Chapter III Lending and return of securities |
| Article 8 | Business hours for lending of book-entry central government bonds is from 9:00 am to 3:00 pm.
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| Article 9 | Book-entry central government bonds may not be lent for more than six months, starting from the deal date. Furthermore, the lending period must not cover the two business days before the interest pay date of the lent security or any government bond secured by which. This excludes situations where the securities firm and the customer have agreed in writing on how the principal, interests, taxes, and expenses relating to the book-entry central government bonds are handled.
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| Article 10 | The delivery and return of book-entry central government bonds shall proceed by way of registered transfers, according to Directions for the Operation of Book-Entry Central Government Securities. Delivery and settlement statements must be produced for sign-off by customers. However, the delivery and return of stripped bonds shall proceed by way of book-entry.
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| Article 11 | Customers are required to submit "Borrowing" and "Returning" applications for the book-entry central government bonds they borrow from or return to the securities firm. Once a lending transaction has been completed, the securities firm shall prepare a "Borrowing Statement" that details the name of the borrower, the account number, deal date, deal reference number, application serial number, transaction type, name of government bond, the quantity borrowed, the agreed rate, lending fees, the type and quantity of collaterals etc.
Articles 62 and 62-2 of Taipei Exchange Rules Governing Securities Trading on the TPEx are applicable with regards to the above.
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| Article 12 | The interest rate at which book-entry central government bonds are lent is negotiated between the securities firm and the customer, subject to a maximum of 20% per annum and a tick size of 0.01%.
The methods for calculating and collecting lending fees are negotiated between the securities firm and the customer, which need to be specified in the agreement.
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| Article 13 | Securities firms are required to set up dedicated accounts for lending book-entry central government bonds. Only the following sources of securities can be lent to customers:
- Book-entry central government bonds held in possession
- Securities borrowed from TPEx's lending system.
- Securities acquired from a reverse repurchase agreement.
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| Article 14 | The types of collaterals that securities firms may request from customers for lending book-entry central government bonds, and the applicable discounts on collateral values, are listed below:
- Cash.
- Book-entry central government bonds. Collateral value is determined at 90% of the face value.
The abovementioned collaterals can not be used for any purposes other than the ones described below:
- To be placed as collateral for borrowing from TPEx's lending system.
- Bank deposits.
- Purchase of short-term notes.
Only bonds that are registered in the customer's name can be placed as collaterals. For collaterals that are placed in cash, the securities firm shall pay interest to the customer at a rate agreed between two parties.
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| Article 15 | Encumbered book-entry central government bonds can neither be lent nor placed as collaterals.
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| Article 16 | Upon receiving the customer's request to replace collaterals, the securities firm must complete the replacement accordingly before the second business day in the manner agreed between the two parties.
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| Article 17 | Securities firm shall notify the customer in accordance with Article 7, Paragraph 1 at least 10 business days before the securities are due for return. Customer's collateral must be returned on the due date when the customer returns the lent securities.
Collaterals that are placed in cash shall be deposited into the customer's bank account, whereas book-entry central government bonds need to be returned in the manner described in Article 10.
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| Article 18 | Securities firm may request for an early return by the customer according to the agreed terms, and shall undertake to return customer's collaterals on the day the securities are recovered.
Customer may request for a partial or full return of borrowed securities before the due date, and arrange the means and timeframe in which the lent securities and collaterals are to be delivered. The securities firm must return customer's collateral no later than the second business day after the customer has returned the lent securities.
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| Article 19 | Securities firms are required to maintain detailed records and documentation of all payments and securities receivable and payable in relation to the lending of book-entry central government bonds, and must prepare the following reports on a daily basis:
- Book-entry central government bond daily lending report.
- Book-entry central government bond daily lending balance report, summarized and detailed.
- Book-entry central government bond collateral delivery, disposal and usage report.
- Collateral details report.
- Collateral shortfalls report.
- Compensation report.
The abovementioned reports must be prepared with all details mandated by TPEx, and may be stored on media to facilitate retrieval.
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