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Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules(2006.10.16) |
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Article 16-1
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Where a borrower applying to borrow securities through a fixed-price or competitive bid transaction designates the securities borrowed in the present transaction to be used for return of another securities borrowing transaction record of the borrower, the borrower, notwithstanding the provision of Article 29 to the contrary, need not provide collateral for the present borrowing application, and upon execution of the present transaction through the matching process, the TSEC will notify the central securities depository to use the present securities borrowing to return the securities borrowed in the other transaction, as instructed by the borrower.
The quantity of securities in a borrowing application under the preceding paragraph shall be not more than the quantity of securities not yet returned for the designated securities borrowing transaction record, and such a transaction must be conducted through the same securities borrowing account at the same securities firm.
A securities borrowing transaction record designated by a borrower to be returned as described in paragraph 1 must be a transaction for which no application has been submitted under Article 18, paragraph 3 to renew the loan.
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Article 19
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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, 1 business day, 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 Central Securities Depository 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.
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Article 35
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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 holder-of-record 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 3 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 Central Securities Depository 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. 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 transfer the money, via the securities borrowing system of this Corporation, to the borrower to subscribe for the securities or purchase them from the market for the account of the lender.
(2) Prior to 3 business days of the distribution date for the newly issued securities, this Corporation will notify the borrower via the securities firm the necessity on the part of the borrower to notify the Central Securities Depository 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.
(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.
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Article 39
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Upon occurrence of one of the following events on the part of a borrower of fixed-price transaction or competitive-auction transaction, 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 event, 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.
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Article 41
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Where a borrower of fixed-price transaction or competitive-auction transaction has an events set forth in the subparagraphs 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 that party's 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, it will constitute a default and this Corporation will terminate the borrower's right to participate in securities lending and borrowing transactions.
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Article 42
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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.
Where a borrower in a negotiated transaction is unable, even at a limit-up price, to buy securities in the market to return the borrowed securities when required, or in the case of such a borrower being an offshore foreign institutional investor, the borrowed securities are subject to a ratio cap on foreign capital investments as fixed by the competent authority in charge of the relevant industry, such that the circumstance in Article 39, paragraph 1, subparagraph 1 of these Rules applies, the loan may be repaid in cash if so agreed between the lender and the borrower, in which case they shall forthwith file a report, accompanied by relevant factual evidence, to this Corporation to close out the securities loan.
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.
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