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Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules(2007.01.25) |
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Article 2
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The term "securities borrowing and lending" or "securities loan" transaction means a transaction in which a lender agrees to lend securities and the borrower to return securities of the same type and quantity.
The term "securities borrowing needs" refers to securities borrowing by a specific institutional investor for the purpose of trading or delivery, or by a securities firm or securities finance enterprises for the purpose of settlement.
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Article 5
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Borrowers and lenders of securities for transaction needs and for performance shall be limited to the following specific corporate institutions:
1. Lenders: insurance companies, banks, trust investment 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 approved by the competent authorities.
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Article 6
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Borrower and lender shall sign a Securities Borrowing and Lending Authorization Agreement with a securities firm, open a securities borrowing and lending account, a central securities custody account, and a financial institution deposit account, and report to and obtain approval from this Corporation before they may engage the securities firm to execute securities borrowing and lending transactions.
The Securities Borrowing and Lending Authorization Agreement 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 Securities Borrowing and Lending Authorization Agreement and the Master Securities Borrowing and Lending Agreement entered into by and between the securities firm and this Corporation, as well as the Securities Borrowing and Lending Rules 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 Authorization Agreement.
A borrower shall entrust the same securities firm to handle the securities lending and borrowing transaction and the sale of the object securities.
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Article 8
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The securities that can be the subjects of securities borrowing for transaction needs and for performance shall be publicly announced by this Corporation.
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Article 9
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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.
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Article 13
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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 Central Securities Depository 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 Central Securities Depository 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 Central Securities Depository 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 Central Securities Depository to release the pen-in collaterals for the securities borrowing from the securities central depository account of the borrower.
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Article 15
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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 Central Securities Depository 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 Central Securities Depository 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 Central Securities Depository 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 Central Securities Depository 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 Central Securities Depository to release the pen-in collaterals for the securities borrowing from the securities central depository account of the borrower
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Article 18
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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.
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Article 22
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The collaterals for securities obtained by this Corporation on account of the securities lending and borrowing transaction shall be entrusted to the Central Securities Depository for custody.
After a transaction of securities lending and borrowing has been concluded, the Central Securities Depository 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.
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Article 26
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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 Central Securities Depository will directly transfer to the securities central depository account of the borrower or the lender.
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Article 29
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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 Central Securities Depository 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 Central Securities Depository 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.
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Article 30
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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 Central Securities Depository, 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.
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Article 31
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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 Central Securities Depository 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.
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Article 33
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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.
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Article 36
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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.
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Article 38
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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 Central Securities Depository for transfer through book-entry.
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Article 40
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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.
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Article 43
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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.
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Article 44
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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.
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Article 47
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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.
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