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Article NO. Content

Title:

Operating Rules for Securities Firms Handling Non-Restricted Purpose Loan  CH

Amended Date: 2017.11.27
Article 22     The client may use the securities or other commodities prescribed under Article 2 to cover the finance shortfall, and the supplementary value may be calculated according to Article 16. However, the collateral to which either of the circumstances listed below applies may not be used as supplementary collateral:
  1. Securities comprising less than one trading unit.
  2. Where the securities are registered shares of the issuing company acquired by its shareholders or capital contributors as a result of that company's conduct of a capital increase from earnings, capital increase through contributions by that company's employees out of their bonuses to the industry in which they serve, or capital increase by a venture capital company out of undistributed earnings pursuant to Article 13 of the Statute for Encouragement of Investment or Articles 16 and 17 of the Act for Upgrading Industries, and such shares have not been transferred or reported for taxes.
    When calculating a client's overall account collateral maintenance ratio, a securities firm is not required to apply a haircut to the value of the supplementary collateral securities or other commodities.
    If the rate of bonus shares or stock dividend shares distributed on collateral or additional collateral securities or other commodities provided by a client is 20% or higher, except where the competent authority has imposed restrictions on trading of the securities or pledge has been created under Article 6, paragraph 3, all such new shares shall serve as collateral, and the right to defer income tax shall be waived. The TDCC shall transfer the shares by book-entry transfer into the segregated loan collateral account opened by each securities firm, and the provisions of Article 33 of the Criteria Governing Handling of Stock Affairs by Public Stock Companies shall not apply.
    Bonus shares or stock dividends referred to in the preceding paragraph may not be used as collateral for borrowing securities from the TWSE securities lending system or for obtaining refinancing from a securities finance enterprise.
    The provisions of Article 21 shall not apply to bonus shares or stock dividend shares used as collateral. After ex-rights trading has commenced, the market value of such shares shall be calculated at 60% of the closing price of the TWSE or TPEx listed securities. After the shares have been transferred to the securities firm's segregated loan collateral account, the haircut need not be applied to the calculation of their value.
    For the calculation standard set forth in paragraph 1 and preceding paragraph, a securities firm may adopt a stricter standard depending on the market status of the collateral and the client credit risk.