Chapter III Settlement-Driven Securities Borrowing
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Section I Securities Firms
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| Article 50 | If a seller securities firm does not have enough securities in its book-entry custody account available for the satisfaction of a securities settlement obligation, it shall submit a securities borrowing application by 10 am on the second business day after the trade date. the securities firm fails to submit such an application and fails to complete the securities settlement, the TWSE will borrow securities for the account of the securities firm after 11 am, with a notice to that effect to the securities firm on the same day. The securities firm shall pay, and may not raise any objection as to, the securities lending fee thus incurred.
Where the borrowing securities firm is prevented during the suspension of trading of the securities borrowed from redeeming said securities, the TWSE will, in accordance with Article 109, paragraph 2 of the TWSE Operating Rules, issue a securities delivery voucher and forward the same to the securities depository for safekeeping on behalf of the securities firm representing the purchaser.
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| Article 51 | The borrowing securities firm shall, by 11 am on the second business day after the trade date, deposit collateral with the TWSE against the borrowing of securities ("securities borrowing collateral"), in an amount of 120percent of the closing price of the securities on the first day after the trade date, multiplied by the quantity it requests to borrow. If no closing price is available for the preceding business day, the closing price shall be determined by the principles given in Article 58-3, paragraph 2, subparagraphs 2 and 3 of the TWSE Operating Rules.
The provisions of the preceding paragraph in relation to deposit of securities borrowing collateral shall apply mutatis mutandis to a seller securities firm in the case where the TWSE borrows securities for its account or otherwise issues a securities delivery voucher as a temporary substitute for securities to satisfy settlement requirements.
If the borrowing securities firm fails to deposit securities borrowing collateral or otherwise to provide non-cash collateral against the borrowing of securities by 11 am on the borrowing date, the TWSE may temporarily retain any amounts payable for the current clearing period and/or an equivalent portion of securities.
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| Article 52 | Lendable securities shall be restricted to those securities listed on a centralized exchange market and shown in the custody accounts at the central securities depository. An owner of such securities wishing to lend the securities shall fill out a lend order instructing its securities firm or its custodian institution to enter relevant information into a computerized securities borrowing and lending system for a lending quote, and may change or cancel the quote at any time before the conclusion of the lending transaction.
The lending order under the preceding paragraph shall specify the title and quantity of securities to be lent as well as the lending quote and shall be made in a form determined by the TWSE.
The quantity under the preceding paragraph shall be quoted on a per trading unit basis as provided in Article 60 of the TWSE Operating Rules, and the lending rate shall be no more than 7 percent of the closing price of the securities.
In the event that loaned securities go ex-rights or ex-dividend, the borrowing securities firm shall compensate the lender in cash in the amount of the value of the rights or dividends on the securities, as calculated by the TWSE.
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| Article 53 | A settlement-driven securities borrowing request shall be matched against one or more of the lending quotes available from among all lenders, in ascending order of lending rate, 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.
The securities lending fee incurred on a given security shall be shared by all securities firms borrowing that security, on a pro rata basis according to their respective borrowing quantities.
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| Article 54 | A seller securities firm borrowing securities pursuant to Article 50 shall return securities on a daily and transaction-by-transaction basis starting from the next business day. Until it has returned the securities in full, it shall reborrow securities to meet the requirement for returning of securities under the preceding paragraph [sic].
The borrowing securities firm shall complete return of securities by 10 am on a given business day. If the return of securities is not completed by that time, the TWSE will, after 11 am on that day, execute reborrowing of securities for the account of the securities firm, except where the securities firm has purchased securities on the TWSE exchange market and has submitted an application by 10 am to return securities that day and a verification has been made in this regard.
Upon notification from the central securities depository advising that the returned securities are successfully transferred by book-entry, the TWSE will, upon application by the borrowing securities firm, transfer the payment of the securities lending fee out of the securities borrowing collateral to be returned, to the lender through its securities firm, and refund to the borrowing securities firm the balance of the cash collateral remaining after deduction of the securities lending fee, or notify it to withdraw the non-cash collateral, as the case may be.
The securities firm of the lender, or the bank approved by the competent authority to operate custody business and acting as its custodian, shall advise the lender of the status of the securities lent and returned, and may charge the lender a service fee at a rate of not more than 10 percent of the securities lending fee.
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| Article 55 | If, on a day on which a borrowing securities firm reborrows securities for a securities loan not yet returned, the remaining balance of the securities borrowing collateral deposited is lower than 107 percent of the outstanding balance of the securities borrowing multiplied by the closing price of the securities on the preceding business day, then the securities firm shall, by 11 am on the reborrowing date, make additional deposit to bring the level to 114 percent of the outstanding balance of the securities borrowing multiplied by the closing price of the securities on the preceding business day. If there is no closing price available for the preceding business day, the closing price shall be determined by the principles given in Article 58-3, paragraph 2, subparagraphs 2 and 3 of the TWSE Operating Rules.
Where the borrowing securities firm fails to deposit the securities borrowing collateral required under the preceding paragraph, or is unable to return the borrowed securities for a cause attributable to itself, the TWSE will buy in the securities in the market and return them to the lender. The prices needed and all expenses incurred shall first be paid out of the remaining balance of the securities borrowing collateral, and in the event of any shortfall, then be recovered from the borrowing securities firm; any amount remaining thereafter will be refunded to the borrowing securities firm.
The provisions of paragraphs 1 and 2 shall apply mutatis mutandis in the case where the TWSE borrows securities for the account of a seller securities firm or otherwise issues a securities delivery voucher as a temporary substitute for securities to satisfy the settlement requirement.
If the securities firm defaults on its settlement obligations, the TWSE will forthwith suspend the securities firm's participation in securities borrowing and lending transactions.
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| Article 55-1 | A borrowing securities firm may satisfy a requirement for securities borrowing collateral or for covering of a shortfall in securities borrowing collateral arising from a reborrowing of securities, by a bank guarantee or by creating a pledge of book-entry central government bonds (hereinafter collectively referred to as "non-cash collateral").
Where a borrowing securities firm provides non-cash collateral to satisfy a requirement for securities borrowing collateral or for covering of a shortfall in securities borrowing collateral arising from a reborrowing of securities, if the cash portion of the total securities borrowing collateral deposited is insufficient to cover the daily deduction of securities lending fee, it shall transfer on a daily basis the amount of the securities lending fee to a TWSE-designated account, which amount to be forwarded by the TWSE to the lender through its securities firm.
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| Article 55-2 | A borrowing securities firm providing a bank guarantee to satisfy a requirement for securities borrowing collateral or for covering of a shortfall in securities borrowing collateral arising from a reborrowing of securities or to replace any non-cash collateral, shall first complete the guarantee procedures with a bank, and then submit the original bank letter of guarantee to the TWSEor transmit said original letter electronically through the bank to the Blockchain Platform for approval by the TWSE in reply,by 11 am on the borrowing or reborrowing date, as the case may be.
TheTWSE may refuse to accept the bank guarantee provided by the securities firm, or demand the securities firm to replace it within a specified period of time.
The bank guarantee may be denominated only in New Taiwan Dollars (NTD), and shall be in units of thousands of NTD.
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| Article 55-3 | A borrowing securities firm providing pledged book-entry central government bonds to satisfy a requirement for securities borrowing collateral or for covering of a shortfall in securities borrowing collateral arising from a reborrowing of securities or to replace any non-cash collateral, shall first effect a restricted transfer registration with a clearing bank, and then, by 11 am on the borrowing or reborrowing date, as the case may be, transfer the bonds into a book-entry central government bond account designated by the TWSE.
The posted book-entry central government bonds shall be valued at 90 percent of their face value.
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| Article 55-4 | A borrowing securities firm may use one or more book-entry central government bonds and/or bank guarantees to serve as non-cash securities borrowing collateral for one or more securities borrowing transactions.
The maturity date of the bank guarantee or book-entry central government bond, or, in a case where multiple bank guarantees or book-entry central government bonds with different maturity dates are used to serve as non-cash collateral for a single securities borrowing transaction, the earliest maturity date shall extend beyond the return date for the securities borrowing transaction.
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| Article 55-5 | The securities borrowing collateral or non-cash collateral for which a borrowing securities firm submits a refund or withdrawal application pursuant to Article 54, paragraph 3 will be returned in the following manner when the TWSE has verified the receipt of any and all fees payable by the securities firm for borrowing of securities:
- In the case of securities borrowing collateral, the cash collateral will be transferred to the securities firm's bank account.
- In the case of a bank guarantee, the original guarantee documentation will be returned to the securities firm, or the securities firm may apply on the Blockchain Platform through the bank for return, subject to approval by the TWSE in reply.
- In the case of book-entry central government bonds, registration of cancellation of the pledge will be made, and the bonds will be transferred, after cancellation by the clearing bank of the restricted transfer registration, to the clearing bank book-entry central government bond account designated by the securities firm.
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| Article 55-6 | The prices needed for and all expenses incurred from the buy-in of securities in the market by the TWSE for returning the borrowed securities pursuant to Article 55, paragraph 2 shall first be paid out of the cash portion of the securities firm's securities borrowing collateral, and in the event of any shortfall, the TWSE will then dispose of the posted non-cash collateral or otherwise exercise any rights to seek repayment or cover necessary payments; the procedures for disposing of the posted non-cash collateral shall be as follows:
- In the case of a bank guarantee used as non-cash collateral, the TWSE shall seek recovery directly from the guaranteeing bank.
- In the case of book-entry central government bonds pledged as collateral, the TWSE shall dispose of the bonds through the Taiwan Stock Exchange Corporation Account for Events of Default it maintains with a securities firm.
- All expenses arising from or in connection with the disposition of the non-cash collateral shall be borne by the borrowing securities firm.
- The proceeds from the disposition of the non-cash collateral after deducting the amount in arrears shall be returned to the borrowing securities firm; if the proceeds of the disposition are insufficient to cover the amount in arrears, the TWSE shall seek recovery from the securities firm for the insufficient amount.
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Section II Securities Finance Enterprises |
| Article 56 | If a shortfall occurs in a security due to a securities finance enterprise's operation of margin purchase and short sale business, securities lending business and refinancing business (hereinafter, "shortfall in securities in margin and short trading"), or, if the securities finance enterprise is engaged by a securities firm to handle on its behalf any open position that still remains after sell-first buy-later day trading (hereinafter, "shortfall in securities in day trading"), the securities finance enterprise shall initiate a competitive bid loan from the following lenders as from 9 am on the next business day, and if a shortfall still exists, shall arrange for negotiated transaction with any specified persons no later than 2 pm on that day.
- owners of that type of securities
- securities firms or securities finance enterprises operating securities lending business or margin purchase and short sale business
With the exception of a shortfall in securities in day trading, if the shares of the given security obtained following the procedures described in the preceding paragraph are still insufficient in amount, the securities finance enterprise shall engage a securities firm to conduct a purchase of shares by reverse auction at the TWSE by 2:30 pm on the same day.
Any borrowing of securities through competitive bid and negotiated transaction and any purchasing of securities by reverse auction under the preceding two paragraphs shall be suspended for a given security on the second business day preceding the first day of a book closure, except when book closure occurs due to the convening of a special shareholders meeting by the issuer or for reasons that do not affect the exercise of shareholder rights.
The calculation of the business day referred to in the preceding paragraph shall be in accordance with Article 76 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities.
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| Article 57 | A securities finance enterprise wishing to borrow securities through a competitive bid process shall submit an application to the TWSE and thereafter, by 9 am on the competitive bid loan application date, have a staff member enter into the TWSE competitive bid loan system the information on that competitive bid loan, keeping separate those for shortfalls in securities in margin and short trading and those for shortfalls in securities in day trading, and specify the type of securities to be borrowed, quantity, time, and highest acceptable rate. The TWSE will, according to the aggregate quantity of each type of securities to be borrowed through competitive bid, publish such information from 9 am on that day on its Market Information System.
The highest acceptable rate for the borrowing of a security through the competitive bid process, as described in the preceding paragraph, shall in no case be more than 7 percent of the auction reference price at market opening of the security on the competitive bid application date; the borrowing quantity will be matched against one or more of the competitive bids available on that day, determined in ascending order of rate, until the borrowing quantity is reached; if the borrowing quantity is reached at a rate at which the total number of shares offered for lending from all competitive bids at that rate is higher than the number of shares needed to be borrowed through the competitive bid process, one or more of those competitive bids will be selected for matching, in order of the time they are entered, until the needed quantity is reached.
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| Article 58 | A lender as in Article 56, paragraph 1, subparagraph 1 wishing to participate in the competitive bid process for a competitive bid loan shall fill out a bid order and submit it through a securities firm. If it is submitted in person, the bid order shall be filled out and signed/sealed by the securities owner; 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 bid order shall be completed by the associated person handling the bid order. Where an order is placed in the manner of transaction listed in Article 75, paragraph 1, subparagraph 8 of the TWSE Operating Rules, the bid order shall be made according to the relevant operating procedures.
A lender as in Article 56, paragraph 1, subparagraph 2 wishing to participate in the competitive bid process for a competitive bid loan shall fill out a bid order and enter the bid order information in the TWSE competitive bid loan system.
The bid order in the preceding two paragraphsshall specify the name ,name of the dedicated account, brokerage account number, securities lending account number or margin purchase and short sale account number of the lender in Article 56, paragraph 1, subparagraph 1, as well as the name, quantity and rateof securities lent.Securities offered to participate in the competitive bid process may only be securities it has deposited in a custody account at the central securities depository. The securities firm, when accepting a bid 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 competitive bid process for its own account, shall put the lendable securities on hold (except for those securities that have been lent out on the previous business day). The securities firm shall record the time and serial number on the bid order, and enter the information on the bid order in sequence into the TWSE competitive bid loan system.
The timeframe for entering information, as described in the preceding paragraph, shall start from 9 am and end at 12:10 pm on the application date of the competitive bid loan, and all bids will be opened automatically at 12:30 pm; upon completion of the bid opening procedure, the TWSE will publish on the Market Information System the lending rate(s) and number of shares of the winning bid(s).
The order confirmation and winning bid confirmation of the lender in Article 56, paragraph 1, subparagraph 1 in relation to the competitive bid loan will be printed out through the printer of the securities firm handling the bid order. Entry confirmations and winning bid confirmations of the lenders in Article 56, paragraph 1, subparagraph 2 in relation to the competitive bid loan will be printed by the respective companies. The TWSE will provide a function to query for winning bid(s) from 2 pm.
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| Article 59 | A securities finance enterprise, by 2 pm on the competitive bid loan application date, shall deposit cash collateral with the TWSE in the amount of 120 percent of the closing price of that security on that day multiplied by the number of shares of the winning bid(s); provided that if no closing price is available for a given day, the provisions of Article 33-1, paragraph 4 shall apply mutatis mutandis.
Upon delivery of cash collateral by the securities finance enterprise, the TWSE will give notice to the central securities depository advising it to transfer the shares of security underlying the winning lending bid(s) to the securities finance enterprise's dedicated account at the central securities depository on the next business day following the competitive bid loan application date (the next business day hereinafter referred to as "the lending date").
Certificates of deposit or pledged book-entry central government bonds, to be valued at 90 percent of the face value of the non-cash collateral, as well as bank guarantees, may be posted as collateral in lieu of the cash collateral described in the preceding paragraph.
In regard to bank guarantees referred to in the preceding paragraph, the securities finance enterprise shall, upon completion of guarantee procedures with a bank, submit the original bank letter of guarantee to the TWSE or transmit said original letter electronically through the bank to the Blockchain Platform for approval by the TWSE in reply. The TWSE may refuse to accept the bank guarantee provided by the securities finance enterprise, or demand the securities finance enterprise to replace it within a specified period of time. Bank guarantees may be denominated only in New Taiwan Dollars (NTD), and shall be in units of thousands of NTD.
The lent securities shall be returned to the lender through the central securities depository on the next business day following the lending date; provided, however, that securities borrowed through competitive bid loan on the first settlement day that follows the last trading day before the Lunar New Year holiday, shall be returned on the second trading day after the Lunar New Year holiday.
By 10 am on the next business day following the lending date, the securities finance enterprise shall pay the securities lending fee (securities lending fee = lending rate x quantity) to the lender in Article 56, paragraph 1, subparagraph 1 through the lender's securities firm or to the lender in Article 56, paragraph 1, subparagraph 2 directly, whereupon the TWSE will return the cash collateral to the securities finance enterprise.
The securities firm of 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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| Article 60 | If a securities finance enterprise by the due date is unable to return the securities lent by a lender through competitive bid loan, the TWSE will use the cash collateral to buy in securities of the same type for return to the lender, with the prices needed for the buy-in of securities in the market by the TWSE for returning the borrowed securities, all processing fees, and other related fees and expenses that the securities finance enterprise shall pay the TWSE incurred for receiving a competitive bid loan, to be paid out of the cash collateral posted by the securities finance enterprise, and with any amount remaining thereafter to be refunded to the securities finance enterprise; provided, that if the cash collateral is insufficient to buy in securities in the full amount, the TWSE will instead deliver the cash collateral to the lender.
If the securities finance enterprise under the preceding paragraph has pledged book-entry central government bonds as collateral in lieu of cash collateral, it may neither refuse to accept nor raise any objection as to how or at what price the TWSE disposes of the pledge to the extent that the disposition is made in a manner complying with the letter of consent (see attachment) provided by the securities finance enterprise. In the case of a bank guarantee used as non-cash collateral, the TWSE may seek recovery directly from the guaranteeing bank.
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| Article 61 | Where with respect to a given security there are two or more securities finance enterprises initiating a competitive bid loan, the loans will be simultaneously brought to one single competitive bid based upon the aggregate quantity requested, with the aggregate lending fee to be shared on a pro rata basis among those securities finance enterprises according to their respective winning-bid quantities multiplied by the average fee calculated based upon the aggregate winning-bid quantity.
If an insufficiency exists after the competitive bid process under the preceding paragraph, each securities finance enterprise will be distributed a quantity decided on a pro rata basis according to the quantity of the shortfall in securities margin and short trading specified in its application for competitive bid loan, rounded to an integral unit of trading; any quantity remaining thereafter will further be distributed to securities finance enterprises in the order of the size of the decimal number of their respective distributable quantity, and if for a decimal number there are multiple securities finance enterprises, to one or more of them determined by drawing lots. If any quantity still remains thereafter, each securities finance enterprise will be distributed a quantity decided, in accordance with the above principles, on a pro rata basis according to the quantity of the shortfall in securities in day trading specified in its application.
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| Article 62 | 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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| Article 63 | If during the period a securities finance enterprise is borrowing a security to cover a shortfall driven by short sale needs, a securities firm also applies for refinancing of that security from the securities finance enterprise, the securities finance enterprise shall allocate the shares of that security it has obtained from borrowing through competitive bid transaction and/or negotiated transaction in accordance with the Operating Rules for Securities Finance Enterprises Offering Refinancing to Securities Firms.
When a securities finance enterprise accepts to conduct on behalf of a securities firm a competitive bid loan or negotiated transaction with respect to a shortfall in securities in day trading, the securities finance enterprise shall allocate the securities it so obtains in accordance with the applicable regulations governing securities finance enterprises. The securities finance enterprise shall transfer the securities to the securities firm's special account for handling shortfalls in securities deliverable in day trading by 6 pm through the TWSE Platform for Reporting Shortfalls in Securities Deliverable in Day Trading. The subsequent return of the securities shall be made through the central securities depository.
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| Article 64 | None of the securities to which one of the following circumstances applies are allowed for competitive bid transactions and negotiated transactions:
- Securities of less than one unit of trading.
- Any registered shares issued to and acquired by shareholders or capital contributors as a result of capital increase out of earnings, or capital increase through capital contribution by company employees out of their bonuses to the industry in which they are serving, or capital increase by a venture capital company out of undistributed earnings, as effected in accordance with Article 13 of the Statute (Act) for Encouragement of Investment or Article 16 or 17 of the Statute (Act) for Upgrading Industries, that have not been transferred and reported for tax purposes, or for which the option of tax deferral has not been waived.
A lender offering securities for lending shall warrant that the securities to be lent are free and clear of all liens, claims, and encumbrances of any nature whatsoever, and that in the case of any defect or legal dispute arising in this respect, upon notification from the securities finance enterprise to that effect, it shall replace the disputed securities with those of the same type and quantity, failing which it shall return the securities lending fee and further be held liable for any loss thus incurred.
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