||Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules(2010.06.08)
A borrower placing an order with a securities firm to submit a quote for borrowing securities through a fixed-price or competitive bid transaction shall satisfy the requirement of providing sufficient eligible collateral, which may take the following forms only:
1. Cash, which may only be New Taiwan Dollars. However, a designated offshore foreign institutional investor may provide United States Dollars as collateral.
2. Collateral securities, which may only be securities eligible for margin purchases and short sales.
3. Bank guarantee.
4. Book-entry central government bonds.
The collateral under the preceding paragraph shall be provided in the following manner:
1. Cash: to be credited by the borrower through book entry transfer directly to a cash collateral account at a bank as designated by the TWSE.
2. Collateral securities: the TWSE will, based on the name and quantity of the collateral securities entered into the system by the securities firm on behalf of the borrower, give notice to the central securities depository over a computer network instructing it to transfer the borrower-specified collateral securities from the borrower's CSD account to the TWSE custodial account exclusively used for collateral securities against securities borrowing, thereby transferring the collateral securities to the TWSE to serve as security against the loan. The same shall also apply where the borrower uses collateral securities to cover a collateral shortfall.
3. Bank guarantee: upon completion of guarantee procedures with a bank, the borrower shall file an application through the securities firm and deliver the original bank letter of guarantee to the TWSE.
4. Book-entry central government bonds: the borrower shall create and register a pledge on, or register a title transfer of, the bonds in favor of the TWSE.
The TWSE may reject any collateral that would otherwise be eligible under paragraph 1 if it so deems appropriate having regard to its market liquidity or risk status; if any such collateral has been accepted and received as security for a loan, the TWSE may notify the relevant borrower to replace the collateral.
Upon occurrence of any of the following circumstances to an SBL participant in a fixed-price or competitive bid transaction, the TWSE will, as from the next business day, place an order with a securities firm to, under the name of the Taiwan Stock Exchange Corporation Borrowing and Lending Transaction Processing Account opened and maintained by the TWSE, submit a quote to buy in subject securities on the exchange or OTC market to return securities in satisfaction of the loan, and further, to the extent necessary for the full satisfaction of the monies required for the execution of the order to buy in securities and other related fees and expenses, dispose of the loan collateral, or otherwise demand payment of the guaranteed amount from the guaranteeing bank, as the case may be.
1. Where the borrower fails to return the subject securities within the time limit when the loan becomes due, or when the lender makes a recall request, or when any cause for compulsory early return of securities exists under Article 26, paragraph 1, subparagraph 4, (1) or (2).
2. Where the borrower fails to pay entitlement compensation to the lender by the payment date for such entitlement compensation.
3. Where the borrower fails to cover any collateral shortfall, or to provide eligible collateral for replacement, by the specified date and time.
4. Where the borrower fails to pay any fee by the due date for payment.
Any processing fees incurred in connection with the buy-in of subject securities or disposal of loan collateral shall be borne by the borrower, and the borrower may not raise any objection as to the timing, quantity, and price at which the TWSE places an order to buy in subject securities or dispose of loan collateral, as the case may be.