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Title:

Operating Rules for Securities Business Money Lending by Securities Firms  CH

Amended Date: 2021.04.01 (Articles 19 amended,English version coming soon)
Current English version amended on 2020.12.31 
Categories: Securities Exchange Market > Borrowing of Money
   Chapter III Loan Application and Repayment
Article 13    In securities business money lending conducted by a securities firm, if the customer applies for a financing period between the second to the fifth business day after the trade date and intends to post collateral in the form of securities that it is purchasing, the customer shall file an application by 11 a.m. on the second business day after the transaction date, and have the securities firm or custodian institution transfer the customer's purchased securities or other commodities into the loan collateral account opened by the securities firm at the TDCC or central government securities settlement bank; the financing period shall be from the second business day after the transaction date to the fifth business day after the transaction date.
    When the customer of the preceding paragraph submits the loan application by a method other than in person, it shall submit a written statement of consent for exemption from the use of a signature or seal on the loan application. If the securities firm has verified and kept that consent statement on file, it is not necessary for the customer to sign/seal the application.
    When the customer applies to borrow money from a securities firm by personal telephone call, the securities firm shall make a synchronous recording of the call, which shall be kept at its place of business and retained for at least one year. In the event of any dispute, the recording shall be retained until the dispute has been eliminated.
    The value of the collateral in paragraph 1 shall be confined to 100 percent to 130 percent of the monetary amount of the financing provided to the customer by the securities firm and calculated as below:
  1. The value of TWSE and TPEx traded securities, except central book-entry bonds, municipal bonds, common corporate bonds and financial bonds, is the closing price of the business day immediately prior to financing.
  2. The value of beneficial certificates of open-end funds traded on the TPEx is the net asset value ("NAV") of each unit of beneficial rights of the business day immediately prior to financing.
  3. The value of physical gold traded on the TPEx is the average of the highest bid price and lowest offer price of market makers at the closing of the business day immediately prior to financing ("Closing Average").
  4. The value of central book-entry bonds is 80 per cent of the face value.
  5. The value of municipal bonds, common corporate bonds and financial bonds is 60 per cent of the face value.
    The closing price referred to in the preceding paragraph and in Articles 18, 24, and 25 shall be determined pursuant to Article 58-3, paragraph 3 of the TWSE Operating Rules and Article 35, paragraph 3 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM.
    When the customer files an application pursuant to paragraph 1 herein and is notified by the securities firm to post the collateral that it holds pursuant to Article 16, paragraph 9, the application-related provisions of paragraph 1 shall apply mutatis mutandis.
    When the customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer on a proportional basis the securities it originally posted as collateral, provided that increments of less than one trading unit may not be returned.
    When the customer has purchased securities for which halting of margin purchases and short sale transactions has been announced, due to a resolution of the Surveillance Operations Oversight Committee of the TWSE or GTSM or due to other circumstances under which those transactions are inappropriate, then during the effective period of the disposition, that security may not be accepted as the additional financing collateral referred to in paragraph 1 above and in Article 16, paragraph 1. However, this rule shall not apply to a customer that posts collateral in the form of the securities that it purchases, if the halting of margin purchases and short sale transactions for those securities has not been announced on the trade date.
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Article 14    In securities business money lending conducted by a securities firm, if a customer posts collateral in the form of securities that it is purchasing and then sells the originally purchased securities prior to the expiration of the financing period, the proceeds from the sale shall first be applied to repay the money lent.
    The securities firm shall stipulate with the customer that prior to the expiration of the financing period as referred to in the preceding paragraph, the customer's securities trading balance will be used to repay the money lent. The scope of the securities trading balance shall be stipulated between the parties.
Article 15    In securities business money lending conducted by a securities firm, if a customer that has applied for a financing period from the second to fifth day after the trade date and posted collateral in the form of securities that it is purchasing applies, prior to the expiration of the financing period, to convert to the financing method specified in Article 16, paragraph 1, the originally purchased securities or otherwise-held securities or other commodities that it posts as collateral shall comply with Article 16, paragraph 9, and the collateral financing shall be calculated according to the standards provided in Article 18.
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Article 16    In securities business money lending conducted by a securities firm, a customer applying for a financing period not exceeding 6 months shall file an application prior to 12 noon on the first business day after the transaction date of its securities purchase. If the customer posts collateral in the form of securities or other commodities that it purchases or holds, the securities firm or custodian institution shall transfer the customer's collateral to the loan collateral account opened by the securities firm at the TDCC or central government securities settlement bank. A customer posting a collateral in foreign currency for an offshore overseas Chinese or foreign national shall deposit the collateral in the foreign currency loan collateral account opened by the securities firm at the bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business. Collateral financing shall be calculated according to the standards provided in Article 18.
    No collateral is required from the above new applicant posting, for money lending purposes, collateral in the form of securities or other commodities or foreign currencies that it purchases, if the maintenance ratio of the financing collateral combined with the collateral for the purposes of calculation of said ratio pursuant to Article 23 is 166 per cent or above.
    Subject to the customer posting securities or other commodities or foreign currencies that it holds as collateral, a securities firm conducting securities business money lending may accept the customer’s application for financing in the form of public subscription or competitive auction of new shares (including cash capital increase). The financing scope includes the bond for competitive auction and the award price after award less the bond, and the subscription price deducted by the bank on the day immediately preceding the lot drawing for subscription, provided the customer shall maintain sufficient collateral in the securities firm’s collateral account at the time of the customer’s application and on the date of disbursement by the securities firm, with a collateral maintenance ratio not lower than the minimum prescribed by Article 23, paragraph 3; transfer to the collateral account in paragraph 1 of new shares allotted is not required, provided the securities firm must strengthen its credit check and KYC in respect of applying customers and its internal control and regulation, to control risks.
    Subject to the customer posting securities or foreign currencies that it holds as collateral, a securities firm conducting securities business money lending may accept the customer’s financing application for subscription for beneficial certificates of open-end securities investment trust funds and those of futures trust funds and directly deliver such beneficial certificates to the customer.
    In securities business money lending conducted by a securities firm, if a customer posts as collateral the beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are purchased on the customer’s order in the securities firm’s name, the authorized securities firm shall keep a registration log for management purposes and inform relevant information to the TDCC, and the requirement in paragraph 1 that the securities firm transfer the collateral provided by the customer to the securities firm’s loan collateral account at the TDCC does not apply.
    When a securities firm lends money to a customer to pay for the settlement price, and the customer has yet to obtain the securities that it has purchased, other securities, foreign currencies, or commodities that the customer holds shall be used as collateral.
    When the customer of the preceding paragraph submits the application to borrow money by a method other than in person, the provisions of Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
    Before the expiration of the financing period in paragraph 1, the customer may file an application to extend the period, and the securities firm may grant a 6-month extension depending on the customer's creditworthiness. After the expiration of one-year period, the securities firm may review the customer's creditworthiness and then grant the customer's application for a 6-month extension.
    Collateral referred to in paragraph 1 shall be limited to the following:
  1. TWSE and TPEx listed securities, excluding EFT beneficial certificates traded in foreign currency and shares subject to an altered trading method or TPEx managed stocks.
  2. TPEx traded beneficial certificates of open-end funds or physical gold.
  3. Beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are offered and invest domestically.
  4. Offshore overseas Chinese and foreign nationals may post foreign currencies as collateral. Currencies received are limited to U.S. Dollar, Euro Dollar, Japanese Yen. British Pound, Australian Dollar, and Hong Kong Dollar. The foreign currency collateral account shall be opened with a bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business.
  5. Other collateral approved by the competent authority.
    Collateral posted by a customer under the preceding paragraph may be replaced during the financing period. The method for applying for replacement shall be stipulated between the parties.
    When a customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer the securities it originally posted as collateral on a proportional basis, provided that increments of less than one trading unit may not be returned. Notwithstanding, the customer may agree with the securities firm that subject to repayment by the customer of the loaned funds, the securities firm is exempt from returning the collateral in whole or in part, and the customer may apply to the securities firm for a loan pursuant to paragraph 1 in respect of the collateral that is not returned.
    For each loan of money using the financing method set out in paragraph 1 herein, the securities firm shall notify the customer in writing 10 business days before the expiration of the financing period.
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Article 17    In securities business money lending conducted by a securities firm, if the customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, funds derived from any sale of those collateral securities prior to the expiration of the financing period shall first be used to repay the money lent, provided that this condition shall not apply if the customer has already replaced the collateral securities before repayment is made.
    The securities firm may stipulate with the customer that prior to the expiration of the financing period as referred to in the preceding paragraph, the customer's securities trading balance will be used to repay the money lent. The scope of the securities trading balance shall be stipulated between the parties.
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Article 18    In securities business money lending conducted by a securities firm, if the customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, the financing calculation standards for the collateral shall be as listed below, save in the event of fractions of one trading unit or of one unit of beneficial rights:
  1. The value of TWSE and TPEx traded securities except central book-entry bonds, municipal bonds, common corporate bonds and financial bonds is 60 percent, and that of securities not eligible for margin purchase and short sale is 40 percent, of the closing price on the business day immediately prior to the application for financing.
  2. The value of beneficial certificates of open-end funds traded on the TPEx is 60 percent of their NAV of the business day immediately prior to financing. The value of physical gold is 60 percent of the Closing Average of the business day immediately prior to the application for financing.
  3. The value of beneficial certificates of open-end securities investment trust funds and those of futures trust funds is 60 per cent of the NAV of the business day immediately prior to the application for financing.
  4. The value of central book-entry bonds is 80 percent of their face value.
  5. The value of municipal bonds, common corporate bonds and financial bonds is 60 per cent of their face value.
  6. The value of a foreign currency collateral is the spot rate – buying as at the date of application for financing of the bank with which the foreign currency collateral account is opened. No haircut is applied to the value of an additional collateral.
    A securities firm may adjust the calculation standard in the preceding paragraph as a stricter standard subject to the market condition of the collateral and the customer’s credit risk.
    With respect to subparagraph 1 of the first paragraph and Article 13, paragraph 4, if there is no closing price of the business day preceding the financing date, it shall be replaced by the price determined by the principles set out in Article 58-3, paragraph 4, subparagraph 2 of the TWSE Operating Rules or Article 57, paragraph 1 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM.
    The financing calculation standards for collateral set out in paragraph 1 may be adjusted by the TWSE in consultation with the TPEx based on the circumstances regarding that collateral.
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Article 19    When the competent authority approves and announces suspension of trading or termination of the TWSE listing or TPEx trading of a security that a customer has posted as collateral; when the principal of central book-entry bonds, municipal bonds, common corporate bonds or financial bonds is repaid partially; when the beneficial certificates of open-end securities investment trust funds and those of futures trust funds are combined; or when the deed of trust terminate or its existence expires, then the aforementioned suspension date, termination date, repayment date, combination date, or termination or expiration date of the deed of trust shall be deemed the expiration date of the financing period. After being notified by the securities firm, the customer shall repay the money lent and the interest by the tenth business day before the aforementioned suspension date, termination date, repayment date, combination date, or expiration date of the deed of trust, provided that this requirement shall not apply if the customer has replaced the collateral, or in cases where the issuing company of a TPEx listed security is applying to convert the security to a TWSE listed security, or where the securities of both the surviving and non-surviving listed (or TPEx) companies in a merger or the beneficial certificates of open-end securities investment trust funds and of futures trust funds being the surviving beneficial certificates of open-end securities investment trust funds and of futures trust funds after merger qualify as the collateral in Article 16, paragraph 9.
    When during the collateral period, the customer replaces collateral it provided with the collateral in Article 16, paragraph 9, the securities firm may accept that collateral until the expiration date of the financing period.
    
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Article 20    When the customer repays money lent, it shall fill out a Loan Repayment Application Form, and shall deposit (remit) the repayment money into the financial institution account designated by the securities firm by 3:30 PM of the application date. After the securities firm verifies that the financed amount and interest have been properly credited to its account, it shall transfer the collateral and additional collateral securities or other commodities or foreign currencies to the depository account or central government securities account opened by the customer, or deposit the same in the foreign currency demand account opened by the customer with the bank, in the currency of the foreign currency collateral furnished by the customer, by the first business day after the repayment application date.
    If the customer is not itself the owner of the additional collateral securities or other commodities referred to in the preceding paragraph, the securities firm shall transfer the collateral to the depository account or central government securities account opened by the owner.
    When a customer referred to in the first paragraph submits the application to repay money by a method other than in-person, Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
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Article 21    A securities firm shall keep detailed and accurate records and receipt/payment vouchers for securities business money lending, and shall compile on a daily basis the following statements:
  1. Daily operations report for loan transactions.
  2. A summary statement and itemized statement of additions to, repayments of, and balances of, loan accounts.
  3. Itemized statement of receipt/payment, disposition, and utilization of collateral for loan accounts.
  4. Summary statement of collateral shortfalls and covering thereof.
  5. Itemized statement of additional collateral securities or other commodities or foreign currencies.
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Article 22    Each business day, a securities firm shall compile statements and computer data based on the balance of the collateral and additional collateral securities or other commodities or foreign currencies deposited by a customer that has applied to borrow money, and transmit them to the TWSE.
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