Chapter 1 General Principles |
| Article 1 | These Operating Rules are adopted pursuant to Article 40, paragraph 1 of the Regulations Governing Securities Lending by Securities Firms.
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| Article 2 | A securities firm conducting securities lending business shall do so in compliance with securities trading laws and regulations, these Operating Rules, and the relevant bylaws, operating rules, public announcements, and circular letters of the Taiwan Stock Exchange Corporation (TWSE), GreTai Securities Market (GTSM), or Taiwan Depository & Clearing Corporation (TDCC).
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| Article 3 | "Securities lending business" conducted by a securities firm means business activities in which the securities firm borrows securities from or lends securities to a customer, another securities firm or a securities finance enterprise under an agreement stipulating return of securities of the same type and quantity within a specified period.
The "specified period" referred to in the preceding paragraph may not exceed six months. However, before that period expires and with the consent of the lending party, the borrowing party may apply twice only to extend that period, and may not change the lending terms and conditions.
The subject of "securities lending" referred to in paragraph 1 means securities eligible for margin purchase and short sale, and other securities approved by the competent authority.
If any of the circumstances described in the financial information indicators listed in the Key Financials and Transaction Information Section of the Market Observation Post System, as shown in Appendix 2, 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 jointly with the TPEx an adjustment to the appendix in the event of a revision to indicators in the above section.
Borrowing and lending of futures ETF beneficial certificates as subject securities will be halted from the next business day following the public announcement of the TWSE or 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.
Securities lending transactions of a subject security eligible for margin purchase and short sale under the paragraph 3 are not suspended during a halt to trading, provided the securities firm shall halt such transactions when the TWSE announces a halt to trading in such security pursuant to Article 14-1, paragraph 2 of its Securities Borrowing and Lending Rules.
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| Article 4 | To apply to conduct securities lending business, a securities firm shall fill out an application form and submit it to the TWSE together with the relevant documentation. After the application materials are reviewed by the TWSE and the securities firm is found to be qualified and in conformance with the relevant provisions of these Operating Rules, the application shall be forwarded to the competent authority for approval.
A securities firm approved by the competent authority to conduct securities lending business shall submit the following in document form to the TWSE for recordation and open a securities borrowing and lending account two days before commencing such business.
- Photocopies of the approval documents of the competent authority.
- List of supervisors and associated persons handling securities lending business and their certificates of qualification.
The responsible persons and associated persons under the preceding paragraph shall register with the TWSE before they may conduct such business; for any change in those registered persons, a change of registration shall be carried out within five days.
A securities firm in the first paragraph approved by the competent authority to conduct securities lending business shall amend the registration of its securities business items with the TWSE before commencing such business. In addition, the securities firm's business personnel that conduct such business shall possess the relevant qualifications prescribed by the competent authority in the Regulations Governing Responsible Persons and Associated Persons of Securities Firms.
After a securities firm has been approved by the competent authority to conduct securities lending business, if its regulatory capital adequacy ratio is below 200 percent for two consecutive months, it shall suspend such business except the redelivery of securities, and may resume it only after the securities firm achieves compliance with regulations for three consecutive months and receives approval from the competent authority. If the securities firm has already been approved to conduct such lending but has not begun doing so, it shall suspend proceeding with such business.
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| Article 5 | Securities collateral obtained by a securities firm from lending securities to customers shall be deposited in the dedicated account for securities lending collateral opened by that securities firm at the TDCC. If the customer issues a written statement of consent for collateral rehypothecation, the securities collateral may be utilized for the purposes listed below and no others:
- As collateral for securities borrowed through the TWSE securities lending system.
- As collateral for refinancing of securities by securities finance enterprises.
If the securities collateral of the preceding paragraph are book-entry central government bonds, they shall be handled by transfer of registration at the clearing bank in accordance with the Directions for the Operation of Book-Entry Central Government Securities.
A securities firm that utilizes any of its collateral securities obtained in the course of lending securities to customers shall return the same quantity and type of securities, or utilize said securities as the collateral of another borrowing transaction as agreed between the parties, when the customer returns the securities it borrowed.
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