Chapter II TWSE Securities Lending System |
| Article 5 | Securities borrowing and lending transactions as regulated by these Rules shall be divided into three types, defined as follows:
- Fixed-price transaction: a loan transaction in which a borrower or lender (each hereinafter referred to as an "SBL participant") places an order with a securities firm, authorizing and empowering it to enter a borrowing or lending quote, as the case may be, at a fee rate declared by the TWSE, and which is executed through a matching process on the TWSE securities lending system as stated in Article 19.
- Competitive bid transaction: a loan transaction in which an SBL participant fixes a fee rate for borrowing or lending securities, at an interest rate of not more than 16 percent per annum and subject to a minimum tick of 0.1 percent for submission of quotes, and places an order with a securities firm, authorizing and empowering it to enter a borrowing or lending quote at that fee rate, and which is executed through a matching process on the TWSE securities lending system as stated in Article 21.
- Negotiated transaction: a loan transaction in which an SBL participant seeks its own counterparty, and the two parties concerned negotiate and agree between themselves on the lending fee rate, to be an interest rate of not more than 16 percent per annum and subject to a minimum tick of 0.01 percent, and other loan terms and conditions.
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| Article 6 | Once a fixed-price or competitive bid transaction is executed through matching by the TWSE of corresponding borrowing and lending quotes, a securities loan agreement shall then come to existence and take effect between the borrower and the lender concerned. From the time the transaction is executed through such matching, the TWSE will undertake obligations in the place of both the borrower and the lender, for which it also acquires the corresponding claims in relation to the same subject matter, and assume the claims of the borrower against the lender, and also of the lender against the borrower, thereby acting as the counterparty to both the borrower and the lender in that transaction. In such capacity, the TWSE will guarantee the performance of the loan agreement pursuant to these Rules and have responsibility for giving notice to the central securities depository to proceed with the receipt and delivery of the subject securities underlying the loan transaction (hereinafter, the "subject securities"), the receipt and deposit of collateral supporting the borrowing of securities ("loan collateral") and any further procedures in relation to marking-to-market, return or redelivery, and entitlement compensation. Any loan collateral thus received by the TWSE shall be held for the benefit of the lender and not constitute the property of the TWSE.
In the case of a negotiated transaction, the TWSE shall not be responsible for guaranteeing the performance of the loan agreement or any obligation, and the borrower and the lender shall handle such issues as the receipt and deposit, marking-to-market, and return between themselves regarding the loan collateral; the TWSE will only assume the responsibility that, upon confirmation that the loan terms and conditions reflected in the report on the execution of the lending transaction entered into the TWSE securities lending system are consistent with those reflected in the corresponding report on the execution of the borrowing transaction entered, it shall give notice to the central securities depository to effect a book-entry transfer for the delivery, return, and compensation of any entitlement arising from the securities, as the case may be.
In view of any risk of loss it might incur when taking action to buy in securities for return of a securities loan, the TWSE shall set aside a reserve from, and of a certain percentage of, each loan service fee it receives, and in the event of deficiency, it shall pay out of its own funds.
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| Article 7 | A securities firm shall enter into a Master Securities Borrowing and Lending Agreement with the TWSE, in the form set out in Appendix 1 hereto, before it may accept authorization and empowerment from an SBL participant to apply for opening a securities borrowing and lending account, and further to carry out securities loan transactions and to submit regulatory filings reporting the execution of negotiated transactions, on behalf of the SBL participant.
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| Article 8 | An SBL participant shall enter into a Securities Borrowing and Lending Authorization Agreement with a securities firm, in the form set out in Appendix 2 hereto, whereby it shall authorize and empower the securities firm to submit an application for opening a securities borrowing and lending account on its behalf, and the SBL participant may authorize and empower its securities firm to submit quote for a fixed-price or competitive bid transaction and any regulatory filing reporting the execution of a negotiated transaction, and to do any other things relevant to securities borrowing and lending transactions, only after review and approval of the account opening application by the TWSE; the effective existence of the authorization agreement shall be a condition precedent to the continuance of the authorization and empowerment granted to the securities firm for dealing with such matters.
An SBL participant applying for opening of a securities borrowing and lending account shall have an authorized person to prepare a letter of authorization, an application form for opening a securities borrowing and lending account, and other relevant supporting documents, and shall authorize and empower a securities firm to submit an application to the TWSE for opening a securities borrowing and lending account on its behalf. The securities firm shall truly review the content of the securities borrowing and lending account opening application form and relevant attached documents, and affix its corporate seal and the seal of the statutory representative on the photocopies of the forwarded relevant documents and indicate thereon the words "Same as Original."An SBL participant may, alternatively, authorize a securities firm to apply to the TWSE for account opening, by correspondence or electronic means that is sufficient to identify the applicant as the SBL participant itself or its indication of intent.
The securities firm shall enter any information on account opening or cancellation of account with respect to the SBL participant, and any change in such account information, into the TWSE's computer system.
The securities firm processing securities borrowing and lending transactions as authorized and empowered by the SBL participant shall exercise the due care of a good administrator in doing so.
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| Article 9 | Any rights and obligations that may arise between an SBL participant and its securities firm, between the SBL participant and the TWSE, and between the securities firm and the TWSE, out of a securities borrowing or lending transaction shall be subject to and governed by these Securities Borrowing and Lending Rules, other applicable rules and circular letters, and also the Master Securities Borrowing and Lending Agreement, the Securities Borrowing and Lending Authorization Agreement, and other applicable agreement documents.
An SBL participant participating in securities borrowing and lending trading shall comply with the laws and regulations of the industry's regulatory authority and competent securities authority.
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| Article 10 | An SBL participant, if and only if a juristic person or fund, may authorize and empower a securities firm to act on its behalf in submitting an application to the TWSE for opening a securities borrowing and lending account, in obtaining the eligibility as a participant in the securities borrowing and lending market, in conducting fixed-price and competitive bid transactions for borrowing and lending of securities, and in submitting regulatory filings reporting the execution of negotiated transactions.
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| Article 10-1 | A securities firm, futures commission merchant, and other specific participant applying for opening of a securities borrowing and lending account pursuant to Article 8, paragraph 2 shall do so based on the securities trading account numbers specified in the Guidelines for the Opening of Securities Borrowing and Lending Accounts by Specific Trading Accounts (Appendix 1) and conduct securities borrowing and lending transactions with the designated loaned securities for their designated lending purposes.
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| Article 11 | The TWSE will not entertain any application for opening a securities borrowing and lending account submitted by an SBL participant through an authorized securities firm if any of the following circumstances applies:
- The applicant does not conform to the provisions of Article 10 or 49.
- The applicant applies for opening a securities borrowing and lending account using the name of another person.
- The applicant's securities trading brokerage contract with its securities firm has been terminated.
An SBL participant may authorize and empower a securities firm to open only one securities borrowing and lending account. This restriction, however, does not apply where it is specifically allowed that the SBL participant may open two or more trading accounts at the same place of business of a securities broker.
If any circumstance described in the subparagraphs of paragraph 1 occurs after a securities borrowing and lending account is opened, the TWSE shall halt that SBL participant's participation in securities borrowing and lending transactions and notify it to settle all outstanding obligations and, upon closing out of all such positions, proceed to cancel the SBL participant's securities borrowing and lending account.
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| Article 12 | If there is any change in the information contained in a securities borrowing and lending account opening application form with respect to the company's name, name or national ID number of its agent or responsible person, government uniform invoice number as a profit-seeking enterprise or tax withholding agent, withholding tax rate, bank account number, address or mailing address, contact telephone number, or e-mail address, such change shall be entered, through the securities firm, into the TWSE securities lending system, with notice given to the TWSE in writing or by correspondence or electronic means.
If the applicant for conducting securities borrowing and lending transactions fails to give such notice in writing or by correspondence or electronic means, the TWSE will proceed using the original recorded information, and the applicant shall be solely responsible for any legal issues that may arise and may not raise any objection whatsoever afterwards.
When the TWSE gives a notice by postal mail, if the notice is unable to be served due to a change of address or mailing address for which the SBL participant fails to give the notice required above, or otherwise due to a reason attributable to the SBL participant, such notice shall be deemed to have become effective as of the date of the first delivery attempt by the post office.
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| Article 12-1 | No director, supervisor, officer, or shareholder with more than 10% shares of an issuer of the subject securities may engage in borrowing and lending transactions or sale of borrowed securitiesinvolving such subject securities, whether in its own name or in the name of a domestic or offshore company directly or indirectly incorporated.
With the exception of the following designated institutional investors, an SBL participant shall advise the TWSE in the manner prescribed in Article 12 of the names and nationalities of the top three shareholders in terms of shareholding, each holding up to 30% or more of shares. Juristic-person shareholders shall also advise the names and nationalities of the top three natural-person shareholders in terms of shareholding, each holding up to 30% or more of shares. The government uniform invoice number of a profit-seeking enterprise or national ID number shall further be provided in the event of an R.O.C. shareholder; the national ID numberand government uniform invoice number of a tax withholding agent shall be provided in the event of an offshore overseas Chinese or foreigner that has completed registration:
- Lender: an insurance company, bank, trust investment company, securities firm, futures commission merchant, securities investment trust fund, futures trust fund, securities finance enterprise, designated offshore foreign institutional investor, government fund, trust enterprise, and others as approved by the competent authority.
- Borrower: a bank, securities firm, futures commission merchant, securities investment trust fund, securities finance enterprise, designated offshore foreign institutional investor and others as approved by the competent authority.
For purposes of the preceding paragraph, a designated offshore foreign institutional investor denotes an offshore foreign institutional investor in the capacity of a foreign bank, insurance company, securities firm, fund manager, foreign government investment institution, pension fund, mutual fund, unit trust, investment trust, trust company, academic or charity institution, and privately placed mutual fund and unit trust.
The shares held by a shareholder as mentioned in paragraph 2 shall include those held by its spouse and minors and in others' name.
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| Article 13 | A securities firm or securities finance enterprise intending to carry on securities borrowing and lending business pursuant to the Regulations Governing Securities Lending by Securities Firms or pursuant to the Regulations Governing Securities Finance Enterprises shall sign a Securities Borrowing and Lending Agreement with the TWSE and open a securities borrowing and lending account before it may carry out securities borrowing and lending transactions through the TWSE securities lending system.
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| Article 14 | The subject securities in securities borrowing and lending transactions means any securities eligible for margin purchase and short sale transactions; any securities eligible to be underlying securities in the issuance of call (put) warrants; domestic component securities of securities investment exchange-traded trust funds (EFTs); and any underlying securities on which any of the following derivative instruments have been issued where such securities are listed on the TWSE or GreTai Securities Market (GTSM):
- Single-stock options or single-stock futures.
- Domestic and overseas convertible or exchangeable corporate bonds.
- Overseas depositary receipts.
If any of the circumstances described in thefinancial information indicators listed in the Key Financialsand Transaction Information Section of the Market Observation Post System, as shown in Appendix 4, applies to any of the above subject securities in securities borrowing and lending transactions, the borrowing and lending transactions of the securities concerned will be suspended from the following business day unless the trading method trading method is altered or trading is suspended, in which case the date of implementation as announced will prevail. The TWSE will announce an adjustment to the appendix in the event of a revision to indicators in the abovesection.
Borrowing and lending of futures ETF beneficial certificates as subject securitieswill be halted from the next business day following the public announcement of the TWSE or Taipei Exchange (TPEx) in the event of the circumstance in Article 23, paragraph 1 of the TWSE Rules Governing Trading of Beneficial Certificates or Article 16, paragraph 1 of the TPEx Rules Governing Trading of Exchange-Traded Fund Beneficial Certificates and will be resumed from the next business day following the public announcement of the TWSE or TPEx if the circumstance in Article 23, paragraph 2 of the TWSE Rules Governing Trading of Beneficial Certificates or Article 16, paragraph 2 of the TPEx Rules Governing Trading of Exchange-Traded Fund Beneficial Certificates applies to the subject securities during the halt of borrowing and lending.
Objects of securities borrowing and lending that conform to the first paragraph do not include ETF beneficial certificates traded in foreign currency.
The subject securities as set forth in the first paragraph shall be those as announced by the TWSE and subject to any further adjustment by the TWSE having regard to the market situation.
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| Article 14-1 | Where a public announcement is made halting the trading of the subject securities in securities borrowing and lending transactions, their securities borrowing and lending transactions are not suspended unless the circumstance stated in paragraph 2 exists.
Where the TWSE announces a halt to trading pursuant to Article 12 of the Operating Rules or the GTSM does so pursuant to theArticle 42 of the Rules Governing Securities Trading on the TPEx, the TWSE may, depending on the circumstance, announce a halt of fixed-price and competitive bid transactions for borrowing and lending of securities and regulatory filings reporting the execution of negotiated transactions.
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| Article 14-2 | Where the cause in Article 26, paragraph 1, subparagraph 4, item B or C for the compulsory early return of securities appliesto subject securities in securities borrowing and lending transactions, no additional loaning of such securities is permitted from the 10th business day prior to the date prescribed by the TWSE for the return of securities in satisfaction of the loan or from the date of announcement of the above cause.
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| Article 15 | The business hours in which securities borrowing and lending services are available through the TWSE securities lending system shall start from 9 am and end at 3:30 pm.
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| Article 16 | The quantity specified in a quote for a securities borrowing or lending transaction shall be as follows:
- Lending quantity: one or more trading units of the subject securities.
- Borrowing quantity: one or more trading units of the subject securities.
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| Article 17 | A quote to borrow securities through a fixed-price or competitive bid transaction shall be valid only for the day on which the quote is submitted, while a quote to lend securities through such a transaction shall remain valid until cancelled.
Where a subject security is halted from borrowing and lending transactions, any borrowing or lending quote for the subject security that has already been submitted before the halt occurs but is not yet executed shall remain valid, and cancellation or reduction in quantity of the quote is permitted.
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| Article 18 | A quote to lend or borrow securities through a fixed-price transaction, any change or withdrawal of such a quote, and the book-entry transfer of securities shall be handled in the following manner:
- In the case of a quote to lend securities, its change or withdrawal, and book-entry transfer of the securities:
- A lender submitting a quote to lend securities shall have a securities firm to enter the account number, name of subject securities, quantity, and recall notification period into the TWSE securities lending system.
- Upon receipt of the quote, the TWSE will notify the central securities depository over a computer network to check the subject securities in the lender's central securities depository account (hereinafter, "CSD account") and put the securities on hold to make them available for lending; the quote will be invalid if the lender does not have enough subject securities in the account.
- A valid lending quote shall remain valid until executed, changed, or withdrawn, or if partially executed, remain valid with respect to the unexecuted portion.
- With respect to any unexecuted portion of the lending quote, the lender may at any time instruct the securities firm to reduce the lending quantity through the TWSE securities lending system, whereupon the TWSE will forthwith give notice of the reduction to the central securities depository to make a corresponding change to the quantity of subject securities put on hold.
- With respect to any unexecuted portion of the lending quote, the lender may at any time instruct the securities firm to withdraw its quote through the TWSE securities lending system. When the lender withdraws its lending quote, the TWSE will forthwith notify the central securities depository to release the subject securities put on hold for the unexecuted portion of the lending quote in the lender's CSD account.
- Upon execution of a transaction for the lending quote with a borrowing quote through a matching process, the TWSE will forthwith notify the central securities depository to effect a book-entry transfer of the subject securities on hold from the CSD account of the lender to that of the borrower.
- In the case of a quote to borrow securities, its change or withdrawal, and book-entry transfer of securities:
- A borrower submitting a quote to borrow securities shall have a securities firm enter the account number, name of subject securities, quantity, return date, recall notification period, and details of collateral to be provided, into the TWSE securities lending system. The TWSE will notify the central securities depository over a computer network to effect a book-entry transfer of the collateral securities, if such is the case, from the borrower's CSD account to the TWSE custodial account exclusively used for collateral securities against securities borrowing.
- The borrower's borrowing quote will become effective upon the TWSE's confirmation that the aggregate value of the designated collateral satisfies the original margin requirement.
- Upon posting of collateral in a sufficient amount, the borrower may at any time instruct the securities firm to change the quantity, return date, or to withdraw the quote through the TWSE securities lending system with respect to any unexecuted portion of the original borrowing quote.
- Upon withdrawal of the borrowing quote, or with respect to the unexecuted portion of the quote, the borrower may instruct the securities firm to apply to the TWSE for return of, or cancellation of pledge on, any excess portion of the cash, bank guarantee(s), book-entry central government bond(s) or other collateral it has provided. The TWSE will forthwith notify the central securities depository to effect a book-entry transfer of the excess portion of collateral securities, if such is the case, from the TWSE custodial account of exclusive use for collateral securities against securities borrowing back to the borrower's CSD account.
- Upon execution of a transaction for the borrowing quote with a lending quote through a matching process, the TWSE will forthwith notify the central securities depository to effect a book-entry transfer of the subject securities on hold from the CSD account of the lender to that of the borrower.
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| Article 19 | In fixed-price transactions, borrowing quotes are matched against lending quotes that state the same terms and conditions with respect to the recall notification period, on a transaction-by-transaction basis and in an order of priority determined as follows:
- With respect to borrowing quotes:
- Where the quantity from all lending quotes does not exceed that from all borrowing quotes, transactions will be executed for all lending quotes.
- Where the quantity from all lending quotes exceeds that from all borrowing quotes, the lending quotes will be matched in a random order determined by computer.
- With respect to lending quotes:
- Where the quantity from all borrowing quotes does not exceed that from all lending quotes, transactions will be executed for all borrowing quotes.
- Where the quantity from all borrowing quotes exceeds that from all lending quotes, the borrowing quotes will be matched in the order of the time they are entered.
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| Article 20 | A quote to lend or borrow securities through a competitive bid transaction, any change or withdrawal of such a quote, and the book-entry transfer of securities shall be handled in the following manner:
- In the case of a quote to lend securities, its change or withdrawal, and book-entry transfer of securities:
- A lender submitting a quote to lend securities shall have a securities firm to enter the account number, name of subject securities, quantity, recall notification period, and ask rate into the TWSE securities lending system.
- Upon receipt of the lending quote, the TWSE will notify the central securities depository over a computer network to check the subject securities in the lender's CSD account and put the subject securities on hold to make them available for lending; the quote will be invalid if the lender does not have enough subject securities in its account.
- A valid lending quote shall remain valid until executed, changed, or withdrawn, or if partially executed, remain valid with respect to the unexecuted portion.
- With respect to any unexecuted portion of the lending quote, the lender may at any time instruct the securities firm to reduce the lending quantity or the ask rate of lending fee through the TWSE securities lending system, whereupon the TWSE will give notice of the reduction to the central securities depository to make a corresponding change to the quantity of subject securities put on hold.
- With respect to any unexecuted portion of the lending quote, the lender may at any time instruct the securities firm to withdraw its quote through the TWSE securities lending system. When the lender withdraws its lending quote, the TWSE will forthwith notify the central securities depository to release the subject securities put on hold for the unexecuted portion of the lending quote in the lender's CSD account.
- Upon execution of a transaction for the lending quote with a borrowing quote through a matching process, the TWSE will forthwith notify the central securities depository to effect a book-entry transfer of the subject securities on hold from the CSD account of the lender to that of the borrower.
- In the case of a quote to borrow securities, its change or withdrawal, and book-entry transfer of securities:
- A borrower submitting a quote to borrow securities shall have a securities firm to enter the account number, name of subject securities, quantity, return date, recall notification period, securities borrowing fee rate, and details of collateral to be provided, into the TWSE securities lending system. The TWSE will notify the central securities depository over a computer network to effect a book-entry transfer of the collateral securities, if such is the case, from the borrower's CSD account to the TWSE custodial account exclusively used for collateral securities against securities borrowing.
- The borrower's borrowing quote will become effective upon the TWSE's confirmation that the aggregate value of the designated collateral satisfies the original margin requirement.
- Upon posting of collateral in a sufficient amount, the borrower may at any time instruct the securities firm to change the quantity, securities borrowing fee rate (the time of change is deemed the new order time), return date, or to withdraw the quote through the TWSE securities lending system with respect to any unexecuted portion of the original borrowing quote.
- Upon withdrawal of the borrowing quote, or with respect to the unexecuted portion of the quote, the borrower may instruct the securities firm to apply to the TWSE for return of, or cancellation of pledge on, any excess portion of the cash, bank guarantee(s), book-entry central government bond(s) or other collateral it has provided. The TWSE will forthwith notify the central securities depository to effect a book-entry transfer of the excess portion of collateral securities, if such is the case, from the TWSE custodial account of exclusive use for collateral securities against securities borrowing back to the borrower's CSD account.
- Upon execution of a transaction for the borrowing quote with a lending quote through a matching process, the TWSE will forthwith notify the central securities depository to effect a book-entry transfer of the subject securities on hold from the CSD account of the lender to that of the borrower.
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| Article 21 | In competitive bid transactions, borrowing quotes are matched against lending quotes that state the same terms and conditions with respect to the recall notification period, on a transaction-by-transaction basis and in an order of priority determined according to the following principles:
- If the securities borrowing fee rate entered for a borrowing quote is at a rate higher than or equal to the lowest ask rate among all lending quotes, the borrowing quantity will be matched against one or more of the lending quotes available from among the lenders, determined in ascending order of the ask rates quoted by the lenders, until the borrowing quantity is reached; if the borrowing quantity is reached at a rate at which the total quantity from all lending quotes at that rate is higher than the quantity needed to be borrowed, one or more of those lending quotes will be selected on a random basis for matching, until the needed quantity is reached.
- If the ask rate entered for a lending quote is at a rate lower than or equal to the highest securities borrowing fee rate among all borrowing quotes, the lending quantity will be matched against one or more of the borrowing quotes available from among the borrowers, determined in descending order of the borrowing fee rates quoted by the borrowers, until the lending quantity is reached; if the lending quantity is reached at a rate at which the total quantity from all borrowing quotes at that rate is higher than the quantity offered for lending, one or more of those borrowing quotes will be selected for matching, on a transaction-by-transaction basis and in the order of the time they are entered, until the needed quantity is reached.
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| Article 22 | If a borrower in a fixed-price or competitive bid transaction specifies in the borrowing quote that the securities thus borrowed will be used to satisfy the return obligation of another borrowing transaction, then the borrower, notwithstanding the provisions of Article 33 to the contrary, need not provide collateral for the present borrowing transaction, and upon execution of the present borrowing transaction through the matching process, the TWSE will notify the central securities depository to proceed with the return of the loan by transferring the securities thus borrowed to the specified lender's CSD account, as per the instructions of the borrower.
The quantity of securities in a borrowing quote under the preceding paragraph shall not exceed the quantity of securities not yet returned for the specified securities borrowing transaction record, and the borrower may engage in such a practice only through the same securities firm and via the same securities borrowing account.
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| Article 23 | A negotiated transaction shall be conducted in the following manner:
- A borrower and a lender shall negotiate and agree between themselves on the terms and conditions of a securities loan that cover, with respect to the securities to be loaned, the type, quantity, lending rate, loan period, and with respect to the collateral to be provided, the type, terms and conditions, and how entitlement compensation will be made, and shall enter into a Negotiated Securities Loan Transaction Agreement (in the form set out in Appendix 3 hereto), under which the borrower shall provide collateral to the lender.
- The borrower and the lender shall respectively instruct their authorized securities firm to submit on their behalf regulatory filings reporting the execution of the borrowing transaction and reporting the execution of the lending transaction by entering the information of the regulatory reports into the TWSE securities lending system, specifying therein such information as the name of securities, borrowing/lending quantity, lending fee rate as executed for the transaction, return date, securities book-entry transfer date, collateral margin, the borrower's securities borrowing and lending account and that of the lender, and the securities book-entry transfer date, which transfer date may be either the report filing date or the next following business day; and the borrower and the lender may submit their respective regulatory filing reporting the execution of the negotiated transaction through the same or through different securities firms.
- Where the securities book-entry transfer date of the filed regulatory report on the execution of the lending transaction is the report filing date, the TWSE will thereupon notify the central securities depository to put the subject securities on hold to make them available for lending; the lending transaction report will become invalid if the lender does not have sufficient securities on deposit in its CSD account.
- No change may be made to the loan terms and conditions stated in the filed regulatory report on the execution of the negotiated transaction once the TWSE confirms that those in the regulatory report on the execution of the borrowing transaction are consistent with those in the regulatory report on the execution of the lending transaction. If the securities book-entry transfer date is the next business day following the report filing date, the lender and the borrower may, acting jointly, apply for withdrawal of that negotiated transaction report at any time from the TWSE's confirmation until before 10 am on the securities book-entry transfer date.
- Where the securities book-entry transfer date of the regulatory reports on the execution of the negotiated transaction is the report filing date, the TWSE upon confirmation will notify the central securities depository to transfer the securities.
- Where the securities book-entry transfer date of the regulatory reports on the execution of the negotiated transaction is the next business day following the report filing date, the TWSE will give notice to the central securities depository at 10:30 am on that day advising it to transfer the securities; the negotiated transaction report will become invalid if the lender does not have sufficient subject securities on deposit in its CSD account, in which case the TWSE will not execute the transaction and will thereupon issue a notice to the lender and borrower through their securities firm(s).
- With respect to a subject security halted from borrowing and lending transactions, any report on the execution of the negotiated transaction that has already been entered into the TWSE computer system before the halt occurs but the paired trade is not yet approved shall remain valid. After the borrower and lender have negotiated and reached agreement, they may engage the securities firm to cancel or reduce the quantity of the original quote.
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| Article 24 | Where in a regulatory report on the execution of a negotiated transaction the securities book-entry transfer date is specified as the next business day following the report filing date, if a circumstance arises that the borrower needs to sell the borrowed securities before they are transferred to its CSD account, it may only do so though the authorized securities firm that has submitted on its behalf the regulatory filing reporting the execution of the borrowing transaction.
If after the borrower under the preceding paragraph has executed the securities sale transaction the transfer of securities for the negotiated transaction fails to be completed by the due date, making the borrower unable to satisfy its delivery obligation with the securities firm handling the sell order, the TWSE will, depending on which party is held responsible for such failure, halt or terminate the lender's or borrower's participation in securities borrowing and lending transactions, or otherwise announce an event of default on the part of the lender or borrower.
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| Article 25 | The period of a securities loan may not exceed 6 months in maximum, starting from the execution date of the loan transaction.
The borrower may return the borrowed securities any time during the agreed period.
If the lender does not make a recall request during the term of the loan, the borrower may, at any time during the period from the tenth business day before expiration of the loan term to the expiration date, submit a notice through the TWSE to the lender requesting renewal of the loan; the lender shall be deemed to have refused to grant consent if it does not otherwise indicate upon receipt of the notice.
The request for renewal of a loan under the preceding paragraph may be granted with two extensions each not more than 6 months, and no term or condition of the loan may be changed except solely for the loan period.
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| Article 26 | In a fixed-price or competitive bid transaction, the subject securities shall be returned within the following timeframe, and in the following manner, as the case may be:
- Return of securities on due date: the TWSE will, 10 business days prior to the scheduled return date, notify the borrower through the securities firm to return the subject securities.
- Return of securities before due date: the borrower may return the subject securities, in whole or in part, at any time from the next business day following the borrowing date.
- Lender's request for early return of securities: the lender may claim return of subject securities in whole or in part on any date which is one, three, or 10 business days prior to the date to be scheduled as the early return date in accordance with the terms and conditions under which the borrowing/lending application is made; the borrower shall return the subject securities as requested, in one or more batches, starting from the next business day following the receipt of the notice.
- Compulsory early return of securities:
- When upon review the subject securities are no longer found eligible or are halted from lending transactions, the TWSE may notify the borrower to return securities in satisfaction of the loan within a specified period of time.
- If the issuer of the subject securities undergoes a merger or consolidation, capital reduction, or any other event affecting the exercise of shareholder's rights by the lender, or performs a split or reverse split of ETF beneficial certificates, the borrower shall return securities in satisfaction of the loan by the sixth business day before the book closure date.
- If the subject securities are the subject of an announcement of suspension of trading, where the time for resumption of trading is not specified, or of delisting from the TWSE or GTSM, the borrower shall return securities in satisfaction of the loan within a period of time specified by the TWSE.
- If due to a natural disaster or other emergency, the trading on the securities market is suspended across the board and the time for resumption of trading is not specified, the borrower shall return securities in satisfaction of the loan within a period of time specified in a TWSE announcement.
Upon receipt of a regulatory report on securities return filed by the borrower through its securities firm via the TWSE securities lending system, the TWSE will notify the central securities depository to effect a book-entry transfer of the securities to be returned, from the CSD account of the borrower back to that of the lender, with a notice to the borrower and the lender respectively through their securities firms.
The borrower's obligation, liability, and duty arising from its borrowing of securities are not satisfied unless and until all subject securities borrowed, all entitlements incurred during the borrowing period, and all relevant fees and expenses are fully returned or paid.
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| Article 27 | A borrower in a negotiated transaction shall return the subject securities within the following timeframe, and in the following manner, as the case may be:
- Return of securities on due date: the TWSE will, 10 business days prior to the agreed return date, give notice to the borrower's authorized securities firm, to be forwarded to the borrower, advising it to return the securities.
- Return of securities before due date: the borrower and the lender may between themselves agree that the return of securities be made at any time before the due date, and the two parties shall instruct their authorized securities firms to submit a regulatory filing to the TWSE reporting the change of return date.
- Compulsory early return of securities: upon occurrence of any of the circumstances under subparagraph 4, paragraph 1 of the preceding article, the borrower shall return the securities within the relevant period of time specified in that subparagraph.
Upon receipt of a regulatory report on securities return from the borrower, as entered by its authorized securities firm on its behalf into the TWSE securities lending system, the TWSE will notify the central securities depository to effect a book-entry transfer of the subject securities to be returned, from the CSD account of the borrower to that of the lender, with a notice to the borrower and the lender respectively through their securities firms.
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| Article 28 | The TWSE shall make the following information available for query over a computer network or the Internet:
- With respect to fixed-price transactions:
- The fixed rate.
- Execution information: display the total volume of executed transactions in each security.
- Lending information: display the total volume of unexecuted lending orders for each security.
- Borrowing information: display the total volume of unexecuted borrowing orders for each security.
- With respect to competitive bid transactions:
- Execution information: upon order matching and execution of each transaction, display the name of the security, quantity, and rate, and the total volume of executed transactions in that security.
- Lending information: display the lending quantity and rate of the best five lending quotes in each security, and the total lending volume in that security.
- Borrowing information: display the borrowing quantity and rate of the best five borrowing quotes in each security, and the total borrowing volume in that security.
- With respect to negotiated borrowing transactions: a statement showing the balances of securities on loan.
The TWSE will publish statements of balances of loaned securities on a daily basis, for which the balances of loaned securities for fixed-price and competitive bid transactions may be incorporated into the statements of balances of loaned securities for negotiated transactions.
The TWSE may adjust the information items as necessary based on the market situation.
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| Article 29 | The collateral securities received by the TWSE in conducting securities loan transaction business shall be delivered to the custody of the central securities depository.
Upon execution of a securities loan transaction, the central securities depository shall make a notation on the borrowed subject securities as per notification from the TWSE. The same does not apply, however, to securities borrowed through a securities borrowing and lending account of a securities firm or of a securities finance enterprise.
No subject securities on which a notation has been made under the preceding paragraph may be transferred or withdrawn, except for the following purposes:
- For sale through a sell order given to a securities firm.
- For returning securities borrowed or for compensating for securities entitlements.
- For returning spot securities in short sales.
- For the purposes associated with the exercise of call (put) warrants, equity options, and other equity-type financial instruments.
- For use in the in-kind creation or redemption of units of ETFs, futures ETFs, or offshore ETFs.
- For such other purposes as may be approved by the TWSE.
When borrowed securities are used for the in-kind creation of units of ETFs or offshore ETFs under subparagraph 5 of the preceding paragraph, any further lending thereof is prohibited.
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| Article 30 | Any money or securities returnable or payable by the TWSE to an SBL participant shall be delivered through book-entry transfer, among which the money, with the sole exception of cash collateral, which shall be handled pursuant to Article 33-2, shall be transferred by the TWSE to the designated financial institution account of the securities firm and then forwarded by the securities firm to the deposit account opened and maintained by the SBL participant at a financial institution, whereas the securities shall be transferred through the central securities depository directly to the CSD account of the SBL participant.
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| Article 31 | An SBL participant placing an order with a securities firm to lend, borrow, or return securities shall fill out an order ticket marked "LEND", "BORROW", or "RETURN", and upon successful execution of the borrowing or lending transaction, the securities firm shall, based upon the transaction information on record with the TWSE, prepare and issue a securities loan report marked "LEND", "BORROW", or "RETURN" and any other supporting documents, in the form and content as separately announced by the TWSE.
The provisions of Article 75 of the TWSE Operating Rules shall apply mutatis mutandis with respect to the preceding paragraph.
The TWSE shall, by means of file transfer, notify the borrower's securities firm regarding the original margin and maintenance margin requirements.
For any ex-rights or ex-dividend notification or any relevant calculation statement, the TWSE shall deliver a copy to each relevant SBL participant through its securities firm.
Upon repayment and satisfaction of a securities loan transaction, the TWSE shall, after settlement of accounts, prepare statements of the lending fee, lending income, return of collateral, and net receipt or payment of money, and deliver a copy thereof to each relevant SBL participant through its securities firm.
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| Article 31-1 | A securities firm or borrower in a fixed-price or competitive bid transaction shall remit payments to the bank account, in the formof a virtual account,designated by the TWSE, according to the Instructions on the Remittance of Securities Borrowing and Lending Payments to Virtual Accounts (Appendix 2):
- Cash collateral, or additional cash collateral to cover a shortfall, as provided by a securities borrower pursuant to Article 33-1, paragraph 1.
- Compensation for cash entitlements, payments for subscription to newly issued shares, and securities lending fees delivered by a securities firm on behalf of an SBL participant, as calculated according to Article 31, paragraphs 4 and 5.
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| Article 32 | An SBL participant applying for terminating its securities borrowing and lending account shall fill out an Application Form for Termination of Securities Borrowing and Lending Account, and the TWSE will approve of the account cancellation when it has confirmed that all of the SBL participant's securities borrowing and lending transactions and all of its obligations have been fully settled and satisfied.
When entertaining an application for account cancellation, the securities firm may proceed with the cancellation by correspondence or electronic means that is sufficient to identify the applicant as the SBL participant itself or its indication of intent.
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| Article 33 | A borrower placing an order with a securities firm to submit a quote for borrowing securities through a fixed-price or competitive bid transaction shall satisfy the requirement of providing sufficient eligible collateral, which may take the following forms only:
- Cash, which may only be New Taiwan Dollars. However, an offshore foreign institutional investor or a securities borrowing and lending account of a securities firm or of a securities finance enterprise may provide foreign currency as collateral. The types of foreign currency are limited to the United States Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), and Hong Kong Dollar (HKD).
- Collateral securities, which may only be securities eligible for margin purchases and short sales, and shall only be Taiwan 50 Index constituent stocks and securities investment trust fund beneficial certificates issued by such index if the borrower is not a designated institutional investor or designated offshore foreign institutional investor as mentioned in Article 12-1.
- Bank guarantee issued by a Taiwan bank or a Taiwan branch of a foreign bank, which bank is accredited by the TWSE.
- Book-entry central government bonds.
The collateral under the preceding paragraph shall be provided in the following manner:
- Cash: to be credited by the borrower through book entry transfer directly to a cash collateral account at a bank as designated by the TWSE.
- Collateral securities: the TWSE will, based on the name and quantity of the collateral securities entered into the system by the securities firm on behalf of the borrower, give notice to the central securities depository over a computer network instructing it to transfer the borrower-specified collateral securities from the borrower's CSD account to the TWSE custodial account exclusively used for collateral securities against securities borrowing, thereby transferring the collateral securities to the TWSE to serve as security against the loan. The same shall also apply where the borrower uses collateral securities to cover a collateral shortfall.
- Bank guarantee: upon completion of guarantee procedures with a bank, the borrower shall file an application through the securities firm, with the original bank letter of guarantee submitted to the TWSE or electronically transmitted by the securities firm through the bank to the finance blockchain platformrecognized by the TWSE (Blockchain Platform),for approval by the TWSE in reply.
- Book-entry central government bonds: the borrower shall create and register a pledge on, or register a title transfer of, the bonds in favor of the TWSE.
TheTWSE may reject any collateral that would otherwise be eligible under paragraph 1 if it so deems appropriate having regard to its market liquidity or risk status; if any such collateral has been accepted and received as security for a loan, the TWSE may notify the relevant borrower to replace the collateral.
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| Article 33-1 | When placing an order with a securities firm to submit a quote for borrowing securities through a fixed-price or competitive bid transaction, a borrower shall provide collateral to the TWSE in an amount equivalent to the current day's auction reference price at market opening or base price for first trading of the subject securities multiplied by the quoted quantity and further by the original margin (140 percent). From the day on which the securities loan transaction is executed, the total collateral value for the given securities borrowing transaction shall be marked to market daily using the current day's closing price, and a ratio shall then be calculated by dividing the total collateral value thus obtained, after deduction of relevant fees and expenses required for the borrowing of securities, by the sum of the total value of the subject securities plus total cash dividends; if the ratio thus obtained falls below the maintenance margin (120 percent), then upon receipt of a notice from the TWSE as forwarded by the securities firm, the borrower shall provide additional collateral on the next business day to cover the shortfall, so that the collateral value will be brought back to the original margin level or above.
The term "total collateral value" referred to in the preceding paragraph shall be equal to the sum of the current day's closing price of collateral securities multiplied by quantity and further by a valuation percentage, plus the par value of book-entry central government bonds multiplied by quantity and further by a valuation percentage, plus the total cash collateral, and plus the total bank guarantee amount.
The value of a cash collateral provided or an additional cash collateral provided to cover a shortfall, by a borrowerin foreign currency pursuant to paragraph 1, is the value as converted into New Taiwan Dollars at the buying rate upon closing of the previous business day of a bank designated by the TWSE.
Of the "total collateral value" referred to in paragraph2, the foreign currency collateral value is the value as converted into New Taiwan Dollars at the buying rate at 3:30 pm of the current day of a bank designated by the TWSE. Fractions of a dollar do not count
If a circumstance arises where a collateral security is traded ex-rights or ex-dividend, with the exception of cash capital increases, then for the 3 business days prior to the ex-rights or ex-dividend date, the collateral value shall be calculated using the respective current day's closing price minus the value of the dividend or the value of the rights, as the case may be.
If the closing price referred to in paragraphs 1, 2 and 5 of this article and in Articles 44 and 47 is not available for the given day, the closing price shall be determined by one of the following principles:
- When the highest bid price at market close on the day the security is loaned is higher than the auction reference price at market opening or the base price for first trading, the highest bid price will be the closing price.
- When the lowest ask price at market close on the day the security is loaned is lower than the auction reference price at the opening of market or base price for first trading, the lowest ask price will be the closing price.
- When neither of the above circumstances applies, the auction reference price at market opening or the base price for first trading will be the closing price.
The valuation percentage for collateral securities shall be 70 percent for -listed securities, 60 percent for GTSM-listed securities, and 90 percent for book-entry central government bonds. The valuation percentages may be adjusted by the TWSE with regard to market liquidity or risk status.
In a negotiated transaction, the lender and the borrower shall negotiate and agree between themselves on the terms and conditions, and the margins required, as to the collateral and shall between themselves arrange for the furnishing of the collateral.
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| Article 33-2 | If the fixed-price or competitive bid transaction contemplated by a quote for securities borrowing is not executed, then upon application by the borrower, the TWSE shall return the collateral furnished by the borrower in the following manner:
- In the case of cash, a money transfer will be made on the next business day directly into a bank account designated by the borrower. A foreign currency collateral shall be returned in the original foreign currency, and the borrower may not apply for converting said collateral into New Taiwan Dollars.
- In the case of collateral securities, a notice will be given to the central securities depository to transfer the collateral securities from the TWSE custodial account exclusively used for collateral securities against securities borrowing, back to the borrower's CSDaccount.
- In the case of a bank guarantee, on the next business day, the original guarantee documentation will be returned to the borrower, or the borrower may apply on the Blockchain Platformthrough the bank for return, subject to approval by the TWSE in reply.
- In the case of book-entry central government bonds, if they were provided as collateral through creation of a pledge, the creation of the pledge will be deregistered on the current day, or if they were provided as collateral through transfer of ownership, a notice will be given to the clearing bank to register a re-transfer in favor of the borrower.
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| Article 33-3 | A borrower in a fixed-price or competitive bid transaction may apply to withdraw any excess collateral for which the pledged collateral value exceeds the original margin requirement.
Where a borrower applies for withdrawing a foreign currency cash collateral, the value of said collateral is the value as converted into New Taiwan Dollars at the buying rate upon closing of the previous business day of a bank designated by the TWSE. Fractions of a dollar do not count.
To apply to withdraw any excess collateral, the borrower shall instruct a securities firm to submit a withdrawal application on its behalf via the TWSE securities lending system; upon receipt of the application, the TWSE will proceed pursuant to the preceding article as applied mutatis mutandis.
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| Article 34 | A borrower in a fixed-price or competitive bid transaction applying to replace collateral shall do so through its securities firm, using the TWSE securities lending system, and shall provide substitute collateral before submitting an application to withdraw the previously pledged collateral within the value of the substitute collateral (in the case of collateral securities, the value shall be discounted at the collateral valuation percentage based on the auction reference price at the opening of market or base price for first trading for the current day on the exchange market).
Upon occurrence of any of the following circumstances to the collateral provided against a securities borrowing transaction, the TWSE shall forthwith give notice to the securities firm, to be then forwarded to the borrower, advising the borrower to replace the collateral on the next business day:
- Where the collateral securities do not conform to subparagraph 2, paragraph 1, Article 33 or otherwise are subject to an event of altered trading method, capital reduction, suspension of trading, delisting from the TWSE or GTSM, or split or reverse split of ETF beneficial certificates.
- Where the bank guaranteeing the performance of obligation becomes insolvent or, by the operation of law, is put under receivership or rehabilitation or files for reorganization or bankruptcy, or is declared bankrupt or subject to court ruling for reorganization, or has any other event involving significant loss of creditworthiness.
- Any other event sufficient to result in a low value or liquidity of the collateral.
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| Article 35 | The TWSE shall pay interest on the cash collateral provided by a borrower in a fixed-price or competitive bid transaction, at an interest rate determined based upon the demand deposit interest rate of the bank of the TWSE.
When the interest rate described in the preceding paragraph is adjusted, the interest rate after adjustment shall be used, as of the date of adjustment, to calculate the interest payable with respect to the then outstanding portion of the borrowing transaction.
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| Article 36 | A borrower in a fixed-price or competitive bid transaction shall, through a securities firm and via the TWSE securities lending system, repay the lender in the following manner any cash dividends, stock dividends, or other benefits that the lender would have received if it had not lent the subject securities:
- In the case of cash entitlements:
- The TWSE will, no later than 5 business days before the distribution date, notify the borrower through its securities firm.
- The borrower shall through its securities firm credit the cash amount to the TWSE's designated bank account, and have the securities firm enter the information on the return of entitlements into the TWSE securities lending system, on the same day when the distribution is made, and the TWSE upon confirmation of accuracy will afterwards, either on that day or on the next business day, transfer the amount to the lender through its securities firm. Notwithstanding, distribution will be postponed to the day trading resumes or to the nextbusiness day in the event the securities market is closed due to an act of God on the distribution day.
- In the case of securities entitlements:
- The TWSE will notify the lender through its securities firm after the holder-of-record date, and if the lender, within 3 business days starting from the date of the notice from the TWSE, enters a message into the TWSE securities lending system indicating its option to have securities or cash of equivalent value returned, the TWSE will give notice to the borrower through its securities firm to that effect, and give further notice to the borrower through the securities firm 3 business days prior to the distribution date. The TWSE will cause securities to be returned if the lender fails to enter the message indicating its option within the time limit.
- To return securities, the borrower shall give notice through its securities firm and via the TWSE securities lending system to the central securities depository within 3 business days starting from the distribution date, instructing it to effect a book-entry transfer of the securities to the lender from the borrower's CSD account, or in the case of returning cash of equivalent value, effect the return on the distribution date in the same manner as cash entitlements, in an amount determined based upon the ex-rights reference price.
- In the case of rights to subscribe to newly issued securities:
- The TWSE will, 5 business days prior to the end of the period for subscribing to securities in a new issue, notify the lender through its securities firm and the lender shall, 3 business days prior to the end of the subscription period, declare its intention to subscribe, if so desired, by giving notice through its securities firm to the TWSE and, also through its securities firm, credit the money to the TWSE's designated bank account, to be further transferred via the TWSE securities lending system and through the securities firm to the borrower, for the latter to subscribe to the securities, or otherwise to buy in the securities in the market, for the account of the lender.
- The TWSE will, no later than 3 business days prior to the distribution date for the newly issued securities, give notice to the borrower through its securities firm and the borrower must, within 3 business days starting from the distribution date, give notice through the securities firm via the TWSE securities lending system to the central securities depository to effect a book-entry transfer of the securities to the lender from the borrower's CSD account.
- The lender shall be deemed to have waived the right to subscribe to the newly issued shares if it tardily declares or fails to declare its intention to subscribe or if it, having so declared, fails to pay the subscription price within the required time limit.
To exercise the right to subscribe the newly issued securities stated in the Subparagraph 3, Paragraph 1 of this Article,a borrower in a fixed-price or competitive bid transactionshall ask for returning the securities before the last holder-of-record dateand actively join the subscription, if the subscribed shares are the preferred sharesof a issuing company or the newly issued shares of a company that is not listed on the Taiwan Stock Exchange, nor traded on theTaipei Exchange; failing to do so, the lender shall be deemed to have waived the right to subscribe to the newly issued shares.
In a negotiated transaction, the borrower and the lender shall negotiate and agree between themselves on how to deal with any cash entitlements, securities entitlements, and subscription rights for newly issued securities that the lender would have received if it had not lent the securities, as well as on the exercise of any rights attaching to shares. In the case of securities entitlements, the TWSE will calculate the amount by reference to the number of subject securities borrowed and not yet returned by the borrower, exclusive, however, of any securities entitlements not yet repaid or returned by the borrower. If any such securities entitlements require a book-entry transfer, the transfer shall be made through the TWSE securities lending system.
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| Article 37 | A borrower shall have its securities firm enter into the TWSE securities lending system the information on any outstanding balances of borrowed subject securities that remain in its CSD account after the holder-of-record date, within 10 business days after the holder-of-record date for any distribution of cash entitlements or securities entitlements on such subject securities.
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| Article 38 | In the event of book closure by an issuing company of collateral securities, the TWSE shall prepare a title transfer list and electronic data file incorporating information on the securities of that issuing company, and further, on the business day preceding the issuing company's book closure date, deliver the same to the central securities depository to effect the title transfers with the issuing company or with its stock registrar and transfer agent on behalf of the relevant parties.
A lender in a fixed-price or competitive bid transaction wishing to exercise any attached voting rights shall make a recall request prior to the holder-of-record date for the relevant shareholders' meeting and in accordance with the recall notification period under the original lending terms; the TWSE will give notice to the securities firm, to be forwarded to the borrower, advising of the request.
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| Article 39 | Upon occurrence of any of the following circumstances to an SBL participant in a fixed-price or competitive bid transaction, the TWSE will, as from the next business day, place an order with a securities firm to, under the name of the Taiwan Stock Exchange Corporation Borrowing and Lending Transaction Processing Account opened and maintained by the TWSE, submit a quote to buy in subject securities on the exchange or GTSM to return securities in satisfaction of the loan, and further, to the extent necessary for the full satisfaction of the monies required for the execution of the order to buy in securities and other related fees and expenses, dispose of the loan collateral, or otherwise demand payment of the guaranteed amount from the guaranteeing bank, as the case may be.
- Where the borrower fails to return the subject securities within the time limit when the loan becomes due, or when the lender makes a recall request, or when any cause for compulsory early return of securities exists under Article 26, paragraph 1, subparagraph 4, (1) or (2).
- Where the borrower fails to pay entitlement compensation to the lender by the payment date for such entitlement compensation.
- Where the borrower fails to cover any collateral shortfall, or to provide eligible collateral for replacement, by the specified date and time.
- Where the borrower fails to pay any fee by the due date for payment.
Any processing fees incurred in connection with the buy-in of subject securities or disposal of loan collateral shall be borne by the borrower, and the borrower may not raise any objection as to the timing, quantity, and price at which the TWSE places an order to buy in subject securities or dispose of loan collateral, as the case may be.
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| Article 40 | If the proceeds arising from the disposal of collateral under the preceding article and the amount payable to the borrower are not sufficient to fully cover the price required for the buy-in of securities and other related fees and expenses, the TWSE may, to the extent necessary for the settlement of the remaining obligations, cause an early loan return to be made by buy-in of securities, and/or effect any disposal of collateral, on any other securities loan transaction of the borrower, and use the proceeds thus obtained to cover the aforesaid shortfall, after deduction of the price of and other fees and expenses related to each such buy-in transaction. there is any surplus, the SBL participant may submit a request through its securities firm to withdraw the surplus collateral. the SBL participant's obligations remain not fully satisfied, and if the SBL participant fails to settle the obligations within the time limit specified in a notice from the TWSE, such failure shall then constitute an event of default, in which case the TWSE may, with respect to each and any outstanding securities lending position of the SBL participant, request an early return of securities from the corresponding borrowing counterparty on such terms as set out in the original loan transaction, and notify the central securities depository to transfer the returned securities to the TWSE's account exclusively used for collateral securities against securities borrowings, and then place an order with a securities firm to sell the securities, in whole or in part, for realization of cash to settle the remaining obligations, or otherwise may seek to recover the unsettled amount(s) from any other property of the SBL participant.
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| Article 41 | If trading on the exchange market or the GTSM is suspended across the board, or any subject securities are the subject of an announcement of suspension of trading, and the time for resumption of trading is not specified, of if any subject securities are delisted, thereby rendering it impossible for a borrower to return securities in satisfaction of a securities loan, the TWSE will, if the loan arises from a fixed-price or competitive bid transaction, have a securities firm to submit an application on its behalf to buy in subject securities through a reverse auction to return the loan, in which case Article 39, paragraph 1 shall apply mutatis mutandis with respect to the disposal of collateral for the full satisfaction of the price and fees and expenses required for the buy-in of securities. However, if the loan arises from an outstanding negotiated transaction, then the lender and the borrower may agree between themselves that the loan be repaid by cash, or either of them may submit an application through its authorized securities firm to the TWSE for purchase of subject securities through reverse auction.
Any fees and expenses arising from a reverse auction under the preceding paragraph shall be borne, on a pro rata basis, by all borrowers who have any outstanding positions of fixed-price or competitive bid transactions on that security, and all borrowers in negotiated transactions on that security who are involved in the application to purchase through reverse auction.
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| Article 42 | Upon occurrence of any of the circumstances described in the subparagraphs of Article 39, paragraph 1 to an SBL participant in a fixed-price or competitive bid transaction, the TWSE may halt that party's participation in securities borrowing and lending transactions.
If an event of default under Article 40 occurs to an SBL participant in a fixed-price or competitive bid transaction, the TWSE shall terminate that party's participation in securities borrowing and lending transactions.
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| Article 43 | Upon occurrence of any of the following circumstances to an SBL participant in a fixed-price or competitive bid transaction, all of its outstanding borrowing and lending transactions shall be deemed to become due.
- The SBL participant files for pre-bankruptcy composition, or declares bankruptcy, or is declared bankrupt, under a domestic or foreign bankruptcy law.
- The SBL participant files for reorganization, or is subject to a court ruling for reorganization, or commences any liquidation proceedings, under a domestic or foreign company law.
- The SBL participant is put under receivership or debt clearance procedures by a domestic or foreign competent authority under any banking, insurance or other law.
- The SBL participant defaults on a transaction, or is subject to suspension of trading or cancellation of membership, in a foreign securities or futures market.
- The SBL participant is the subject of a blacklist announcement by a domestic or foreign clearing house.
- The SBL participant is subject to a declaration out of a criminal reason, resulting in seizure or freezing of any of its assets.
- Given the occurrence of any of the circumstances under the preceding subparagraphs to the holding company of the SBL participant or the occurrence of any other circumstance, it is objectively clear and sufficient to ascertain that the SBL participant has lost its ability to carry on general business objects and purposes or has lost its ability to pay.
Upon occurrence of any of the circumstances under the subparagraphs of the preceding paragraph to an SBL participant, the TWSE will take action against the SBL participant's outstanding lending positions by making a request to the corresponding borrowing counterparty for an early return of securities pursuant to the terms and conditions as set out when the loan was made, and notify the central securities depository to transfer the returned securities to the TWSE's account exclusively used for collateral securities against securities borrowings. The TWSE may also, as the circumstances merit, either simultaneously or separately, take the following measures against all or part of the SBL participant's outstanding borrowing positions and, upon unwinding of all its outstanding securities borrowing and lending transactions and upon liquidation of all its relevant claims and obligations, cancel the SBL participant's securities borrowing and lending account.
- Notify the central securities depository to carry out securities loan return operations by transferring subject securities to such lender's CSD account as specified by the TWSE, from those remaining in the SBL participant's (as borrower) CSD account after a buy/sell order is completed and settled.
- Place an order with a securities firm to buy in subject securities in the market for return of securities loan and, to the extent necessary for the full satisfaction of the buy-in price, related fees and expenses and any outstanding obligations, to sell any collateral securities or any securities received from recall of lent securities, or otherwise demand payment of the guaranteed amount from the guaranteeing bank, or sell the book-entry central government bonds, as the case may be.
Upon occurrence of any of the following circumstances to an SBL participant, the TWSE may notify the SBL participant to return all borrowed securities within a specified period of time, failing which the TWSE will take action in accordance with the preceding paragraph.
- The SBL participant is found to have furnished any false or untrue information in its account opening application.
- The SBL participant is subject to an order by a domestic or foreign competent authority for suspension of its business or revocation of its business license.
- The SBL participant is subject to an order of compulsory execution or of provisional attachment, provisional injunction, or other injunctive measure, resulting in the likelihood that its creditors would not be able to obtain payment.
- Given the occurrence of any other circumstance to the SBL participant, or the occurrence of any of the circumstances under the first six subparagraphs of paragraph 1 to its holding company, it is objectively clear and sufficient to ascertain the likelihood that the SBL participant would lose its ability to carry on general business objects and purposes or lose its ability to pay.
Articles 39 and 40 shall apply mutatis mutandis to the processing procedures and related rights and obligations with respect to buy-in of subject securities for return of any securities loan, disposal of securities loan collateral or sale of securities received from recall of lent securities for satisfaction of any obligations.
When the TWSE uses any cash collateral, or any proceeds obtained from the sale of any collateral securities or book-entry central government bonds, or any guaranteed amount transferred by the guaranteeing bank upon demand, to cover the price or amount payable for the buy-in or borrowing of subject securities and any other related fees and expenses, if there is any monies, collateral securities, or lent subject securities remaining after such covering, the TWSE will, depending on the circumstance of each case, return and transfer the remaining monies or securities respectively back to the account designated by the SBL participant or any entitled person, or turn the same over to the court, or otherwise submit a report to the court advising of the processing status.
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| Article 44 | If a circumstance arises under Article 39 or the preceding article that requires a buy-in of securities for return of securities borrowed in a fixed-price or competitive bid transaction, and if due to the constraint of the settlement period the lender is unable to exercise its shareholder's rights in a timely manner, the TWSE may, in addition to placing an order with a securities firm to buy in subject securities, borrow subject securities for return to the lender and effect a further return of securities when the bought securities are credited to the account.
If a circumstance arises under Article 39 or the preceding article that requires a buy-in of securities for return of securities borrowed in a fixed-price or competitive bid transaction, and if due to the trading status of the market generally or the subject securities specifically it is not possible to buy in subject securities within 2 consecutive business days after the date of the circumstance, the TWSE will repay the shortfall by cash in an amount determined by reference to the closing price on the second business day.
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| Article 45 | Upon occurrence of any of the circumstances under subparagraph 1 of Article 39, paragraph 1 to the borrower in a negotiated transaction, the lender shall, either by itself or through its lending agent authorized to keep custody of collateral on its behalf, place an order with a securities firm to buy in subject securities in the exchange market for return of the securities loan, and submit a regulatory filing, together with relevant transaction details, to the TWSE reporting the close-out of the negotiated transaction.
If a circumstance arises under the preceding paragraph, and if due to the trading status of the market generally or the subject securities specifically it is not possible to buy the necessary amount of subject securities, even at a limit-up priceor with market order, within 2 consecutive business days after the date of the circumstance requiring the buy-in action, or if due to a restraint from the ratio of foreign capital allowable for investment in the subject securities it is not possible to buy in the subject securities, the shortfall may be repaid in cash or otherwise offset and settled by collateral, as per the pre-determined criteria set out in the loan agreement or as otherwise agreed between the lender and the borrower.
In the case where the lending agent places an order with a securities firm to, using the brokerage trading account established in the name of the lending agent itself, buy in the subject securities in the exchange market for return of the securities loan, upon confirmation of accuracy regarding the loan transaction record and the transaction execution information, the TWSE will, based on the buy-in amount stated in the submitted regulatory filing, notify the central securities depository to effect a book-entry transfer of subject securities in that amount from the CSD account of the lending agent to that of the lender, and thereby make a note indicating the close-out of the negotiated transaction.
In the event that the borrower in a negotiated transaction is in the circumstances in Article 39, paragraph 1, subparagraphs 1 or 4, or the lender is in the circumstances in subparagraph 4 of the same paragraph, or an SBL participant is in breach ofa negotiated transaction agreementfor securities borrowing and lending,the other participant shall forthwith instruct their authorized securities firm to submit a regulatory filing to the TWSE reporting the handling of the event, the TWSE may halt or terminate the participation in securities borrowing and lending transactionsby the party in one of the above circumstances.
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| Article 45-1 | When an SBLparticipant is in one of the circumstances specified in the subparagraphs of Article 43, paragraph 1, and its negotiated transaction agreement contains a net settlement clause, the other participant may, based on the agreement of the clause, settle all outstanding claims and debts under the negotiated transaction, credit one against the other and pay the difference. Upon completion of settlement, it shall authorize a securities firm to submit a regulatory filing to the TWSE reporting that borrowing and lendingtransactions have been fully settled and satisfiedby submitting the related transaction information and supporting documents to the TWSE.The TWSE will then give notice to the central securities depositoryto remove the note for security borrowing for underlying securities and take other related actions.
When reporting borrowing and lending transactionshave been fully settled and satisfiedin accordance with the preceding paragraph, the authorizedsecurities firm shall submit the following supporting documents:
- Where the circumstances under Article 43, paragraph 1, subparagraphs 1 to 6 exist, documents issued by Taiwan or foreign court or competent authority sufficient to prove the existence of these circumstances are required. For documents issued by a foreign court or competent authority, the documents shall be legalized by Taiwan's embassy or consulate or anequivalent agency.
- Where the circumstances under Article 43, paragraph 1, subparagraph 7 exist, specific supporting documents are required. All these documents, other than those issued by the court or competent authority, shall be notarized or certified. Foreign documents shall be legalized by Taiwan's embassy or consulate or an equivalent agency.
- Evidence of payment of all taxes payable in the Republic of China.
The TWSE will dismiss any and all requests from an authorized securities firm that fails to perform a thorough review on and investigate into the circumstances under the subparagraphs of Article 43, paragraph 1 and fails to submit supporting documents described in the preceding paragraph. In the event an SBL participant has disputes arising therefrom or its rights and interests are damages as a result, the parties shall be responsible for the issue without concern to the TWSE.
Where an authorized securities firm submit a regulatory filing to the TWSE reporting that transactions have been fully settled and satisfiedin accordance with the first paragraph, the TWSE may halt or terminate the participation of a party in one of the circumstances described in the subparagraphs of Article 34, paragraph 1 in securities borrowing and lending transactions.
Where a party to negotiated transaction is in one of the circumstances described in the subparagraphs of Article 43, paragraph 1,and itsnegotiated transaction agreement does not contains a net settlement clause, the provisions of Article 45 shall apply mutatis mutandis.
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| Article 46 | Upon occurrence of any of the circumstances described in Article 39, paragraph 1 to an SBL participant in a fixed-price or competitive bid transaction, the TWSE, in addition to taking any action in a prescribed manner, may charge an additional loan service fee in the amount of 10 percent of the securities lending fee. The TWSE will be entitled to an additional delay interest on any advances made by the TWSE arising from the taking of relevant actions, calculated at the rate of 5 percent per annum for the period from the advance payment date to the date the advance is repaid.
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| Article 47 | The securities lending fee for a fixed-price or competitive bid transaction shall be calculated, on a daily marked-to-market and on a transaction-by-transaction basis, as the sum of the products obtained by multiplying the outstanding balance of subject securities on loan on a given day by the closing price of the subject securities on that day and further by the lending rate fixed upon execution of the loan transaction. The total securities lending fees shall be collected/paid through the securities firm upon return of securities in satisfaction of the loan by the borrower.
The borrowing period shall begin on the date the subject securities are borrowed and end on the day preceding the date they are returned. If on the return date an act of God or accident occurs prompting the TWSE or TPEx to announce closure of the securities market, the next business day shall be treated as the return date. The preceding paragraph shall apply mutatis mutandis when calculating securities lending fees for holidays.
Where in the fixed-price or competitive bid transaction the lender agrees to renew the loan, the securities lending fee shall continue to accrue until, and be collected/paid upon, return of securities in satisfaction of the loan.
If the borrower in a fixed-price or competitive bid transaction makes any early, partial return during the life of the loan, it shall on the next business day settle all lending fees and expenses that have incurred on the securities borrowing transaction. If the borrower in a negotiated transaction makes any early, partial return during the life of the loan, it shall on the next business day settle all processing fees and loan service fees in relation to the securities returned.
The calculation and payment of the securities lending fee on a negotiated transaction shall be negotiated and agreed upon between the borrower and the lender themselves, notwithstanding the provisions of Article 31, paragraph 5.
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| Article 48 | A securities firm shall charge processing fees for providing securities borrowing and lending transaction services, and the TWSE shall charge loan service fees for providing borrowing and lending services on the securities market.
The processing fees and loan service fees, and their rates, for securities borrowing and lending transactions shall be determined by the TWSE in conjunction with the securities association and shall be adopted upon submission to and approval by the competent authority.
The processing fees and loan service feesmentioned in the preceding paragraph are charged according to the TWSE Securities Lending System Processing Fees and Loan Service Fees Schedule (Appendix 3).
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| Article 49 | Except as otherwise stated in Article 42 or 45, if an SBL participant violates or breaches these Rules, the Master Securities Borrowing and Lending Agreement, the Securities Borrowing and Lending Authorization Letter, or any applicable regulations, rules, announcements, or circular letters, the TWSE may halt that party's participation in securities borrowing and lending transactions or notify it to make corrections, depending upon the seriousness of the matter.
If the SBL participant fails to make the correction specified by the TWSE in the notice, the TWSE may terminate that party's participation in securities borrowing and lending transactions.
When an SBL participant's participation in securities borrowing and lending transactions is halted or terminated by the TWSE pursuant to Article 42, 45, or this article, the TWSE shall promptly forward notice to all securities finance enterprises and securities firms. In cases in which participation in securities borrowing and lending transactions has been terminated by the TWSE, the SBL participant may resume its participation in securities borrowing and lending transactions only after one full year following the full satisfaction or performance of its obligations or completion of correction.
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| Article 49-1 | If any of the following circumstances applies to an SBL participant, and the case is not yet closed, the TWSE shall halt the SBL participant's participation in securities borrowing and lending transactions:
- Any breach specified in Article 76, paragraph 3, subparagraph 1 or 3 of the TWSE Operating Rules or Article 47, paragraph 2, subparagraph 1 or 3 of the GTSM Rules Governing Securities Trading on the GTSM.
- Any default or violation specified in Article 81 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities, Article 28 of the Operating Rules for Securities Business Money Lending by Securities Firms, or Article 33 of the Operating Rules for Securities Lending by Securities Firms.
- Any default or violation specified in an individual securities finance enterprise's operating rules for handling margin purchases and short sales, operating rules for securities settlement financing, or operating rules for securities lending.
If participation in any securities loan transaction by a borrower in a fixed-price or competitive bid transaction is halted by the TWSE pursuant to the preceding paragraph, thereby rendering it impossible for the borrower to return securities in satisfaction of a securities loan, the borrower may request the TWSE to apply mutatis mutandis the provisions of Article 39, paragraph 1 with respect to the disposal of loan collateral and the buying in of subject securities for return to the lender.
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