| Title： |
Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules(2008.04.16) |
| Date： |
|
|
Article 6-1
|
A securities firm shall sign a Master Securities Borrowing and Lending Agreement with the TSEC before it may accept authorization to handle securities borrowing or lending matters on behalf of a borrower or lender.
The Master Securities Borrowing and Lending Agreement, the format of which is shown in Appendix 2 hereto, shall contain the following particulars:
1. Securities borrowing and lending transactions between the securities firm and the TSEC, between the TSEC and a borrower or lender, and between a borrower and a lender shall all be made under the Master Securities Borrowing and Lending Agreement as well as the TSEC Securities Borrowing and Lending Rules and other applicable regulatory stipulations and rules.
2. The securities firm shall sign a Securities Borrowing and Lending Authorization Agreement with a borrower or lender before it may accept authorization to handle securities borrowing or lending transaction matters on behalf of the borrower or lender, and the securities firm may continue to act in such capacity only while the Authorization Agreement remains effective.
3. When handling securities borrowing or lending transaction matters on behalf of a borrower or lender, the securities firm shall exercise the due care of a good administrator. A securities firm handling securities borrowing or lending transaction matters under these Rules shall exercise the same degree of care as it does in handling its own affairs.
4. When placing an order for a fixed-price or competitive bid securities lending transaction on behalf of a customer, the securities firm shall confirm the content of the order and cause to be deposited in advance the eligible securities to be lent or the collateral against the securities borrowing. Unless the transaction is not successfully executed, the securities firm may not, with respect to the deposited securities or collateral, make any offset, seizure, retention or make any other claim or do any other thing that may impede payment or settlement in that loan transaction.
5. Upon execution of a fixed-price or competitive bid transaction through matching by the TSEC, the loan relationship between the borrower and the lender shall be established and become effective. Should the borrower or lender default on or breach any of its obligations or representations, it shall pay as stipulated a default penalty to the TSEC and be liable for damages, and in such a case the TSEC shall assume rights and obligations such as demanding payment on the default, or advancing the payment and seeking recovery.
6. Upon execution of a negotiated transaction through negotiation between a borrower and a lender, the borrower and the lender shall solely be responsible for all rights and obligations arising from, and assume all default and recovery risks associated with the loan relationship, and the TSEC shall in no event be held liable for the performance of any obligation arising therefrom. The lender and borrower shall forthwith through a securities firm report to the TSEC the terms and conditions of the negotiated transaction, and the TSEC shall provide a transaction confirmation and give notifications for the handling of the book-entry delivery and the subsequent return of the underlying securities.
|
|
Article 7
|
A securities firm or securities finance enterprise intending to carry on securities borrowing and lending business pursuant to the Regulations Governing Securities Lending by Securities Firms or the Regulations Governing Securities Finance Enterprises, shall sign a Securities Borrowing and Lending Agreement with the TSEC and open a securities borrowing and lending account before it may carry out securities borrowing and lending transactions through the TSEC securities lending system.
|
|
Article 17
|
A negotiated transaction shall be conducted in the following manner:
1. A borrower and a lender shall between themselves negotiate and agree on the terms and conditions of a securities loan that cover, with respect to the securities to be loaned, the type, quantity, lending rate, loan period, and with respect to the collateral to be provided, the type, terms and conditions, and how entitlement compensation will be made, and shall enter into a Negotiated Securities Loan Transaction Agreement (format as shown in Appendix 3 hereto), under which the borrower shall provide collateral to the lender.
2. The borrower and the lender shall respectively request a securities firm to enter on their behalf a report on the execution of the borrowing transaction and a report on the execution of the lending transaction through the TSEC securities lending system, specifying therein such information as the title of the securities, borrowing/lending quantity, rate for the transaction, return date, securities book-entry transfer date, collateral percentage, the borrower's securities borrowing and lending account and that of the lender, where the securities book-entry transfer date may be either the report date or the next following business day; and the borrower and the lender may file their respective reports through the same or through different securities firms.
3. Where the report date is specified as the securities book-entry transfer date in the lending transaction report, the TSEC will thereupon notify the central securities depository to put the securities on hold to make them available for lending; the lending transaction report will be invalid if the lender does not have sufficient securities on deposit in its central securities depository account.
4. No change may be made to the borrowing/lending terms and conditions once the TSEC confirms that those in the borrowing transaction report are consistent with those in the lending transaction report. If the securities book-entry transfer date is the next business day following the report date, the lender and the borrower may, acting jointly, apply to withdraw that negotiated transaction report at any time from the TSEC's confirmation until before 10 a.m. on the securities book-entry transfer date.
5. Where the securities book-entry transfer date is the report date, the TSEC upon confirmation will notify the central securities depository to transfer the securities.
6. Where the securities book-entry date is the next business day following the report date, the TSEC will issue a notice to the central securities depository at 10:30 a.m. on that day, advising it to transfer the securities; the negotiated transaction report will be invalid if the lender does not have sufficient securities on deposit in its central securities depository account, in which case the TSEC will not execute the transaction and will thereupon issue a notice to the lender and borrower through their securities firm(s).
|
|
Article 17-1
|
If in a negotiated transaction report the next business day following the report date is specified as the securities book-entry transfer date, if a circumstance arises that the borrower needs to sell the borrowed securities before they are transferred into its central securities depository account, it may only do so though the securities firm which has filed the borrowing transaction report on its behalf.
If after the borrower has executed the sale of securities under the preceding paragraph, the transfer of securities for the negotiated transaction fails to be completed by the due date, making the borrower unable to satisfy its delivery obligation with the securities firm handling the sell order, the TSEC will, depending on which party is to be held responsible for such failure, suspend or terminate the lender's or borrower's participation in securities borrowing and lending transactions, or otherwise announce a default on the part of the lender or borrower.
|
|
Article 22
|
The securities collateral received by the TSEC in conducting securities borrowing and lending transaction business shall be delivered to the custody of the central securities depository.
Upon the execution of a securities loan transaction, the central securities depository shall make a notation specifying how the borrowed securities may be used. However, the same shall not apply to securities borrowed through a securities borrowing and lending account of a securities firm or of a securities finance enterprise.
No securities with respect to which a notation has been made under the preceding paragraph may be transferred or withdrawn, except for the following purposes:
1. For sale through a securities firm so authorized.
2. For returning securities borrowed or for compensating for securities entitlements.
3. For returning spot securities borrowed in short sales.
4. For purposes associated with the exercise of call (put) warrants, equity options, and other equity-type financial instruments.
5. For use in the in-kind creation or redemption of exchange traded fund (ETF) units.
6. For such other purposes as may be approved by the TSEC.
|
|
Article 35
|
A borrower in a fixed-price or competitive bid transaction shall, through a securities firm and through the TSEC securities lending system, repay the lender in the following manner any cash dividends, stock dividends, or other benefits that the lender would have received if it had not lent the securities:
1. In the case of cash entitlements:
(1) The TSEC will, no later than five business days before the distribution date, notify the borrower through its securities firm.
(2) The borrower shall through its securities firm deposit cash into a bank account designated by the TSEC and enter the information into the TSEC securities lending system for confirmation purposes on the distribution day, and the TSEC will afterwards, on that day or on the next business day, transfer the money to the lender through its securities firm.
2. In the case of securities entitlements:
(1) The TSEC will notify the lender through its securities firm after the holder-of-record date, and the lender shall, within three business days starting from the date of the notice from the TSEC, decide at its option whether securities or cash of equivalent value shall be returned, and then enter the information into the TSEC securities lending system, whereupon the TSEC will notify the borrower through its securities firm advising of the fact, and give further notice to the borrower through the securities firm three business days prior to the distribution date, advising that the TSEC will cause securities to be returned if the lender fails to exercise that option within the time limit.
(2) The borrower shall, in the case of returning securities, give a notice through its securities firm and through the TSEC securities lending system, to the central securities depository within three business days starting from the distribution date, instructing it to effect a book-entry transfer of the securities to the lender from the borrower's central securities depository account, or in the case of returning cash of equivalent value, make the return on the distribution date in the same manner as cash entitlements, in an amount determined based upon the ex-rights reference price.
3. In the case of rights to subscribe to newly issued securities:
(1) The TSEC will, five business days prior to the end of the period for subscribing to securities in a new issue, notify the lender through its securities firm, and the lender shall, three business days prior to the end of the subscription period, declare its intention to subscribe, if so desired, by giving notice through its securities firm to the TSEC and, also through its securities firm, deposit the money into the TSEC-designated bank account, to be transferred through the TSEC securities lending system to the borrower to subscribe to the securities, or to buy in the securities in the market, for the account of the lender.
(2) The TSEC will, no later than three business days prior to the distribution date for the newly issued securities, give a notice to the borrower through its securities firm advising that the borrower must, within three business days starting from the distribution date, give a notice through the securities firm via the TSEC securities lending system to the central securities depository to effect a book-entry transfer of the securities to the lender from the borrower's central securities depository account.
(3) The lender shall be deemed as having waived the right to subscribe to the newly issued shares if it tardily declares its intention to subscribe, or fails to declare its intention to subscribe, or if it, having so declared, fails to pay the subscription price within the time limit.
In a negotiated transaction, the borrower and the lender shall between themselves negotiate and agree on how to deal with any cash entitlements, securities entitlements, subscription rights for newly issued securities, and other benefits that the lender would have received if it had not lent the securities, as well as on the exercise of any rights on the shares. In the case of securities entitlements that require a book-entry transfer, the transfer shall be made through the TSEC securities lending system.
|
|
Article 36
|
A borrower shall through its securities firm enter into the TSEC securities lending system the information on any unsold portion of securities it has borrowed, within 10 business days after the holder-of-record date for any distribution of cash or securities entitlements on such securities.
|
|
Article 37
|
The TSEC shall, on the business day preceding an issuing company's book closure date, prepare a title transfer list and electronic data file incorporating information on the securities of that issuing company that have been posted as collateral, and deliver the same to the central securities depository to effect the title transfers with the issuing company or its stock registrar and transfer agent on behalf of the relevant parties.
A securities firm or securities finance enterprise that has posted as collateral for a securities borrowing transaction made through the TSEC securities lending system the collateral securities it had previously received, shall replace the same four business days before the book closure date, so that the operations described in the preceding paragraph may be carried out accurately; the securities firm or securities finance enterprise shall be solely held responsible for any dispute regarding shareholders' rights that may arise if it fails to make such replacement.
A lender in a fixed-price or competitive bid transaction wishing to exercise the voting rights attached shall make a recall request prior to the holder-of-record date for the shareholders' meeting and in accordance with the recall notification period under the original lending terms; the TSEC will forward the request to the borrower through the securities firm.
|
|
Article 38
|
The terms and conditions, required collateral percentage, collateral maintenance ratio, and minimum collateral percentage with respect to the collateral for a negotiated transaction shall be negotiated and agreed, and the collateral transferred, between the lender and the borrower themselves.
|