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Article 25
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A securities firm shall calculate on a daily basis, for each customer, the collateral ratio for the customer's securities borrowing and lending account as a whole and for each securities loan made through it, based on the closing prices published by the TWSE or the GTSM, according to the following formula:
Collateral ratio = (total collateral value of the collateral － securities lending fees payable ) ÷ (market value of the loaned securities ＋ market value of stock dividend shares to be returned ＋ cash dividends to be returned) × 100%
Except in the case of a cash capital increase, for the six business days prior to any ex-dividend or ex-rights date for a security that is provided as collateral, its collateral value shall be calculated at the valuation percentage specified in Article 19, based on the respective current day's closing price minus the value of the dividend or minus the value of the right determined based on the current day's closing price.
The current day’s closing price mentioned in the preceding paragraph is governed by Article 19, paragraph 5 mutatis mutandis.
Where a customer's overall account collateral ratio is lower than the 120 percent collateral maintenance ratio, the loaning securities firm shall promptly give notice to request the customer to provide additional collateral within two business days from the day the notice is delivered to make up the collateral shortfall for each individual securities lending transaction that does not meet the required collateral maintenance ratio, so as to bring the individual collateral ratios thereof above the initial collateral ratio, provided where the customer is a professional institutional investor as defined in Article 19-7, paragraph 2 of the Regulations Governing Securities Firms and has otherwise agreed to a collateral maintenance ratio with the loaning securities firm, the aforementioned notice shall be given requesting that the shortfall be made up based on the agreed ratio.
The collateral maintenance ratio in the preceding paragraph and the initial collateral ratio in Article 15 may be adjusted by the TWSE in consultation with the GTSM based on market circumstances.
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Article 32
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Under any of the following circumstances, the securities firm shall, beginning from the next business day, dispose of the collateral from the lending transactions at issue, and also take any necessary measures pursuant to the provisions of the agreement, unless the parties agree otherwise:
- The loan period has expired, or early return is agreed between the parties or required by Article 22, paragraph 3, and the customer is unable to return the securities within the stipulated time limit.
- The payment date for compensation for entitlements has arrived, and the customer fails to make such compensation.
- The customer fails to make up a collateral shortfall or to provide eligible replacement collateral within the required time period.
- The customer fails to pay any applicable fee as stipulated.
When a securities firm disposes of securities collateral or makes necessary repurchases pursuant to the preceding paragraph, it shall do so, through the Securities Lending Default Handling Account it has opened with another securities broker, on the TWSE central securities market or through the GTSM trading system. If such an order is not executed, it shall continue to be quoted from the next business day, and the relevant processing fees and tax shall be borne by the customer.
After a securities firm disposes of that collateral, if the settlement proceeds are insufficient to offset the debt, it may, within the scope necessary to settle the obligation, liquidate outstanding securities borrowing and lending transactions of the customer and use the funds obtained thereby to offset its debt. If a positive balance remains, it shall be returned to the customer; if the funds obtained are still insufficient, the securities firm shall notify the customer to make up the shortfall within a specified period.
A securities firm that borrows securities from customers shall discontinue operations regarding additional securities borrowing and extension of its securities lending and borrowing business if the circumstance in paragraph 1, subparagraph 1, 2 or 4 applies to it or if it fails to pay the performance bond in full pursuant to Article 38, paragraph 1.
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