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Taiwan Stock Exchange Corporation Rules Governing Purchase of Listed Securities by Reverse Auction  CH

Amended Date: 2016.12.30 
Categories: Securities Exchange Market > Trading > Securities Transaction
   Chapter 3 Reverse Auctions by Securities Finance Enterprises
Article 13    When a securities broker accepts an order from a securities finance enterprise to carry out a reverse auction for exchange-listed securities that will be used either for trade settlement purposes or for purposes of the return of securities obtained in a securities borrowing and lending (SBL) transaction, the securities broker shall submit an application to the TWSE by 2:30 p.m. on the afternoon of the day of the reverse auction. The TWSE will then publicly announce the name, quantity, and other information on the subject securities of the reverse auction via the Market Information System (MIS) website. Once the public announcement has been made, the securities finance enterprise and the securities broker that accepted the order may not apply to amend or cancel it.
Article 14    A securities firm intending to participate in bidding to sell in a reverse auction shall submit its quote between 2:30 and 3:00 p.m. via a computer with an online link to the TWSE's computer system, with such trades to be executed on the same day the quote is submitted.
Article 15    The unit price of any securities to be purchased by reverse auction shall be within 10 to 20 percent of the closing price of those securities on the date of application for the reverse auction; the sell bid quoted at the unit price farthest below the price of the securities on the date of application for reverse auction will have priority of execution, with quotes at the same price executed in order of the chronological sequence of their entry into the system. If no closing price is available on the current day for the securities under reverse auction, the reverse auction unit price shall be limited to the price determined by application, mutatis mutandis, of the provisions of Article 2, paragraph 2, subparagraph 4 regarding when no closing price is available on the day of the reverse auction, plus 10 to 20 percent.
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Article 16    When two or more securities finance enterprises simultaneously engage securities broker(s) to conduct a reverse auction for a given security, a single reverse auction shall be conducted for the combined total of the quantities sought. The execution price of the reverse auction shall be the average price of all successful bids, and shall be collected from each securities finance firm on the basis of the total number of successful bids for that firm's offer.
    If a reverse auction carried out under the preceding paragraph does not result in enough successful bids, each securities finance enterprise will be distributed an integral number of trading units, the quantity to be decided on a pro rata basis according to the quantity specified when the enterprises engaged the securities broker to apply for a reverse auction; any quantity remaining thereafter will further be distributed in decimal fractions of trading units to the securities finance enterprises in the order of the size of the distribution to which they are entitled, and if multiple securities finance enterprises are due to receive the same decimal fraction, the distribution shall be made in random order.
Article 17    For successfully executed trades, by 3:30 p.m. of the day of the transaction the securities broker that was engaged by the purchaser in the reverse auction shall transfer payment to a bank account designated by the TWSE. The TWSE will then instruct the central depository to transfer the purchased securities to the securities finance enterprise's dedicated account at the central securities depository on the day of the transaction, and then on the business day following the transaction will give instruction to transfer payments to the securities brokers that submitted the bids to sell. The latter shall then transfer payments to the principals on that same day.
    Where a securities firm that handles an order fails to settle in accordance with the provisions of the preceding paragraph, the TWSE may impose a delinquency fine of NT$30,000 if settlement is made no more than an hour late, and if settlement is more than an hour late may increase the fine by an additional NT$10,000 per hour.
    Where the securities firm that handles an order fails to make settlement within the required time period, it shall be deemed in default of its settlement obligations, provided that this does not apply if settlement is completed during banking hours on that same day.
Article 18    When the TWSE handles a reverse auction for exchange-listed securities, the successful bid price is not subject to the price fluctuation limits that apply to ordinary trading, and will not be treated as the opening, high, low, or closing price for that day.
Article 19    Article 3, Article 4, paragraphs 2, 3, and 4, Article 9, paragraphs 1 and 2, Article 10, and Article 11 apply mutatis mutandis to reverse auctions initiated by securities finance enterprises.