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Article 62
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A securities finance enterprise undertaking a negotiated transaction to borrow a security shall execute the transaction at a rate of not more than 10 percent of the auction reference price for the security at market opening on the date of application for the negotiated transaction, and priority of distribution of the quantity obtained through the negotiated transaction shall be given to the shortfall in securities in margin and short trading.
A negotiated transaction shall be conducted in the following manner, unless there is a necessary reason to do otherwise:
- A lender as in Article 56, paragraph 1, subparagraph 1 wishing to participate in the negotiated transaction may engage a securities firm to carry out the transaction on its behalf. An order ticket for the negotiated transaction shall be filled out and signed/sealed by the securities owner if it is submitted in person; if it is submitted over the telephone, the securities broker shall synchronously record the telephone conversation, and in doing so shall comply with the provisions of Article 80, paragraphs 4 to 6 of the TWSE Operating Rules, and the order ticket shall be completed by the associated person handling the order ticket. Where an order is placed in the manner listed in Article 75, paragraph 1, subparagraph 8 of the TWSE Operating Rules, the order ticket shall be made according to the relevant operating procedures.
- A lender as in Article 56, paragraph 1, subparagraph 2 shall fill out an order ticket for the negotiated transaction and conduct the transaction with a securities finance enterprise.
- The order ticket above shall specify the name, name of the dedicated account, brokerage account number, securities lending and borrowing account number or margin purchase and short sale account number of the lender as in Article 56, paragraph 1, subparagraph 1, as well as the names, quantity and rateof securities lent.
- Securities offered to participate in the negotiated transaction may only be securities the lender has deposited in a custody account at the central securities depository.Upon receipt of the order request from a lender as in Article 56, paragraph 1, subparagraph 1, or when a lender as in Article 56, paragraph 1, subparagraph 2 participates in a negotiated transaction, the securities broker shall put the lendable securities on hold (excluding those securities that have been lent out on the previous business day).
- Upon conclusion of the negotiated transaction, the securities finance enterprise shall, keeping separate the transactions for shortfalls in securities in margin and short trading and the shortfalls in securities in day trading, enter the name, name of the dedicated account, brokerage account number, securities lending and borrowing account number or margin purchase and short sale account number, as well as thename, quantity, and rate of securities lent,into the TWSE's negotiated lending transaction system by 2 pm on that day, and, together with the details of the securities on hold, fax the same to the TWSE, and the TWSE upon confirmation will give a notice to the central securities depository, instructing it to transfer the lent securities to the securities finance enterprise's dedicated account on the next business day.
- The cash collateral shall be deposited at a level as negotiated and agreed between the securities finance enterprise and the lender in Article 56, paragraph 1, subparagraph 1 through the lender’s securities firm or between the securities finance enterprise and the lender in Article 56, paragraph 1, subparagraph 2 directly.
- The securities lent by the lender shall be returned through the central securities depository on the second business day following the date of the negotiated transaction.
- The securities finance enterprise shall pay the securities lending fee (securities lending fee = agreed lending rate x quantity) to, and reclaim the cash collateral from, the lender in Article 56, paragraph 1, subparagraph 1 through the lender’s securities firm, or the lender in Article 56, paragraph 1, subparagraph 2 directly, by 10 am on the second business day following the date of the negotiated transaction.
If there is a necessary reason to do otherwise, as referred to in the preceding paragraph, a negotiated transaction shall be conducted in the following manner and under the supervision of personnel sent by the TWSE:
- The lender in Article 56, paragraph 1, subparagraph 1 agreeing to lend the security shall deliver transfer the security lent to the dedicated account for margin purchases and short sales or the special account for handling shortfalls in securities deliverable in day trading, opened by the securities finance enterprise at the central securities depository, by 2:00 pm on the current day; the securities finance enterprise shall prepare and deliver a receipt to the lender by 12 noon on the next business day following the date of the negotiated loan.
- The cash collateral shall be deposited at a level as negotiated and agreed between the securities finance enterprise and the lenderin Article 56, paragraph 1, subparagraph 1 through the lender’s securities firm or between the securities finance enterprise and the lender in Article 56, paragraph 1, subparagraph 2 directly.
- The securities finance enterprise shall return the securities borrowed under negotiated transaction and pay the securities lending fee (securities lending fee = agreed lending rate x quantity) to, and reclaim the cash collateral from, the lender in Article 56, paragraph 1, subparagraph 1 through the lender’s securities firm, or the lender in Article 56, paragraph 1, subparagraph 2 directly, by 2 pm on the second business day following the date of the negotiated transaction.
The securities firm engaged by the lender may charge the lender a service fee at a rate of not more than 10 percent of the lending fee.
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