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Relevant Laws

Title：Operating Rules for Securities Business Money Lending by Securities Firms (2023.07.06)
Article 16     In securities business money lending conducted by a securities firm, a customer applying for a financing period not exceeding 6 months shall file an application prior to 12 noon on the first business day after the transaction date of its securities purchase. If the customer posts collateral in the form of securities or other commodities that it purchases or holds, the securities firm or custodian institution shall transfer the customer's collateral to the loan collateral account opened by the securities firm at the TDCC or central government securities settlement bank. A customer posting a collateral in foreign currency for an offshore overseas Chinese or foreign national shall deposit the collateral in the foreign currency loan collateral account opened by the securities firm at the bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business. Collateral financing shall be calculated according to the standards provided in Article 18.
    No collateral is required from the above new applicant posting, for money lending purposes, collateral in the form of securities or other commodities or foreign currencies that it purchases, if the maintenance ratio of the financing collateral combined with the collateral for the purposes of calculation of said ratio pursuant to Article 23 is 166 per cent or above.
    Subject to the customer posting securities or other commodities or foreign currencies that it holds as collateral, a securities firm conducting securities business money lending may accept the customer’s application for financing in the form of public subscription or competitive auction of new shares (including cash capital increase). The financing scope includes the bond for competitive auction and the award price after award less the bond, and the subscription price deducted by the bank on the day immediately preceding the lot drawing for subscription, provided the customer shall maintain sufficient collateral in the securities firm’s collateral account at the time of the customer’s application and on the date of disbursement by the securities firm, with a collateral maintenance ratio not lower than the minimum prescribed by Article 23, paragraph 3; transfer to the collateral account in paragraph 1 of new shares allotted is not required, provided the securities firm must strengthen its credit check and KYC in respect of applying customers and its internal control and regulation, to control risks.
    Subject to the customer posting securities or foreign currencies that it holds as collateral, a securities firm conducting securities business money lending may accept the customer’s financing application for subscription for beneficial certificates of open-end securities investment trust funds and those of futures trust funds and directly deliver such beneficial certificates to the customer.
    In securities business money lending conducted by a securities firm, if a customer posts as collateral the beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are purchased on the customer’s order in the securities firm’s name, the authorized securities firm shall keep a registration log for management purposes and inform relevant information to the TDCC, and the requirement in paragraph 1 that the securities firm transfer the collateral provided by the customer to the securities firm’s loan collateral account at the TDCC does not apply.
    When a securities firm lends money to a customer to pay for the settlement price, and the customer has yet to obtain the securities that it has purchased, other securities, foreign currencies, or commodities that the customer holds shall be used as collateral.
    When the customer of the preceding paragraph submits the application to borrow money by a method other than in person, the provisions of Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
    Before the expiration of the financing period in paragraph 1, the customer may file an application to extend the period, and the securities firm may grant a 6-month extension depending on the customer's creditworthiness. After the expiration of one-year period, the securities firm may review the customer's creditworthiness and then grant the customer's application for a 6-month extension.
    Collateral referred to in paragraph 1 shall be limited to the following:
  1. TWSE and TPEx listed securities, excluding stocks, EFT beneficial certificates traded in foreign currency, and shares subject to an altered trading method or TPEx managed stocks, of an innovation board listed company and an innovation board primary listed company.
  2. TPEx traded beneficial certificates of open-end funds or physical gold.
  3. Beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are offered and invest domestically.
  4. Offshore overseas Chinese and foreign nationals may post foreign currencies as collateral. Currencies received are limited to U.S. Dollar, Euro Dollar, Japanese Yen. British Pound, Australian Dollar, and Hong Kong Dollar. The foreign currency collateral account shall be opened with a bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business.
  5. Other collateral approved by the competent authority.
    Collateral posted by a customer under the preceding paragraph may be replaced during the financing period. The method for applying for replacement shall be stipulated between the parties.
    When a customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer the securities it originally posted as collateral on a proportional basis, provided that increments of less than one trading unit may not be returned. Notwithstanding, the customer may agree with the securities firm that subject to repayment by the customer of the loaned funds, the securities firm is exempt from returning the collateral in whole or in part, and the customer may apply to the securities firm for a loan pursuant to paragraph 1 in respect of the collateral that is not returned.
    For each loan of money using the financing method set out in paragraph 1 herein, the securities firm shall notify the customer in writing 10 business days before the expiration of the financing period.
Article 18     In securities business money lending conducted by a securities firm, if the customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, the financing calculation standards for the collateral shall be as listed below, save in the event of fractions of one trading unit or of one unit of beneficial rights:
  1. The value of TWSE and TPEx traded securities except central book-entry bonds, municipal bonds, common corporate bonds, secured convertible (exchangeable) corporate bonds, and financial bonds is 60 percent, and that of securities not eligible for margin purchase and short sale is 40 percent, of the closing price on the business day immediately prior to the application for financing.
  2. The value of beneficial certificates of open-end funds traded on the TPEx is 60 percent of their NAV of the business day immediately prior to financing. The value of physical gold is 60 percent of the Closing Average of the business day immediately prior to the application for financing.
  3. The value of beneficial certificates of open-end securities investment trust funds and those of futures trust funds is 60 per cent of the NAV of the business day immediately prior to the application for financing.
  4. The value of central book-entry bonds is 80 percent of their face value.
  5. The value of municipal bonds, common corporate bonds, secured convertible (exchangeable) corporate bonds, and financial bonds is 60 per cent of their face value.
  6. The value of a foreign currency collateral is the spot rate – buying as at the date of application for financing of the bank with which the foreign currency collateral account is opened. No haircut is applied to the value of an additional collateral.
    A securities firm may adjust the calculation standard in the preceding paragraph as a stricter standard subject to the market condition of the collateral and the customer’s credit risk.
    With respect to subparagraph 1 of the first paragraph and Article 13, paragraph 4, if there is no closing price of the business day preceding the financing date, it shall be replaced by the price determined by the principles set out in Article 58-3, paragraph 4, subparagraph 2 of the TWSE Operating Rules or Article 57, paragraph 1 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM.     The financing calculation standards for collateral set out in paragraph 1 may be adjusted by the TWSE in consultation with the TPEx based on the circumstances regarding that collateral.
Article 23     In securities business money lending conducted by a securities firm, if a customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchase or holds, the customer's overall-account and individual-transaction collateral maintenance ratio for money lent to the customer shall be calculated as follows:
Collateral maintenance ratio = (market value of the collateral + market value of additional collateral securities or other commodities or foreign currencies) divided by the financing amount, and multiplied by 100 percent.
     In regard to the collateral referred to in the preceding paragraph, the market value of TWSE and TPEx listed securities is the closing price of the current day; that of central book-entry bonds, municipal bonds, common corporate bonds, secured convertible (exchangeable) corporate bonds, and financial bonds is their face value; that of physical gold is the Closing Average of the current day; that of TPEx traded beneficial certificates of open-end funds, open-end securities investment trust funds and futures trust funds is the NAV of the preceding business day; and that of foreign currency collaterals is calculated at the current spot rate – buying of the bank with which the foreign currency collateral account is opened. If there is no current day's closing price for a given TWSE or TPEx security, the market value shall be determined by the following principles:
  1. If the current day's highest buy order price at the close of market is higher than the current day's auction reference price at market opening for a TWSE listed security, or than the current day's benchmark price at trade opening for a TPEx listed security, use the highest buy order price.
  2. If the current day's lowest sell order price at the close of market is lower than the current day's auction reference price at market opening for a TWSE listed security, or than the current day's benchmark price at trade opening of trading for a TPEx listed security, use the lowest sell order price.
  3. When neither of the above circumstances applies, use the current day's auction reference price at market opening for a TWSE listed security, or the current day's benchmark price at trade opening for a TPEx listed security.
    If the customer has applied for a financing period not exceeding 6 months and posted collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, the securities firm shall mark-to-market the customer's collateral maintenance ratio each business day. If the customer's collateral maintenance ratio is lower than 130 percent due to a change in the value of the collateral or additional collateral securities or other commodities, or the customer is an offshore overseas Chinese or foreign national as in paragraph 7 with a collateral maintenance ratio lower than as agreed, the securities firm shall notify the customer to cover the collateral shortfall and bring the collateral maintenance ratio above 166 percent within 2 business days from receipt of the notice, and shall further comply with the following provisions:
  1. If the customer fails to cover the collateral shortfall within 2 business days from the date upon which the notice is served and the collateral maintenance ratio is still lower than 130 percent, beginning from the third business day, the securities firm shall dispose of the customer's collateral beginning from the third business day under the mutatis mutandis application of Article 27, paragraph 1.
  2. If the customer fails to cover the collateral shortfall within 2 business days from the date on which the notice is served and the collateral maintenance ratio has risen to 130 percent or higher, the securities firm may temporarily refrain from disposing of the collateral on the third business day. However, on any subsequent business day in which its collateral maintenance ratio is again lower than 130 percent and where the customer does not deposit additional collateral on its own initiative on the afternoon of that day, its collateral shall be disposed of beginning on the next business day under the mutatis mutandis application of Article 27, paragraph 1.
  3. If the collateral maintenance ratio returns to 166 percent or higher even though the customer has not covered, or has covered only a portion of, the collateral shortfall, or if the customer makes successive collateral deposits sufficient in total to cover the shortfall as stated in the notice prior before its collateral has been disposed of under the preceding subparagraphs, the record of the collateral call shall be expunged.
    Any and all individual loans of funds in the financing account for which the collateral maintenance ratio is below 130 percent are shortfalls that are required to be covered pursuant to the preceding paragraph, and shall be subject to a collateral call.
    If, as a result of any change in share price, there is an increase in the net value of the collateral in a customer's financing account less the customer's obligations, the securities firm is prohibited from delivering to the customer any cash or securities equivalent to the amount of the increase.
    The disposal of collateral under paragraph 3, subparagraphs 1 and 2 shall be carried out in accordance with Article 27 of the Operating Rules. If such disposal is insufficient to make repayment, the customer shall be notified to make repayment within a certain time period, with interest accruing at the financing interest rate from the date on which the claim occurred until the date of repayment.     A securities firm may agree on the collateral maintenance ratio with offshore overseas Chinese and foreign nationals meeting the following qualification requirements, provided such ratio may not be lower than 110% and is subject to necessary adjustment by the TWSE in relation to financial market volatility:
  1. A qualified institutional investor designated by the competent authority in accordance with Article 4, paragraph 2 of the Financial Consumer Protection Act.
  2. A member of a foreign securities exchange designated by the competent authority in accordance with Article 5, paragraph 1 of the Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities, or a liquidity provider.
Article 24     A securities firm conducting securities business money lending may, except in the case of a cash capital increase, beginning from 6 business days before the ex-dividend date of the collateral and additional collateral securities or other commodities provided by a customer, calculate the collateral maintenance ratio for each day based on that day's closing price or NAV of each security on each given day minus the value of the share rights or dividends, and the provisions of the preceding article shall apply mutatis mutandis.