custodian bank's proprietary depository account.
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Article 27 |
If, during the settlement of the second leg of a repo-style transaction of an investor or an investor custodian bank, the settlement is invalidated, the BCSS will proceed directly to initiate settlement of the second leg of the repo-style transaction. If it is still not possible to complete settlement, the BCSS will handle the matter in accordance with the following procedure, and will conduct follow-up book adjustment operations:
- If settlement cannot be completed because the seller is unable to pay the funds to settle the second leg of the transaction, the BCSS will transfer the short-term bills for settlement of the second leg into the buyer's proprietary position.
- If settlement cannot be completed because the buyer is unable to deliver the short-term bills to settle the second leg of the transaction, the BCSS will not make any book-entry transfer.
When the investor custodian bank receives a "settlement completed" message regarding the second leg of a repo-style transaction under the preceding paragraph, the provisions of Articles 19 and 20 will apply mutatis mutandis to book-entry operations for the investor account. If it is not possible to complete settlement, the book-entry operations shall be conducted in accordance with the following procedure:
- When the investor is the buyer under subparagraph 1 in the preceding paragraph, the quantity of short-term bills for settlement of the second leg shall be deducted from the reverse repo position in the investor account and transferred into the buyer's proprietary position; when the investor is the seller, the quantity of short-term bills for settlement of the second leg shall be deducted from the repo position in the investor account.
- When the investor is the buyer or the seller under subparagraph 2 of the preceding paragraph, no book-entry transfer will be made.
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Article 28 |
When an investor custodian bank handles interbank account transfers of an investor's short-term bills, the following procedure shall be observed:
- The investor custodian bank making an outward transfer (the outward-transfer bank) shall send a settlement instruction to the BCSS in accordance with the Application for Short-Term Bills Transfer filled out by the investor.
- When the investor custodian bank receiving an inward transfer (the inward-transfer bank) receives a notice from the BCSS, after checking to confirm that the inward-transfer account is in fact the investor's account, it shall return a "settlement confirmed" message.
- If the inward-transfer bank has any doubt about the content of the settlement confirmation notice, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the outward-transfer bank to handle the matter.
- After the outward-transfer bank and the inward-transfer bank receive a "settlement completed" message from the BCSS, they shall conduct book-entry in accordance with the following manner:
- The outward-transfer bank shall deduct the outward transfer amount from the proprietary position in the investor account.
- The inward-transfer bank shall transfer the inward transfer amount into the proprietary position in the investor account.
The handling by an investor of an interbank account transfer of short-term bills under the preceding paragraph shall be limited to transfers between proprietary positions in the investor's own depository accounts.
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Article 29 |
When an investor custodian bank conducts account transfers of an investor's short-term bills between affiliated banks, the following procedure shall be observed:
- The investor custodian bank shall send a settlement instruction to the BCSS in accordance with the Application for Short-Term Bills Account Transfer filled out by the investor.
- After the investor custodian bank receives a "settlement completed" message from the BCSS, it shall deduct the outward transfer amount from the proprietary position in the investor account outward-transfer account and transfer it into the proprietary position in the inward-transfer account.
The handling by an investor of an account transfer of short-term bills between affiliated banks under the preceding paragraph shall be limited to transfers between proprietary positions in the investor's own depository accounts.
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Article 30 |
When an investor custodian bank sets or lifts settlement restrictions on an investor's short-term bills, the following procedure shall be observed:
- The investor custodian bank shall send a settlement instruction to the BCSS in accordance with the Application to Set/Lift Settlement Restrictions on Short-Term Bills filled out by the investor.
- After the investor custodian bank receives a "setting/lifting of settlement restrictions completed" message from the BCSS, it shall conduct book-entry in accordance with the following procedure:
- When setting settlement restrictions, the investor custodian bank shall deduct the restricted quantity from the proprietary position in the investor account and transfer it into the restricted (settlement restricted) position.
- When lifting settlement restrictions, the investor custodian bank shall deduct the quantity in the investor account's restricted (settlement restricted) position from which the restriction has been lifted, and shall transfer it into the proprietary position.
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Article 31 |
An investor custodian bank may act at its own discretion to send a settlement instruction to the BCSS to conduct the setting and lifting of settlement restrictions on its proprietary holdings of short-term bills.
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Article 32 |
When an investor custodian bank has been notified by an enforcing authority or competent authority to set or lift a prohibition on settlement of an investor's short-term bills, the bank shall refer the matter to TDCC for handling. After the investor custodian bank receives notice that TDCC has completed the aforementioned handling procedure, the bank shall conduct book-entry in accordance with the following procedure:
- When setting a settlement prohibition: The quantity subject to the settlement prohibition shall be deducted from the proprietary position in the investor account and transferred into the restricted (settlement restricted) position.
- When lifting a settlement prohibition: The quantity from which the prohibition has been lifted shall be deducted from the investor's restricted (settlement prohibited) position in the investor account and transferred into the proprietary position.
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Article 33 |
When an investor custodian bank conducts the creation of a pledge on an investor's short-term bills in favor of another investor, the following procedure shall be observed:
- The pledgor's investor custodian bank (hereinafter, the pledgor bank) shall send a settlement instruction to the BCSS in accordance with the Application to Create Pledge Between Investor and Investor (Investor Custodian Bank) on Short-Term Bills filled out by the pledgor.
- After the pledgor bank and the pledgee's investor custodian bank (hereinafter, the pledgee bank) receive a "settlement completed" message from the BCSS, they shall conduct the book-entry procedure in accordance with the following procedure:
- The pledgor bank shall deduct the pledged quantity from the proprietary position in the pledgor account, and shall record the pledged quantity in the pledgor position.
- The pledgee bank shall transfer the pledged quantity into the pledgee position in the pledgee account.
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Article 34 |
When an investor custodian bank conducts the creation of a pledge on an investor's short-term bills in favor of an investor custodian bank, the following procedure shall be observed:
- The investor custodian bank shall send a settlement instruction to the BCSS in accordance with the Application to Create Pledge Between Investor and Investor (Investor Custodian Bank) on Short-Term Bills filled out by the investor.
- After the investor custodian bank receives a "settlement completed" message from the BCSS, it shall deduct the pledged quantity from the proprietary position in the investor account and record the pledged quantity in the pledgor position.
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Article 35 |
When an investor custodian bank conducts the creation of a pledge on an investor's short-term bills in favor of a bills dealer, the following procedure shall be observed:
- The investor custodian bank shall cross-check the notice of pledge sent by the BCSS against the Application to Create Pledge Between Investor and Bills Dealer on Short-Term Bills filled out by the investor.
- If the investor custodian bank has any doubt about the content of the notice of pledge, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter. If the cross-check confirms the accuracy of the information, the bank shall return a "settlement confirmed" message.
- After the investor custodian bank receives a "settlement completed" message from the BCSS, it shall deduct the pledged quantity from the proprietary position in the investor account, or from the reverse repo position of the one-time repo transaction, and shall note the pledged quantity in the pledgor position.
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Article 36 |
When an investor custodian bank conducts an investor's purchase of short-term bills from a bills dealer and creation of a pledge in favor of the bills dealer, the following procedure shall be observed:
- The investor custodian bank shall cross-check the "notice of an investor's purchase and creation of a pledge on short-term bills" sent by the BCSS against the Application to Create Pledge Between Investor and Bills Dealer on Short-Term Bills filled out by the investor.
- If the investor custodian bank has any doubt about the content of the "notice of an investor's purchase and creation of a pledge on short-term bills," it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter. If the cross-check confirms the accuracy of the information, the bank, after deducting the amount payable by the investor, shall return a "settlement confirmed" message.
- Unless the same bank serves as both investor custodian bank and bills dealer (or agent clearing bank), when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of funds between deposit accounts at the investor custodian bank and the bills dealer (or the agent clearing bank).
- After the investor custodian bank receives a "settlement completed" message from the BCSS, it shall conduct the book-entry procedure in the investor account as follows:
- Outright purchase: The bank shall transfer the purchased quantity into the proprietary position.
- Creation of pledge: The bank shall deduct the pledged quantity from the proprietary position in the pledgor account, and record the pledged quantity in the pledgor position.
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Article 37 |
When an investor custodian bank conducts the cancellation of a pledge created on short-term bills by an investor in favor of another investor, the following procedure shall be observed:
- The pledgee bank shall send a settlement instruction to the BCSS in accordance with the Application to Cancel Pledge Between Investor and Investor (Investor Custodian Bank) on Short-Term Bills filled out by the pledgee.
- After the pledgor bank and the pledgee bank receive a "settlement completed" message from the BCSS, they shall conduct the book-entry procedure in accordance with the following procedure:
- The pledgor bank shall record the pledge cancellation quantity in the pledgor position of the pledgor account, and shall transfer it into the proprietary position.
- The pledgee bank shall deduct the pledge cancellation quantity from the pledgee position of the pledgee account.
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Article 38 |
When an investor custodian bank conducts the cancellation of a pledge created on short-term bills by an investor in favor of a custodian bank, the following procedure shall be observed:
- The pledgee investor custodian bank shall fill out an Application to Cancel Pledge Between Investor and Investor (Investor Custodian Bank) on Short-Term Bills and then send a settlement instruction to the BCSS.
- After the pledgor bank receives a "settlement completed" message from the BCSS, it shall record the pledge cancellation quantity in the pledgor position in the investor account, and shall transfer it into the proprietary position.
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Article 39 |
When an investor custodian bank conducts the cancellation of a pledge created on short-term bills by an investor in favor of a bills dealer, after receiving a "settlement completed" message from the BCSS it shall record the pledge cancellation quantity in the pledgor position in the investor account and transfer it into the proprietary position or the reverse repo position.
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Article 40 |
When a pledge is exercised by a court, the investor custodian bank shall conduct book-entry transfers in accordance with TDCC's notification.
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Article 41 |
When a pledge is created on short-term bills in an investor's proprietary position and title to the bills is obtained through exercise of the pledge, the investor custodian bank shall observe the following procedure:
- The pledgee shall fill out and submit a contract under which the pledgor agrees that the pledgee may obtain the title to the pledged object.
- If the pledgee is an investor:
- After the pledgee bank has checked and confirmed the accuracy of the Application to Exercise Pledge Rights Between Investor and Investor (Investor Custodian Bank) on Short-Term Bills filled out by the pledgee, the third copy of the Application to Create Pledge Between Investor and Investor (Investor Custodian Bank) on Short-Term Bills submitted when the two parties created the pledge, and the contract under the preceding subparagraph, it shall send a settlement instruction to the BCSS.
- After the pledgor bank and the pledgee bank receive a "settlement completed" message from the BCSS, they shall conduct the book-entry procedure in accordance with the following procedure:
- The pledgor bank shall record the quantity of the exercised pledge rights in the pledgor position of the pledgor account.
- The pledgee bank shall deduct the quantity of the exercised pledge rights from the pledgee position of the pledgee account, and shall transfer it into the proprietary position.
- If the pledgee is an investor custodian bank:
- The pledgee investor custodian bank shall submit an Application to Exercise Pledge Rights Between Investor and Investor (Investor Custodian Bank) on Short-Term Bills, the third copy of an Application to Create Pledge Between Investor and Investor (Investor Custodian Bank) on Short-Term Bills submitted when the two parties created the pledge, and the contract mentioned in subparagraph 1, and shall send a settlement instruction to the BCSS.
- After the pledgor bank receives a "settlement completed" message from the BCSS, it shall record the quantity of the exercised pledge rights in the pledgor position in the investor account.
- If the pledgee is a bills dealer:
- The pledgor bank shall cross-check the notice of exercise of pledge sent by the BCSS against the Application to Exercise Pledge Rights Between Investor and Bills Dealer on Short-Term Bills submitted by the bills dealer, the third copy of the Application to Create Pledge Between Investor and Bills Dealer on Short-Term Bills submitted when the two parties created the pledge, and the contract under subparagraph 1.
- If the pledgor bank has any doubt about the content of the notice of exercise of pledge rights, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter. If the cross-check confirms the accuracy of the information, the bank shall return a "settlement confirmed" message.
- After the pledgor bank receives a "settlement completed" message from the BCSS, it shall record the quantity of the exercised pledge rights in the pledgor position of the pledgor account.
- When the pledgee has designated another investor as an assignee for the exercise of pledge rights over the short-term bills, the investor custodian bank shall conduct the book-entry procedure in accordance with the following procedure:
- The pledgor bank shall record the quantity of the exercised pledge rights in the pledgor position of the pledgor account.
- The pledgee bank shall deduct the quantity of the exercised pledge rights from the pledgee position of the pledgee account.
- The assignee's investor custodian bank shall transfer the quantity of the exercised pledge rights into the proprietary position of the assignee account.
When a pledge is created on an investor's reverse repo position in short-term bills, the pledgee may not designate a third party as an assignee for the exercise of pledge rights. The provisions of subparagraph 4 of the preceding paragraph will apply mutatis mutandis to the procedure by which a pledgee obtains title to those short-term bills through the exercise of pledge rights.
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Article 42 |
When an investor custodian bank conducts substitution by an investor of the subject of a pledge with a bills dealer, the following procedure shall be observed:
- The investor custodian bank shall cross-check the "notice of substitution of the subject of a pledge" sent by the BCSS against the Application to Substitute Subject of a Pledge Between Investor and Bills Dealer on Short-Term Bills submitted by the investor, and against the Application to Create Pledge Between Investor and Bills Dealer on Short-Term Bills submitted when the new pledge was created on the short-term bills.
- If the investor custodian bank has any doubt about the content of the notice of substitution of the subject of a pledge, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter; if the cross-check confirms the accuracy of the information, the bank shall return a "settlement confirmed" message.
- When the investor custodian bank receives a "settlement completed" message, it shall conduct the book-entry procedure in the investor account as follows:
- Cancellation of pledge: The bank shall take the quantity of short-term bills originally under pledge to a bills dealer and record it as the pledge cancellation quantity in the pledgor position, and shall transfer it into the proprietary position.
- Creation of pledge: The bank shall deduct from the proprietary position the quantity of short-term bills newly pledged to a bills dealer, and shall record the pledged quantity in the pledgor position.
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Article 43 |
When an investor custodian bank conducts an investor's sale of short-term bills originally under pledge to a bills dealer, and purchases short-term bills from the bills dealer in order to substitute the subject of the pledge with the bills dealer, the following procedure shall be observed:
- The investor custodian bank shall cross-check the "notice of substitution of the subject of a pledge" and the notice of the transactions sent by the BCSS against the Application to Substitute Subject of a Pledge Between Investor and Bills Dealer on Short-Term Bills submitted by the investor, and against the Application to Create Pledge Between Investor and Bills Dealer on Short-Term Bills submitted when the new pledge was created on the short-term bills.
- If the investor custodian bank has any doubt about the content of the notice of substitution of the subject of a pledge or the notice of the transactions, it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- After the investor custodian bank checks the notices of the preceding subparagraph and confirms their accuracy, it shall return a "settlement confirmed" message, but if the investor is the party liable for payment, the investor custodian bank shall first deduct the amount payable by the investor.
- Unless the same bank serves as both investor custodian bank and bills dealer (or agent clearing bank), or unless the net amount of funds due is zero, when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of net funds due between deposit accounts at the investor custodian bank and the bills dealer (or the agent clearing bank).
- When the investor custodian bank receives a "settlement completed" message from the BCSS, it shall conduct book-entry for the investor in accordance with the following procedure:
- Pledge cancellation: The bank shall take the quantity of short-term bills originally under pledge to a bills dealer and record it as the pledge cancellation quantity in the pledgor position, and shall transfer it into the proprietary position.
- Settlement of an outright sale: The bank shall deduct from the proprietary position the quantity sold to the bills dealer.
- Settlement of an outright purchase: The bank shall transfer into the proprietary position the quantity purchased from the bills dealer.
- Creation of pledge: The bank shall deduct from the proprietary position the quantity of short-term bills newly pledged to a bills dealer, and shall record the pledged quantity in the pledgor position.
- If the investor of the preceding subparagraph is the party with funds receivable, the investor custodian bank shall transfer the amount received into the investor's funds settlement account.
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Article 44 |
When an investor custodian bank uses the short-term bills of an investor's reverse repo position to create a pledge in favor of a bills dealer and the repo-style transaction reaches its execution date, the procedures for substituting the subject of the pledge are as follows:
- The investor custodian bank shall cross-check the "notice of substitution of the subject of a pledge" and the "notice of new repo-style transaction" sent by the BCSS against the Application to Substitute Subject of a Pledge Between Investor and Bills Dealer on Short-Term Bills submitted by the investor, and against the Application to Create Pledge Between Investor and Bills Dealer on Short-Term Bills submitted when the new pledge was created on the short-term bills.
- If the investor custodian bank has any doubt about the content of the "notice of substitution of the subject of a pledge," or about the "notice of new repo-style transaction," it shall return a "settlement unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- After the investor custodian bank checks the notices of the preceding subparagraph and confirms their accuracy, it shall return a "settlement confirmed" message, but if the investor is the party liable for payment, the investor custodian bank shall first deduct the amount payable by the investor.
- Unless the same bank serves as both investor custodian bank and bills dealer (or agent clearing bank), or unless the net amount of funds due is zero, when the BCSS receives a "settlement confirmed" message it will promptly notify either the Central Bank's Department of Banking or the FISC to conduct payment and receipt of net funds due between deposit accounts at the investor custodian bank and the bills dealer (or the agent clearing bank).
- When the investor custodian bank receives a "settlement completed" message from the BCSS, it shall conduct book-entry for the investor in accordance with the following procedure:
- Pledge cancellation: The bank shall take the quantity of short-term bills originally under pledge to a bills dealer and record it as the pledge cancellation quantity in the pledgor position, and shall transfer it into the reverse repo position.
- Settlement of the second leg of the investor's repo-style transaction: The bank shall deduct the quantity sold to the bills dealer from the reverse repo position.
- Settlement of the investor's repo-style transaction: The bank shall transfer the quantity purchased into the reverse repo position.
- Creation of pledge: The bank shall deduct from the reverse repo position the quantity of short-term bills newly pledged to a bills dealer, and shall record the pledged quantity in the pledgor position.
- If the investor of the preceding subparagraph is the party with funds receivable, the investor custodian bank shall transfer the amount received into the investor's funds settlement account.
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Article 45 |
If, for the short-term bills of an investor's reverse repo position pledged in favor of a bills dealer, the investor custodian bank has not completed the settlement procedure by canceling the pledge, exercising pledge rights, or substituting another pledged subject by the execution date of the repo-style transaction, TDCC will proceed directly to initiate the exchange of the original repo-style position that was pledged for the investor's proprietary position for the pledge.
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Article 46 |
When an investor custodian bank conducts the transaction settlement procedure under Articles 17, 19, 20, 35, 36, 41 subparagraph 4, 42, or 43, or it conducts the BNS settlement procedure under Article 23, if, before returning a "settlement confirmed" message to the investor, the bank receives the bills dealer's settlement cancellation notice forwarded by the BCSS, it shall cancel the settlement confirmation notice previously delivered by the BCSS.
After the investor custodian bank returns a "settlement confirmed" message to the investor—unless the transaction is one of those set out in Article 17 or 19, or the investor is the party liable for payment in a transaction subject to the BNS settlement procedure, in which cases cancellation of settlement is not allowed—if the bank receives the bills dealer's settlement cancellation notice forwarded by the BCSS, the bank shall handle the matter in accordance with the following procedure:
- The investor custodian bank shall provide the content of the notice to the investor to confirm settlement cancellation.
- When the investor custodian bank receives notice that the investor has a doubt about the content of the confirmation of settlement cancellation, it shall return a "cancellation unconfirmed" message, and the BCSS will in turn notify the bills dealer to handle the matter.
- After the investor completes confirmation of settlement cancellation, the investor custodian bank shall return a "settlement cancellation confirmed" message.
- After the BCSS receives a "settlement cancellation confirmed" message, it will cancel the settlement (or BNS settlement).
- After the investor custodian bank receives a "settlement cancellation" message from the BCSS, if the investor is the party liable for payment, the bank shall transfer the funds already paid by the investor back into the investor's funds settlement account.
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Article 47 |
When an investor custodian bank handling the settlement of a short-term bills trade between investors under Article 21 receives the bills dealer's settlement cancellation notice forwarded by the BCSS, the following procedure shall be observed:
- When the selling investor's custodian bank, before returning a "settlement confirmed" message to the investor, receives the bills dealer's settlement cancellation notice forwarded by the BCSS, the bank shall cancel the settlement confirmation notice previously delivered by the BCSS.
- When the selling investor's custodian bank, after returning a "settlement unconfirmed" message, receives the bills dealer's settlement cancellation notice forwarded by the BCSS, the bank shall cancel the settlement.
- If the selling investor's custodian bank, after returning a "settlement confirmed" message to the investor, receives the bills dealer's settlement cancellation notice forwarded by the BCSS, the bank shall handle the matter in accordance with the following procedure:
- The investor custodian bank shall provide the content of the notice to the investor to confirm settlement cancellation.
- When the investor custodian bank receives notice that the investor has a doubt about the content of the confirmation of settlement cancellation, it shall return a "cancellation unconfirmed" message and the BCSS will in turn notify the bills dealer to handle the matter. After the investor completes confirmation of settlement cancellation, the investor custodian bank shall return a "settlement cancellation confirmed" message.
- After the investor custodian bank receives a "settlement cancellation" message from the BCSS, the bank shall cancel the settlement.
- When the buyer and seller have both completed settlement confirmation but have not yet completed the transfer of funds and securities, if the bank receives a bills dealer's settlement cancellation notice forwarded by the BCSS, the bank shall advise both the buyer and seller to confirm settlement cancellation, and after both parties have confirmed settlement cancellation and received a "settlement cancellation" message from the BCSS, the bank shall cancel the settlement.
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Article 48 |
When an investor custodian bank conducts the transaction settlement procedure under Article 18 or 22, or it conducts the BNS settlement procedure under Article 24, if, before returning a "settlement confirmed" message, the bank receives the bills dealer's or the outward-transfer bank's settlement cancellation notice forwarded by the BCSS, it shall cancel the settlement confirmation notice previously delivered by the BCSS.
If the investor custodian bank, after returning the "settlement confirmed" message, receives the bills dealer's or the outward-transfer bank's settlement cancellation notice forwarded by the BCSS, it shall handle the matter in accordance with the following procedure:
- The investor custodian bank shall conduct confirmation of settlement cancellation in accordance with the content of the notice.
- When the investor custodian bank has a doubt about the content of the confirmation of settlement cancellation, it shall send a "cancellation unconfirmed" message, and the BCSS will in turn notify the bills dealer or the outward-transfer bank to handle the matter.
- After the investor custodian bank confirms settlement cancellation, it shall send a "settlement cancellation confirmed" message.
- After the BCSS receives a "settlement cancellation confirmed" message, it will cancel the settlement (or BNS settlement) and notify the investor custodian bank to complete settlement cancellation.
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Article 49 |
The provisions of Articles 46 and 48 will apply mutatis mutandis to early termination by an investor custodian bank of a repo-style transaction involving an investor's short-term bills or short-term bills in the bank's proprietary depository account.
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Article 50 |
The provisions of Articles 19, 20, 22 to 27, 46, and 48 will apply mutatis mutandis to the procedure for an investor custodian bank's operation of the settlement of a short-term bills trade between the bank itself and the Central Bank, or between a financial institutional investor and the Central Bank.
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