Chapter 1: General Provisions
|
| Article 1 | These Measures are enacted in accordance with the provisions of Articles 82-2 and 109 of the Operation Rules of this Corporation. |
| Article 2 | A securities lending and borrowing transaction shall refer to an act that the lender agrees to lend the securities and the borrower shall redeliver the securities of same category and volume.
The term "securities borrowing needs" shall refer to securities borrowing by specific corporate institutions for purposes of transactions and performance and securities borrowing by securities firms or securities finance enterprises for purposes of settlement. |
| Article 3 | The lender may collect lending charges from the borrower on account of securities lending. |
| Article 4 | The lender or the borrower shall guarantee the integrity of the titles and rights of the securities provided by the lender for lending and the securities and the contents of bank guarantee provided by the borrower for securing the borrowing. In case of any defect or legal dispute, a substitution shall be made on the business day immediately following the date of notice. |
Chapter 2: Securities Borrowing For Transaction Needs and For Performance
|
| Article 5 | The borrowers and lenders of securities for transaction needs and for performance shall be limited to the specific corporate institutions as follows:
1. Lenders: insurance companies, banks, investment and trust companies, securities investment trust enterprises (funds publicly offered or privately placed thereby), futures dealers, and others as approved by the competent authorities.
2. Borrowers: securities dealers, securities investment trust enterprises (funds publicly offered or privately placed thereby), futures dealers, and others as approved by the competent authorities. |
| Article 6 | A borrower and a lender shall entrust a securities firm to handle securities lending and borrowing transaction after they have entered into "Letter of Entrustment for Securities Lending and Borrowing Transaction" with a securities firm, opened an account for securities lending and borrowing, a securities central depository account, and a deposit account at a financial institution, and reported to and been approved by this Corporation.
The "Letter of Entrustment for Securities Lending and Borrowing Transaction" shall contain the following particulars and its format shall be as shown in Appendix 1 hereto:
1. The borrower and the lender agree that the securities lending and borrowing transaction shall be subject to the "Letter of Entrustment for Securities Lending and Borrowing Transaction" and the "Master Contract of Securities Lending and Borrowing Transaction" entered into by and between the securities firm and this Corporation, as well as the ?Measures Governing Lending and Borrowing of Securities" and the relevant regulations and rules of this Corporation.
2. A securities firm may from time to time submit relevant information with regard to a borrower or lender’s account opening, details of transaction and inventory of securities, and securities borrowing positions for transaction needs or for performance, to this Corporation, or provide the same for review.
3. A securities firm shall report to this Corporation in regard to any violation by a borrower or a lender of the obligations to be performed under a securities lending and borrowing transaction or any breach of its representations, and shall handle the relevant matters in accordance with the instructions of this Corporation, and may terminate or rescind the Letter of Entrustment.
A borrower shall entrust the same securities firm to handle the securities lending and borrowing transaction and the sale of the object securities. |
| Article 7 | A securities firm may accept the entrustment of a lender or a borrower to handle the securities lending and borrowing only after it has entered into the "Master Contract of Securities Lending and Borrowing Transaction" with this Corporation.
The "Master Contract of Securities Lending and Borrowing Transaction" shall contain the following particulars and its format shall be as shown in Appendix 2 hereto:
1. The securities lending and borrowing transaction between a securities firm and this Corporation, between this Corporation and a borrower or a lender, and between a borrower and a lender shall be handled in accordance with the "Master Contract of Securities Lending and Borrowing Transaction" as well as the "Measures Governing Lending and Borrowing of Securities" and the relevant regulations and rules of this Corporation.
2. Before a securities firm is entrusted by a borrower or a lender to handle a securities lending and borrowing transaction, it shall enter into a "Letter of Entrustment for Securities Lending and Borrowing Transaction" with such borrower or lender, and the continual validity of the Letter of Entrustment shall be a condition precedent for the securities firm to be entrusted for handing such transaction.
3. A securities firm entrusted by a borrower or a lender to handle a securities lending and borrowing transaction shall exercise the care of a good administrator. A securities firm in handling a securities lending and borrowing transaction of this Corporation shall exercise the same care as it should exercise in handling its own affairs.
4. When placing order for a fixed-price securities transaction or a competitive-auction securities transaction under entrustment, a securities firm shall verify such order pursuant to the contents of entrustment and collect in advance qualified object securities and the collaterals for such borrowing; except for failing to complete the transaction, a securities firm shall not offset, seize, retain the securities and collaterals collected in advance, or make an assertion or conduct any other activities that may hinder the settlement and payment of such lending and borrowing.
5. Where a fix-price transaction or a competitive-auction transaction is concluded through the matching system of this Corporation, the lending and borrowing relationship between the borrower and the lender shall come into force. Where a borrower or a lender is in breach of any of its obligations or representations, it shall pay a default penalty to this Corporation according to the agreement and shall be liable for damages, and the rights and obligations with respect to recovery or advance of payment out of such breach of contract shall be assumed by this Corporation.
6. Where a negotiated borrowing transaction is concluded through the negotiation of a borrower and a lender, the borrower and the lender shall be solely responsible for all rights and obligations arising from the lending and borrowing relationship and bear the risk of seeking recovery out of the breach of contract; this Corporation will not bear any responsibility for the performance of contract. The borrower and the lender shall forthwith entrust the securities firm to report to this Corporation the terms and conditions of each negotiated borrowing transaction, and this Corporation will provide confirmation of the conclusion of the transaction and notify of the handling of matters in regard to the book-entry and redelivery of the object securities. |
| Article 8 | The securities that can be the subjects of securities borrowing for transaction needs and for performance shall be publicly announced by this Corporation. |
| Article 9 | The business hours for services rendered by this Corporation for securities borrowing for transaction needs and for performance shall be from 9:00 am to 2:30 pm of the market trading hours of the then current day; the business hours for redelivery of securities and withdrawal and substitution of collateral are from 9:00 am to 3:00 pm. |
| Article 10 | The volume under an application for securities lending and borrowing transaction shall be as follows:
1. Volume for lending: more than 10 trading units of the object securities;
2. Volume for securities borrowing: at least one trading unit of the object securities. |
| Article 11 | The securities lending and borrowing transactions are categorized into the following three types according to different types of transactions:
1. Fixed-price transaction: an application shall be filed by the borrower and the lender subject to the charge rate publicly announced by this Corporation, and the transaction shall be concluded through matching pursuant to Article 14 hereof;
2. Competitive-auction transaction: the securities borrowing charge rate and lending charge rate shall be reported by the borrower and the lender subject to the highest interest rate of 20% per annum, with 0.1% as the up/down unit, and such transaction shall be concluded through matching pursuant to Article 16 hereof;
Negotiated borrowing transaction: the transaction charge rate shall be determined by the borrower and the lender through negotiation subject to the highest interest rate of 20% per annum, with 0.01% as the up/down unit. |
| Article 12 | An application for securities borrowing of fixed-price transaction and competitive-auction transaction shall be valid only on the day of application, whereas an application for securities lending remains valid before it is withdrawn. |
| Article 13 | The application for securities lending or for securities borrowing, alteration and withdrawal thereof, and the book-entry of securities of a fixed-price transaction shall be conducted in accordance with the following:
1. With respect to the application for securities lending, alteration and withdrawal thereof, and book-entry of securities:
(1) When a lender is to apply for securities lending, the account number, name of the securities, required notice period for early redelivery of the securities, and volume of the securities shall be keyed in the securities lending system of this Corporation by a securities firm.
(2) Upon receipt of application, this Corporation will notify the Securities Central Depository Enterprise by way of computer linkage to pen in the securities in the securities central depository account of the lender to make it available for lending; in the event that the volume of the securities in the securities central depository account of the lender is insufficient, such application shall be null and void.
(3) An application for securities lending at a fixed charge rate shall remain valid if it is not concluded, altered, or withdrawn, whereas, if it is concluded in part, the unconcluded portion shall remain valid.
(4) With respect to the unconcluded portion, a lender may at any time curtail, through a securities firm, the volume for lending at the securities lending system of this Corporation, and this Corporation will notify the Securities Central Depository Enterprise to make alteration to the pen-in volume in the securities central depository account of the lender in accordance with the curtailment of volume for lending.
(5) With respect to the unconcluded portion, a lender may at any time withdraw, through a securities firm, its application at the securities lending system of this Corporation, and this Corporation will forthwith notify the Securities Depository Enterprise to release the pen-in securities for lending from the securities central depository account of the lender.
(6) After an application is concluded through matching, this Corporation will forthwith notify the Securities Central Depository Enterprise to transfer the securities through book-entry from the securities central depository account of the lender into that of the borrower.
2. With respect to applications for securities borrowing, alteration, and withdrawal thereof:
(1) When a borrower is to apply for securities borrowing, the account number, name and volume of the securities, redelivery date, required notice period for early redelivery of the securities, and detailed statement of the collaterals shall be keyed in the securities borrowing system of this Corporation by a securities firm.
(2) After this Corporation has confirmed that the keyed-in information regarding the collaterals is correct and meets the stipulated collateral ratio, and the pen-in of collaterals for securities is simultaneously completed, the application will come into effect.
(3) After a borrower has adequately provided the collaterals, it may at any time apply, through a securities firm, with respect to the unconcluded portion, for alteration to the volume or the redelivery date, or withdrawal of the application.
(4) Upon application by a borrower for withdrawal of the unconcluded portion, this Corporation will forthwith notify the Securities Central Depository Enterprise to release the pen-in collaterals for the securities borrowing from the securities central depository account of the borrower. |
| Article 14 | The application for securities borrowing or for securities lending of a fixed-price transaction is processed by continuous matching for those with identical conditions according to the required notice period for early redelivery of the securities, and the priority of matching is determined according the following circumstances:
1. Application for securities borrowing:
(1) Where the volume of securities lending applied for does not exceed that of securities borrowing applied for, the securities lending applied for shall be entirely transacted.
(2) Where the volume of securities lending exceeds that of securities borrowing applied for, the securities lending applied for shall be matched in the priority randomly determined by computer.
2. Application for securities lending:
(1) Where the volume of securities borrowing applied for does not exceed that of securities lending applied for, the securities borrowing applied for shall be entirely transacted.
Where the volume of securities borrowing applied for exceeds that of securities lending applied for, the securities borrowing applied for shall be matched in sequence by the priority of keyed-in time. |
| Article 15 | The application for securities lending or for securities borrowing, alteration and withdrawal thereof, and book-entry of a competitive-auction transaction shall be handled in accordance with the following:
1. With respect to the application for securities lending, alteration and withdrawal thereof, and book-entry of securities:
(1) When a lender is to apply for securities lending, the account number, name and volume of the securities, required notice period for early redelivery of the securities, and the lending charge rate shall be keyed-in the securities borrowing system of this Corporation by a securities firm.
(2) Upon receipt of application, this Corporation will notify the Securities Central Depository Enterprise by way of computer linkage to pen in the securities in the securities central depository account of the lender to make it available for lending; in the event that the volume of the securities in the securities central depository account of the lender is insufficient, such application shall be null and void.
(3) An application for securities lending at a lending charge rate shall remain valid if it is not concluded, altered, or withdrawn, whereas, if it is concluded in part, the unconcluded portion shall remain valid.
(4) With respect to the unconcluded portion, a lender may at any time curtail the volume for lending or alter the lending charge rate, through a securities firm, at the securities borrowing system of this Corporation, and this Corporation will notify the Securities Central Depository Enterprise to make alteration to the pen-in volume in the securities central depository account of the lender in accordance with the curtailment of volume for lending
(5) With respect to the unconcluded portion, a lender may at any time withdraw, through a securities firm, its application at the securities borrowing system of this Corporation, and this Corporation will forthwith notify the Securities Central Depository Enterprise to release the pen-in securities for lending from the securities central depository account of the lender.
(6) After an application is concluded through matching, this Corporation will forthwith notify the Securities Central Depository Enterprise to transfer the securities through book-entry from the securities central depository account of the lender into that of the borrower.
2. With respect to the application for securities borrowing, alteration and withdrawal thereof:
(1) When a borrower is to apply for securities borrowing, the account name, name and volume of the securities, borrowing charge rate, redelivery date, required notice period for early redelivery of the securities, and detailed statement of the collaterals shall be keyed in the securities borrowing system of this Corporation by a securities firm.
(2) After this Corporation has confirmed that the keyed-in information regarding the collaterals is correct and meets the stipulated collateral ratio, and the pen-in of collaterals for securities is simultaneously completed, the application will come into effect.
(3) After a borrower has adequately provided the collaterals, it may at any time apply, through a securities firm, with respect to the unconcluded portion, for alteration to the volume, the borrowing charge rate (the time of making alteration shall become the time of entrustment), or the redelivery date, or for withdrawal of the application.
Upon application by a borrower for withdrawal of the unconcluded portion, this Corporation will forthwith notify the Securities Central Depository Enterprise to release the pen-in collaterals for the securities borrowing from the securities central depository account of the borrower |
| Article 16 | The application for securities borrowing or for securities lending of a competitive-auction transaction is processed by continuous matching for those with identical conditions according to the required notice period for early redelivery of the securities, and the priority of matching is determined according to the following principles:
1. In case of an application for securities borrowing, when the keyed-in borrowing charge rate is higher than or equivalent to the lowest lending charge rate, the application for borrowing will be processed on the lending charge rates set by lenders on a from-low-to-high basis, whereas, if the volume for lending at a same charge rate exceeds that needed for borrowing, the applications for borrowing will be processed on a random basis.
2. In case of an application for securities lending, when the keyed-in lending charge rate is lower than or equivalent to the highest borrowing charge rate, the application for borrowing will be processed on the borrowing charge rates set by borrowers on a from-high-to-low basis, whereas, if the volume for borrowing at a same charge rate exceeds the volume for lending, the applications for borrowing will be processed in sequence by the priority of keyed-in time. |
| Article 17 | A negotiated borrowing transaction shall be handled by way of the following:
1. The borrower and the lender shall negotiate on the borrowing terms and conditions with respect to the securities category, volume, borrowing charge rate, term of borrowing, types and conditions of collaterals, and the manner in compensation for rights and interests, and shall enter into a "Contract of Negotiated Securities Borrowing Transaction" (please refer to Appendix 3 hereto for its format), under which the borrower shall provide collaterals to the lender.
2. The borrower and the lender shall respectively file application with securities firm(s) for conclusion of securities borrowing and lending transaction, and the securities firm(s) shall apply to this Corporation on behalf of the borrower and the lender through the securities borrowing system of this Corporation. The borrower and the lender may file such application with the same or different securities firm(s). The application shall contain the name of the securities, borrowing volume, transaction charge rate, redelivery date, ratio of collaterals, and the bank accounts and securities central depository accounts of the borrower and the lender.
3. After having received the applications for conclusion of securities borrowing and lending transaction and confirmed the conditions of the both parties to be in conformity, this Corporation will forthwith notify the Securities Central Depository Enterprise to transfer the securities through book-entry from the securities central depository account of the lender into that of the borrower.
This Corporation will notify the Securities Central Depository Enterprise to transfer the securities through book-entry in accordance with the provisions of the preceding paragraph and, if the lender is unable to have the securities transferred or there are insufficient securities, will cancel the application for conclusion of the negotiated borrowing transaction and inform the borrower and the lender. Upon cancellation of the conclusion of the transaction, the lender shall return the collaterals to the borrower. |
| Article 18 | The term of securities borrowing for transaction needs or for performance shall not exceed 6 months from the date of conclusion of the borrowing transaction.
A securities borrower may redeliver the borrowed securities at any time during the agreed term.
If the lender does not request early redelivery of the securities, the borrower may, from the 10th business day before expiration of the lending period until the date of expiration, submit an application to the lender via this Corporation for extension of the loan. If the lender does not give consent after receiving the notice, it shall be deemed to have refused.
In an application for extension of a loan under the preceding paragraph, no term or condition of the loan may be amended except the loan period. The extension period may not exceed six months, and only one extension may be given. |
| Article 19 | A borrower of fixed-price transaction or competitive-auction transaction shall redeliver the securities by way of the following:
1. Redelivery of the securities on the due date: this Corporation will notify the borrower via the securities firm to redeliver the securities 10 business days prior to the date scheduled for redelivery of securities.
2. Redelivery of the securities prior to the due date: a borrower may redeliver the securities in full or in part at any time from the business day immediately following the date of securities borrowing to the due date.
3. Request by the lender for early redelivery of the securities: the lender shall, at the latest, 3 business days or 10 business days before the date for early redelivery, in accordance with the lending application conditions, notify the borrower via this Corporation of its request for early redelivery; the borrower may redeliver the securities in full or in part at any time from the business day immediately following the receipt of the notice to the early redelivery date.
After a borrower is informed by a securities firm through the securities borrowing system of this Corporation, this Corporation will notify the Securities Central Depository Enterprise to transfer through book-entry the borrowed securities from the securities central depository account of the borrower to that of the lender, and this Corporation will inform the borrower and the lender via the securities firm.
Only after the borrowed securities and all rights derived from the borrowed securities during the term of borrowing have been redelivered or paid to the lender is the borrower's obligation for redelivery of the securities concluded. |
| Article 20 | A borrower of negotiated borrowing transaction shall redeliver the securities by way of the following:
1. Redelivery of securities on the due date: 10 business days prior to the scheduled redelivery date, this Corporation will notify the borrower via the securities firm to redeliver the securities.
2. Redelivery of securities prior to the due date: a borrower and a lender may agree to the redelivery of securities at any time prior to the due date, and the parties shall report to this Corporation through a securities firm with regard to the change of the date for redelivery of securities.
After a borrower is informed by a securities firm through the securities borrowing system of this Corporation, this Corporation will notify the Securities Central Depository Enterprise to transfer the borrowed securities from the securities central depository account of the borrower to that of the lender, and this Corporation will inform the borrower and the lender via the securities firm. |
| Article 21 | This Corporation shall provide, via the computer linkage or internet, the following information for inquiries:
1. With respect to fixed-price transaction:
(1) The fixed charge rate;
(2) Information on concluded transactions: disclose the total volume of each securities transacted;
(3) Information on securities for lending: disclose the total volume of each securities for lending that has not been transacted;
(4) Information on securities borrowing: disclose the total volume of each securities for borrowing that has not been transacted.
2. With respect to competitive-auction transaction:
(1) Information on concluded transactions: upon matching and execution of each transaction, disclose the transacted securities and volume, transaction charge rate, and the total volume of such securities transacted;
(2) Information on securities for lending: disclose the volume for lending, the lowest five lending charge rates of each security, and the total lent volume of such security;
(3) Information on securities for borrowing: disclose the volume for borrowing, the highest five borrowing charge rates security, and the total borrowed volume of such security;
3. With respect to negotiated borrowing transaction: the table of balance of borrowed securities.
This Corporation will publicize balance of borrowed securities on a daily basis; the table of balance of borrowed securities in connection with negotiated borrowing transaction may be consolidated with those in connection with fixed-price transaction and competitive-auction transaction.
This Corporation may adjust the contents of information according to the market situation. |
| Article 22 | The collaterals for securities obtained by this Corporation on account of the securities lending and borrowing transaction shall be entrusted to the Securities Central Depository Enterprise for custody.
After a transaction of securities lending and borrowing has been concluded, the Securities Central Depository Enterprise shall mark on the borrowed securities.
Marked securities referred to in the preceding paragraph shall not be assigned, transferred, or withdrawn, except under the following circumstances:
1. Redelivery.
2. Transaction needs or performance.
3. Transfer to the securities central depository account of the borrower opened at a custodian bank.
4. Transfer between different securities lending and borrowing accounts opened by the same investor at the same business place of the same securities firm.
5. Others as approved by this Corporation. |
| Article 23 | This Corporation will not accept application for opening securities lending and borrowing account if a borrower or a lender has any of the following events:
1. Where it is not in compliance with the provisions of Articles 5 and 49 hereof;
2. Where it uses any other's name to open the securities lending and borrowing account;
3. Where the contract entered into with a securities firm for entrustment of securities trading is terminated.
A securities lending and borrowing account opened by a borrower or a lender with the same securities firm place [of business] shall be limited to one account per person. However, this restriction shall not apply to one that is duly permitted by regulations to open two or more trading accounts at the same place of business of the same securities broker.
Where any of the events set forth in any item of the preceding paragraph occurs after a securities lending and borrowing account is opened, this Corporation will suspend its participation in securities lending and borrowing transactions and notify the concerned party to settle their liability, and will cancel such securities lending and borrowing account upon settlement.
If a provisional seizure, provisional injunction, or compulsory execution is imposed by a court upon the borrowed securities of a borrower, Paragraph 2 of Article 41 hereof shall apply mutatis mutandis, and this Corporation may cancel such securities lending and borrowing account upon settlement. |
| Article 24 | When a borrower and a lender apply for opening a securities lending and borrowing account, a duly authorized person shall handle the account opening procedures with a letter of authorization, and the securities firm shall submit the relevant documents to this Corporation. Copies of the submitted documents shall be affixed with seals of the applying company and its representative and marked with wording "identical to the original" In addition, this Corporation shall verify by letters that the account opener was under entrustment or authorization.
The securities firm shall transmit the information with respect to the account opening of a lender or a borrower, cancellation of account, to the computer system of this Corporation; the same shall apply to any changes thereto. |
| Article 25 | In case of any changes to the company name, agent, name and I.D. number of the responsible person, the uniform number or withholding tax number, withholding tax rate, bank account number, address or mailing address, or email address of the company as specified in the application for securities lending and borrowing account, such changes shall be entered by the securities firm into the securities borrowing system of this Corporation and a written notice shall be given to this Corporation.
In the event that an applicant fails to give such notice and this Corporation processes the lending and borrowing transaction by using the original information, such applicant shall be solely responsible for any legal problem arising therefrom and shall not raise any objection.
Where a notice of this Corporation is delivered by way of postal mail and such notice fails to be delivered due to the failure of the borrower or the lender to inform of the changed address or mailing address in accordance with the provisions of the preceding paragraph, or due to any event attributable to the borrower or the lender, such notice shall take effect as of the date on which it is delivered to a post office for the first time. |
| Article 26 | The payment of money or delivery of securities by this Corporation to a borrower or a lender will be conducted by way of book-entry. In the case of money, this Corporation will remit to the bank account designated by the securities firm which, in turn, shall transfer such money into the bank account opened by the lender or the borrower at a financial institution, whereas, in the case of securities, the Securities Central Depository Enterprise will directly transfer to the securities central depository account of the borrower or the lender. |
| Article 27 | When a lender or a borrower is to entrust a securities firm to lend or to borrow securities, it shall fill out a letter of entrustment marked with the wording "securities lending," "securities borrowing," or "securities redelivery." After the lending and borrowing transaction is concluded, the securities firm shall fill out relevant vouchers including a securities lending and borrowing report according to the transaction data of this Corporation, marked with the wording "securities lending," "securities borrowing," or "securities redelivery"; the format and content thereof shall be separately publicly announced by this Corporation.
Article 75 of Operation Rules of this Corporation shall apply mutatis mutandis to the circumstances set forth in the preceding paragraph.
This Corporation will inform by way of transmission of files to the securities firm of the concerned borrower of the stipulated collateral ratio, collateral maintenance ratio and minimum collateral ratio.
This Corporation will inform the borrower and the lender via the securities firm of the notice of ex right or ex dividend and the statements pertaining to its calculation.
After a lending and borrowing transaction is settled, this Corporation will produce statements in connection with securities borrowing expenses, securities lending income, return of collaterals, and the net amount to receive and to pay, which shall be informed to the borrower and the lender by the securities firm. |
| Article 28 | When a borrower or a lender is to apply for termination of its securities lending and borrowing account, it shall fill out the "application for termination of securities lending and borrowing account" the format of which is as shown in Appendix 5 hereto. After having confirmed that all of its securities lending and borrowing transactions have been settled, this Corporation will consent to the cancellation of account. |
| Article 29 | When applying for securities borrowing, a securities borrower of fixed-price transaction or competitive-auction transaction shall provide collaterals, and such collateral shall be limited to the following:
1. Cash;
2. Listed or OTC-traded securities as approved by this Corporation;
3. Bank guarantee;
4. Central book-entry bonds.
The collaterals referred to in the preceding paragraph shall be provided in the following manner:
1. Cash: to be transferred directly by the borrower to the bank account for monetary collateral designated by this Corporation;
2. Listed or OTC-traded securities: after the borrower files an application through a securities firm, this Corporation will notify the Securities Central Depository Enterprise to pen in such securities;
3. Bank guarantee: after the borrower has completed the guarantee procedures with a bank, it shall file an application through a securities firm and forward the original of such guarantee to this Corporation.
4. Central book-entry bonds: the borrower shall create a pledge on the bonds and register it in favor of this Corporation.
After a securities lending and borrowing transaction is concluded, this Corporation will notify the Securities Central Depository Enterprise to transfer the securities provided by the borrower as collaterals to this Corporation as a security.
The terms and conditions on which securities may be used as collaterals, and the discount ratio computed by reference to the opening price of the market of the day shall be determined and publicly announced by this Corporation.
The value of central book-entry bonds provided as collateral shall be calculated at a discount ratio equal to 90 percent of their par value. |
| Article 30 | At the time of filing an application for securities borrowing, a securities borrower of fixed-price transaction or competitive-auction transaction shall provide to this Corporation the collaterals representing a specific ratio (stipulated collateral ratio) of the market value of the borrowed securities computed by reference to the opening price of the borrowed securities of the then current day. After the transaction is concluded, the collateral maintenance ratio shall be calculated on a daily and individual transaction basis. In case the collateral maintenance ratio is lower than the minimum collateral ratio, the borrower shall, after this Corporation has informed the securities firm of the borrower, provide additional collaterals on the business day immediately following the date of notice so as to bring the collateral maintenance ratio back to the stipulated collateral ratio.
The formula for calculation of the collateral maintenance ratio is as follows:
1. Collateral maintenance ratio shall be equivalent to the ratio of the total offset value of collaterals minus the securities borrowing expenses payable, divided by the total value of secured coverage, and times 100%.
2. The total offset value of collaterals shall be the closing price of the then current day of the securities which are provided as collaterals, multiplied by the volume and the discount ratio, plus the total value of cash collaterals and bank guarantee.
3. The total value of secured coverage shall be the closing price of the borrowed securities of the then current day multiplied by the volume of collaterals, plus the total value of cash dividend to be refunded.
4. The volume of collaterals shall be the volume of borrowed securities plus the volume of ex right stock dividend to be returned.
The market value of securities referred to in the preceding paragraph shall be calculated on the basis of closing price; however, for the 3 business days prior to the ex dividend or ex right date of the concerned securities, the market value of the securities which are provided as collaterals shall be calculated at the closing price of the then current day minus the value of dividend or the weighed value of ex right computed on the basis of the closing price of the then current day.
This Corporation will prepare a transfer statement and the medium information with respect to the securities which are provided as collaterals and will on the business day preceding the date on which the issuer suspends the transfer forward the same to the Securities Central Depository Enterprise, which will act as an agent to apply for transfer with the issuing company or its stock agent.
The stipulated collateral ratio, minimum collateral ratio, and discount ratio of securities which are provided as collaterals shall be publicly announced by this Corporation according to the market situation.
After the public announcement referred to in the preceding paragraph has come into effect, except that the existing securities borrowing shall be calculated according to the adjusted ratio, the same shall apply to the unredelivered portion of the original securities borrowing. |
| Article 31 | Where an application for securities borrowing of fixed-price transaction or competitive-auction transaction is not concluded, this Corporation will return the collaterals provided by the borrower in the following manner:
1. In the case of cash, this Corporation will on the following business day remit the cash directly into the bank account designated by the borrower;
2. In the case of listed or OTC-traded securities, this Corporation will directly notify the Securities Central Depository Enterprise to release the pen-in.
3. In the case of bank guarantee, this Corporation will return the original guarantee to the borrower on the following business day.
4. In the case of central book-entry bonds, the registration of the creation of the pledge shall be canceled on the same day. |
| Article 32 | An application may be made for the withdrawal of any portion of the collateral provided by a borrower in a fixed-price transaction or competitive-auction transaction that exceeds the collateral requirement.
A borrower applying for withdrawal of collateral shall do so via the securities firm through the securities borrowing system of this Corporation. After this Corporation receives the application, the matter shall be handled in accordance with the provisions of Article 31 applied mutatis mutandis. |
| Article 33 | A borrower in a fixed-price transaction or competitive auction transaction who is applying to substitute collateral shall do so via the securities firm through the securities borrowing system of this Corporation. The borrower shall first provide the additional collateral before then applying for withdrawal of the original collateral of an equivalent value or less (in the case of securities provided as collateral, the value shall be calculated at the discount ratio of the market opening reference price of the then current day).
Where securities or a bank guarantee provided by a borrower as collateral are audited and found no longer to be qualified collateral, this Corporation will forthwith notify the borrower to make a substitution by the following business day. |
| Article 34 | This Corporation shall pay interest on the cash collaterals provided by a borrower of fixed-price transaction or competitive-auction transaction, which shall be calculated at the interest rate of the saving deposit account of the bank where this Corporation opened such an account.
If the interest rate referred to in the preceding paragraph is adjusted, the interest on the unsettled portion of the borrowing transaction shall be calculated at the adjusted rate as of the date of adjustment. |
| Article 35 | With respect to the dividend, bonus or other benefits which are not received by a lender of fixed-price transaction or competitive-auction transaction due to the lending of the securities, the borrower shall return, via a securities firm through the securities borrowing system of this Corporation, the same to the lender in the following manner:
1. Cash entitlements:
(1) This Corporation will notify, via the securities firm, the borrower 5 business days prior to the payoff date;
(2) The borrower shall deposit, via the securities firm, the cash into the bank account designated by this Corporation on the payoff date, and key in via the securities firm the securities borrowing system of this Corporation for confirmation, this Corporation will transfer via the securities firm to the lender on the same day or on the following business day.
2. Securities entitlements:
(1) This Corporation will notify, via the securities firm, the lender after the ex dividend date, and the lender shall either redeliver the securities or return cash in equivalent value within 3 business days as of the date of notice of this Corporation, and key in via the securities firm the securities borrowing system of this Corporation, this Corporation will notify the borrower via the securities firm. In addition, where this Corporation notifies, via the securities firm, the borrower 5 business days prior to the payoff date, and if the lender fails to make selection within the time limit, this Corporation will redeliver the securities.
(2) In case of redelivery of securities by the borrower, a notice shall be given within 3 business days after the payoff date via the securities firm through the securities borrowing system of this Corporation to the Securities Central Depository Enterprise which will transfer to the lender through book-entry from the securities central depository account of the borrower. In case of return of cash in equivalent value, the amount shall be calculated on the ex dividend reference price and shall be returned on the payoff date in the manner for return of "cash entitlements".
(3) In case of redelivery of securities, the securities may be redelivered prior to the payoff date since the securities entitlements are uniformly to securities which are already traded on the market.
3. Rights to subscribe for securities to be newly issued
(1) This Corporation will notify the lender via the securities firm 5 business days prior to the deadline for subscription of securities to be newly issued. 3 business days prior to the deadline for subscription of securities to be newly issued, the lender shall express its intent of subscription via the securities firm to this Corporation and deposit the money, via the securities firm, to the bank account designated by this Corporation. After the foregoing is keyed in the securities borrowing system of this Corporation for confirmation, this Corporation will transfer the same via the securities firm to the borrower for subscription or for purchase from the market. Within 3 business days of the date of issuance of the new securities, this Corporation will notify the Securities Central Depository Enterprise via the securities firm through the securities borrowing system of this Corporation, to transfer through book-entry from the securities central depository account of the borrower to the lender.
(2) If the securities to be newly issued have already been traded on the market, the new securities may be redelivered even before they are issued.
(3) If the lender fails to express or expresses beyond the deadline its intent of subscription or, after expressing such intent, fails to pay the money for subscription within the prescribed deadline, the lender shall be deemed to have waived the rights to subscribe for the new securities.
Where the distribution date of cash entitlements, securities entitlements, or new share subscriptions mentioned in the preceding paragraph falls after the redelivery date, the borrower shall return all entitlements of the lender to the lender at the time of redelivery. |
| Article 36 | Where a lender of fixed-price transaction or competitive-auction transaction desires to exercise its voting right, it shall make a request for early redelivery of securities prior to the final transfer date for a shareholders' meeting, and in accordance with the required notice period for early redelivery of the securities under the original lending conditions; the request will be conveyed by this Corporation to borrower via the securities broker. |
| Article 37 | The terms and conditions for the collaterals, stipulated collateral ratio, collateral maintenance ratio, minimum collateral ratio, and the manner of transfer of collaterals of a negotiated borrowing transaction shall be determined through negotiation by the lender and the borrower. |
| Article 38 | For negotiated borrowing transactions, the lender and the borrower shall negotiate and stipulate between themselves the handling of cash entitlements, securities entitlements, subscription rights to new issues of securities, and exercise of shareholder rights, that because of the securities loan are not obtained by the lender.
The lender and the borrower shall submit, via a securities firm through the securities borrowing system of this Corporation, the detailed information referred to in the preceding paragraph and any changes thereto to this Corporation; in the case of securities, this Corporation will notify the Securities Central Depository Enterprise for transfer through book-entry. |
| Article 39 | A borrower of fixed-price transaction or competitive-auction transaction will be deemed to be in breach of contract under any of the following events, and this Corporation will dispose of the collaterals from the following business day and will purchase or borrow the securities for redelivery from the market. If the securities are not purchased or borrowed within 3 business days after the date of such breach, the redelivery shall be made with cash of equivalent value calculated on the basis of the closing price at the market as of the 3rd business day:
1. Where the borrower fails to redeliver the securities within the prescribed deadline on the due date or upon request of the lender for early redelivery of the securities;
2. Where the borrower fails to pay the compensation of entitlements upon the due date for such compensation payment;
3. Where the borrower fails to provided additional collaterals or substitute qualified collaterals within the prescribed time limit.
4. Where the borrower fails to pay the relevant expenses when due.
The handling charge of the disposition referred to in the preceding paragraph shall be borne by the borrower. |
| Article 40 | With respect to the disposition of securities which are provided as collaterals, this Corporation may entrust a securities firm to report the sale to this Corporation or to the OTC securities exchange; such collaterals, if reported but not transacted, shall be continually reported until transacted.
In the case of cash collateral, it shall be used for purchase of the securities or for setoff against the related expenses, whereas, in the case of bank guarantee, this Corporation will directly demand for payment from the bank issuing such guarantee.
The disposition of securities which are provided as collaterals shall be handled by through a "Taiwan Stock Exchange Corporation Segregated Account for Handling Default" opened by this Corporation with the securities firms.
The defaulting party shall not raise any objection to the time and price at which this Corporation disposes of the collaterals.
This Corporation will seek recovery from the borrower and the related expenses arising from handling the default, in case the proceeds from disposition of collaterals are insufficient to cover the amount owed. |
| Article 41 | Where a borrower of fixed-price transaction or competitive-auction transaction has any of the events set forth in Paragraph 1 of Article 39 hereof, or where a lender has the event set forth in Sub-paragraph 4 of Paragraph 1 of Article 39 hereof, this Corporation may suspend its participation in securities lending and borrowing transactions.
This Corporation may settle other securities borrowing transactions on behalf of a borrower and use the proceeds derived therefrom for setoff, in case the proceeds from disposition of collaterals are insufficient to cover the amount owed. In case of any remaining balance, such balance will be returned or, in case of any shortfall, this Corporation will give notice to pay for such shortfall by a prescribed deadline and, if the borrower fails to do so, this Corporation will terminate its right to participate in securities lending and borrowing transactions. |
| Article 42 | Where a borrower of negotiated borrowing transaction has any of the events set forth in Sub-paragraphs 1 and 4 of Paragraph 1 of Article 39 hereof, or where a lender has the event set forth in Sub-paragraph 4 of Paragraph 1 of Article 39 hereof, this Corporation may suspend its participation in securities lending and borrowing transactions, and if such borrower or lender fails to make payment or to deliver after being notified by this Corporation, this Corporation may terminate its participation in securities lending and borrowing transactions.
In the event of occurrence of any default in a negotiated borrowing transaction, the concerned party shall forthwith report to this Corporation on handling of such default.
Either party of a negotiated borrowing transaction shall solely bear the risk; this Corporation will assume no responsibility. |
| Article 43 | Where a borrower or a lender of fixed-price transaction and competitive-auction transaction has an event of default, in addition to handling it according to the regulations, this Corporation may charge a default penalty calculated at 10% of the securities borrowing charge. As for any payment advanced by this Corporation on account of handling a default, a default interest shall be charged at the rate of 5% per annum from the date of advance payment to the date of repayment in full. |
| Article 44 | The securities borrowing charge of fixed-price transaction and competitive-auction transaction shall be calculated on a daily and individual transaction basis. The daily closing price of the object securities multiplied by the volume of collaterals, and further multiplied by the transaction charge rate will be the total securities borrowing charge, which shall be collected or paid by the securities firm upon redelivery of the securities. When there is no closing price, the calculation shall be made on the basis of the most recent closing price.
The term of securities borrowing referred to in the preceding paragraph shall be from the date of borrowing of the object securities to the date preceding the redelivery date of such securities; If the redelivery date does not fall on a business day, the next following business day shall be taken as the redelivery date. The preceding paragraph applies mutatis mutandis to securities borrowing charges for holidays.
Where the lender in a fixed-price transaction or competitive-auction transaction agrees to extend the loan, the securities borrowing charge shall continue to accumulate and shall be collected after the redelivery of the securities has been concluded.
Where the borrower redelivers early a portion of the securities during the lending period, the borrower shall on the next following business day pay up the borrowing charge for that redelivered portion first.
The calculation and payment for the securities borrowing charge of a negotiated borrowing transaction shall be determined by the borrower and the lender through negotiation, for which Paragraph 6 of Article 27 hereof shall not apply. |
| Article 45 | A securities firm entrusted to handle the securities lending and borrowing transaction shall collect the handling charge, whereas this Corporation providing securities lending and borrowing service on the market will collect a lending and borrowing service fee.
The handling charge and lending and borrowing service fee of the securities lending and borrowing transaction, along with their rates, shall be determined by this Corporation in conjunction with the Chinese Securities Association and shall be implemented after being submitted to and approved by the competent authority. |
| Article 46 | This Corporation undertakes the possible damage pursuant to Article 39 hereof, and therefore shall appropriate a reserve from the collected lending and borrowing service fee at a certain percentage; in case of any shortfall, such shortfall shall be paid from the self-owned capital of this Corporation. |
| Article 47 | In the event that the object securities are suspended from trading, delisted or ceased to be traded on the OTC market, merged, have a capital reduction, or cease to be qualified securities after being audited, this Corporation may request the borrower to redeliver the securities and end the transaction. |
| Article 48 | Except as otherwise provided for in Articles 41 and 42, where a party to a securities lending and borrowing transaction is in breach of these Measures, Master Contract of Securities Lending and Borrowing Transaction, Letter of Entrustment for Securities Lending and Borrowing Transaction, or the relevant regulations and rules, publications, or letters of notice, this Corporation may suspend its participation in securities lending and borrowing transactions or notify it to make improvement, depending upon the extent of such breach.
Where a party to a securities lending and borrowing transaction fails to improve after being notified to make improvement, this Corporation may terminate its participation in securities lending and borrowing transactions. |
| Article 49 | A person whose participation in securities lending and borrowing transactions is terminated by this Corporation pursuant to Articles 41, 42, and 48 hereof, may re-participate in securities lending and borrowing transactions upon expiry of one year after completion of payment, performance or improvement. |
Chapter 3: Securities Needed for Settlement
|
Section 1: Securities Firms
|
| Article 50 | Where a securities firm is unable to complete the settlement of securities for reasons that an error occurs to an entrusted transaction or to a transaction of its own, or that a client fails to complete the settlement on time, or that the securities provided by the securities firm has any of the events set forth in Paragraph 1 of Article 109 of the Operation Rules, or for any other probable causes, the securities firm shall borrow securities, after having completed the reporting or application procedures in accordance with the relevant provisions of the Operation Rules. |
| Article 51 | A securities firm, when applying for securities borrowing, shall deposit with this Corporation monetary collateral equivalent to 120% of the closing price of the object securities on the date on which the transaction is concluded multiplied by the volume of securities applied for, and shall act in accordance with the Directions for Collection and Delivery Operations of Securities Firms Handling Securities Borrowing for Settlement and Supplementation of Collateral.
When a securities firm fails to complete the settlement of securities and further fails to complete the reporting or application procedures in accordance with the time prescribed in Article 104 of Operation Rules, and if such securities firm is not required to otherwise provide checks pursuant to the provisions of the "Particulars to be Noted" referred to in the preceding paragraph, this Corporation may borrow securities on behalf of the securities firm, and notify such securities firm on the following date, and the securities firm shall not raise any objection to the securities borrowing charge incurred thereby. |
| Article 52 | The securities for borrowing shall be limited to the securities listed on the centralized exchange market as shown in the depository accounts of the Securities Central Depository Enterprise. Where an owner of the foregoing securities intends to lend such securities, it shall fill out a "Form of Lending Entrustment" and entrust its securities broker or a bank approved by the competent authority to operate the custodial business and serving as a custodial institution for it, through which the relevant information will be keyed in the securities lending and borrowing computer system for reporting the lending. Such owner may change the contents of the report or cancel the report from time to time before the lending is completed.
The Form of Lending Entrustment referred to in the preceding paragraph shall contain the name and volume of the securities for lending as well as the lending charge rate, whereas its format shall be framed by this Corporation.
With respect to the volume referred to in the preceding paragraph, the reported lending unit shall be one trading unit or its multiples according to Article 60 of the Operation Rules of this Corporation, and the lending charge rate shall not exceed 7% of the closing price of the object securities.
In case of ex dividend or ex right of the securities, the borrowing securities firm shall compensate the lender by cash based on the value of such ex dividend or ex right computed by this Corporation for the object securities. |
| Article 53 | The application for borrowing filed by a securities firm will be processed on the lending charge rates set by lenders on a from-low-to-high basis through the securities lending and borrowing computer system from the date following the date of application for such lending. In case the volume for lending at a same charge rate is more than that needed, such application will be processed on a random basis.
The securities lending charge for the securities of same category shall be shared by all securities firms applying for borrowing of such securities in proportion to the volume borrowed by each securities firm. |
| Article 54 | The borrowed securities shall be redelivered on a daily basis from the business day following each lending date.
A borrowing securities firm, after completing the securities borrowing, shall redeliver or make up the securities redelivery by the prescribed or committed deadline. Before the redelivery or make-up of securities is completed, it shall continue to borrow the securities on each business day so as to use the same for the redelivery pursuant to the preceding paragraph.
The securities redelivered or made-up by a borrowing securities firm by the prescribed or committed deadline shall be redelivered through the Securities Central Depository Enterprise. Upon notice of such redelivery and completion of transfer by the Securities Central Depository Enterprise, this Corporation will pay the securities lending charge, by deducting from the refundable monetary collateral, to the lender through the securities firm of the lender or through the bank approved by the competent authority to operate the custodial business and serving as a custodial institution for the lender. Thereafter, this Corporation will redeliver to the securities firm the balance of the monetary collateral after deducting the securities lending charge.
A securities firm of a lender or a bank approved by the competent authority to operate the custodial business and serving as a custodial institution for a lender shall inform the lender of the status of securities lending and redelivery of securities, and may therefore charge the lender a service fee; however, such service fee shall not exceed 10% of the securities lending charge. |
| Article 55 | After a selling securities firm borrows securities to perform settlement obligations, on any subsequent day on which it has not yet redelivered the securities and is required to continue the loan, if the balance of the total monetary collateral it has paid minus any securities lending charge incurred is lower than 107% of the amount requiring collateralization as calculated by multiplying the outstanding securities borrowings by the closing price of those securities on the current day, the securities firm shall, by 10 am of the next business day following the date of continuation of the securities loan, supplement the amount to 120% of the amount requiring collateralization as of the date of continuation of the securities loan.
Where a borrowing securities firm fails to pay the monetary collateral in accordance with regulations or is unable to redeliver the borrowed securities for reasons attributable to itself, this Corporation will acquire the securities from the market and redeliver them to the lender. The prices and all expenses incurred therefrom will be paid from the monetary collateral; in case of any shortfall, this Corporation will recover it from the borrowing securities firm, whereas, in case of any remaining balance, such balance will be redelivered to the borrowing securities firm.
In the event that a securities firm is in violation of the settlement obligation, this Corporation will forthwith suspend its participation in securities lending and borrowing transactions. |
| Article 55-1 | A borrowing securities firm may, by 6 pm on the next business day following the trade date, or by 10 am on the next business day following the date of continuation of the securities loan referred to in paragraph 1 of the preceding article, apply to offset monetary collateral, or a shortfall in monetary collateral that must be covered for continuation of a securities loan, by a bank guarantee or a pledged book-entry central government bond. The limit on such offset is 90 percent of the amount of the monetary collateral. (Bank performance guarantees and book-entry central government bonds are collectively termed "offsetting collateral" below.)
After a selling securities firm borrows securities to perform settlement obligations, on any subsequent day on which it has not yet redelivered the securities and is required to continue the loan, if the balance of the cash portion of the monetary collateral it has paid minus any securities lending charge incurred is lower than 6% of the amount requiring collateralization as calculated by multiplying the outstanding securities borrowings by the closing price of those securities on the current day, the securities firm shall, by 10 am of the business day next following the date of continuation of the securities loan, supplement the amount to 10% of the amount requiring collateralization as of the date of continuation of the securities loan. |
| Article 55-2 | A borrowing securities firm that applies to offset monetary collateral, or a shortfall in monetary collateral that must be covered for continuation of a securities loan, by pledged book-entry central government bond(s) shall first carry out "restricted transfer" registration with the clearing bank, and then remit the bond(s) into the book-entry central government bond account designated by this Corporation by 10 am of the second business day following the trade date, or by 10 am of the business day next following the date of continuation of the securities loan.
The offset value of a book-entry central government bond is 90 percent of its face value. |
| Article 55-3 | A borrowing securities firm that applies to offset monetary collateral, or a shortfall in monetary collateral that must be covered for continuation of a securities loan, by a bank guarantee(s) shall first carry out the guarantee procedures with the bank, and then deliver the original written guarantee to this Corporation by 10 am of the second business day following the trade date, or by 10 am of the business day next following the date of continuation of the securities loan. |
| Article 55-4 | A borrowing securities firm may use a single or multiple book-entry central government bond(s) or bank guarantee(s) to offset a single or multiple sum(s) of monetary collateral. |
| Article 55-5 | The price and all fees incurred when this Corporation acquires securities from the market for redelivery in accordance with Article 55, paragraph 2, shall be paid first out of the monetary collateral; in the event it is insufficient, this Corporation will then dispose the offsetting collateral or exercise the rights thereunder to obtain compensation or to make necessary payouts. The procedures for disposal of offsetting collateral are as follows:
1. Where a bank guarantee(s) is used as offsetting collateral, this Corporation will claim compensation directly from the guaranteeing bank.
2. To dispose of pledged book-entry central government bond(s), this Corporation shall open a Taiwan Stock Exchange Corporation Segregated Account for Handling Default with the securities firm for that purpose.
3. All related expenses incurred in the disposal of collateral shall be borne by the borrowing securities firm.
4. After funds obtained by disposal of offsetting collateral have been applied to recover the amount of the outstanding debt, any remaining funds shall be returned to the borrowing securities firm; if the proceeds from the disposal are insufficient to liquidate the debt, recovery shall be sought from the securities firm. |
Section 2: Securities Financing Enterprises
|
| Article 56 | If the total volume of a specific financed securities of a securities financing enterprise plus the volume of the securities borrowed by securities firms from such securities financing enterprise for financing exceeds the total volume of the same securities obtained by the securities financing enterprise from its business of securities financing and re-financing, and the volume is still insufficient after it has applied for securities borrowing to other securities financing enterprises, it shall borrow by competitive auction from the owners of such securities from 8:00am of the following business day. If there is still shortfall, it shall negotiate with specific persons for borrowing before 2:00pm of the same day.
In the event that the volume acquired pursuant to the procedures set forth in the preceding paragraph is still insufficient, the securities financing enterprise shall entrust securities firms to conduct purchase by tender offer at this Corporation from 3:00pm to 3:30pm of the then current day. |
| Article 57 | Where a securities financing enterprise has filed an application with this Corporation for handling borrowing by competitive auction, it shall have its personnel key in the data of the securities for borrowing by competitive auction with respect to the category, volume, time and the highest unit price into the competitive auction system of this Corporation by 9:00am of the date of application for such borrowing, which will be publicly announced by this Corporation from 9:00am in the "reports on the basic market situation".
The highest unit price for securities borrowing by competitive auction referred to in the preceding paragraph shall be limited to 7% of the closing price of the object securities of the date on which the deficiency of financed securities occurs, and the borrowing will be processed on the unit prices bid in the auction of the then current day on a from-low-to-high basis. Where the volume of securities available for lending at a given unit price as set in the auction exceeds the volume of demand for borrowing in the auction, the borrowing shall be processed on the basis of priority of the keyed-in time. |
| Article 58 | An owner of securities participating in lending by competitive auction shall fill out a competitive auction form and entrust a securities firm to handle it. The competitive auction form shall contain the name of the client, account number, name of the securities, and volume and unit price for lending, and the securities for lending by competitive auction shall be limited to those deposited in its securities depository account with the Securities Central Depository Enterprise. A securities firm, upon acceptance of entrustment, shall proceed to conduct a pen-in (except for such securities that had been lent out in the previous business day). After a securities firm accepts entrustment, it shall mark the time and reference number on the competitive auction form, and enter the contents of the competitive auction form in sequence into the competitive auction system of this Corporation.
The keyed-in time as referred to in the preceding paragraph shall be from 9:00am to 12:10pm of the day of application for borrowing by competitive auction, and bid opening will be automatically completed at 12:30pm. After the bid opening is completed, this Corporation will publicly announce the unit prices and volume of securities of the awarded bids in the "reports on the basic market situation".
The reports on the competitive auction orders and successful bids will be printed out through the printer of the entrusted securities firms. Also, this Corporation will provide an auction result query function from 2:00pm. |
| Article 59 | The securities financing enterprise shall pay to this Corporation monetary collateral in the amount of 120% of the closing price of the object securities on the then current day multiplied by the volume awarded by competitive auction by 2:00pm of the day of application for such borrowing by competitive auction.
After the securities financing enterprise has paid the monetary collateral, this Corporation will notify the Securities Central Depository Enterprise to transfer the awarded securities to the special account of the securities financing enterprise on the first business day following the date of application for borrowing by competitive auction (the lending date).
The monetary collateral referred to in the preceding paragraph may be paid in the form of a certificate of time deposit or book-entry central government bond, with a pledge created thereupon, and the setoff value shall be counted at 90% of the face value of such collateral.
The lent securities will be redelivered through the Securities Central Depository Enterprise on the first business day following the lending date; however, securities borrowed by competitive auction on the first settlement day after the last trading day before the Lunar New Year Holidays shall be redelivered on the second trading day after the Lunar New Year Holidays.
By 10:00am of the first business day following the lending date, the securities financing enterprise shall pay the securities borrowing charge (securities borrowing charge = lending unit price x volume) to the lender through the entrusted securities firm, and this Corporation will return the monetary collateral to the securities financing enterprise.
The entrusted securities firm may collect a handling fee from the lender; such handling fee shall not exceed 10% of the securities borrowing charge. |
| Article 60 | If a securities financing enterprise is unable to redeliver the borrowed securities to the owner by the due time, this Corporation will employ the monetary collateral to make up the object securities and return to the lender. In case of any remaining balance thereafter, such balance will be returned to the securities financing enterprise. However, in case the monetary collateral is insufficient to make up the object securities, this Corporation will give the monetary collateral to the lender.
If the securities financing enterprise pays the monetary collateral by way of pledging a central book-entry bond under the preceding paragraph, the securities financing enterprise shall neither refuse nor raise any objection to the manner or price of disposal of the pledge by this Corporation in accordance with the Statement of Consent (see attachment) provided by the securities financing enterprise. |
| Article 61 | When two or more securities financing enterprises engage in competitive auction for the same securities, the auction will proceed simultaneously on the basis of the total volume. With respect to the competitive auction charge, an average amount will be derived from the total borrowed volume, and each securities financing enterprise will be charged according to its total borrowed volume.
In case of deficiency for the borrowing by competitive auction referred to in the preceding paragraph, the distribution will be made in proportion to the volume applied for borrowing by each securities financing enterprise up to an integer unit. In the event of any remainder, further distribution will be made in accordance with the decimal figure of the distributable volume of each securities financing enterprise on a big-figure-first basis; in case of a same decimal figure, distribution will be determined by lot drawing. |
| Article 62 | When a securities financing enterprise conducts a borrowing by negotiation, this Corporation will send personnel for supervision. The unit price for borrowing by negotiation shall not exceed 10% of the closing price of the object securities of the date on which the deficiency of financed securities occurs.
After an owner of securities agrees to lend the securities, it shall deliver the endorsed securities along with complete attachments as well as the securities lending statement to the securities financing enterprise by 2:00pm of the then current day, or transfer the same to the special account of the securities financing enterprise with the Securities Central Depository Enterprise. The securities financing enterprise shall produce a receipt and deliver the same to the lender by 12:00pm of the first business day following the borrowing-by-negotiation date.
The criterion for payment of monetary collateral shall be solely determined by the securities financing enterprise and the lender through negotiation.
The securities financing enterprise shall redeliver the borrowed securities and pay the securities borrowing charge (securities borrowing charge = negotiated unit price x volume) to the lender by 2:00pm of the second business day following the borrowing-by-negotiation date, and collect the monetary collateral back from the lender. |
| Article 63 | If, during the term of securities borrowing conducted by a securities financing enterprise for shortfall of financed securities, a securities firm applies to the securities financing enterprise for the same securities, the distribution of the securities obtained through borrowing by competitive auction or through borrowing by negotiation shall be conducted in accordance with the relevant regulations governing the operation of securities financing enterprises for re-refinancing applied by securities firms. |
| Article 64 | None of the securities having any of the following events shall be the subject of borrowing by competitive auction or borrowing by negotiation:
1. Any securities of less than one trading unit;
2. Any issued name-bearing stocks acquired by a shareholder or by an investor as a result of capital increase through recapitalization of earnings, capital increase through recapitalization of employees' bonus, capital increase by venture capital companies through recapitalization of undistributed profits pursuant to Article 13 of the Statute for Encouragement of Investment, and Articles 16 and 17 of the Statute for Upgrading Industries that have not been transferred and taxed, or the right to defer tax payment has not been waived.
The owner of lent securities shall guarantee the integrity of the rights over the securities. In case of any defect or legal dispute, the owner shall, after being notified by the securities financing enterprise, replace the securities of same category and in same volume, or, if failing to do so, it shall return the securities borrowing charge and, additionally, shall be liable for damages, if any. |
Chapter 4: Miscellaneous |
| Article 65 | Any matters not set forth herein shall be governed by applicable laws and regulations as well as the rules and regulations of this Corporation. |
| Article 66 | These Measures shall be implemented by public announcement of this Corporation after they have been submitted to and approved by the competent authority. Subsequent amendment hereto shall be effected in the same manner. |