||Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules(2011.01.26)
The subject securities in securities borrowing and lending transactions means any securities eligible for margin purchase and short sale transactions; any securities eligible to be underlying securities in the issuance of call (put) warrants; and any underlying securities on which any of the following derivative instruments have been issued where such securities are listed on the TWSE or GreTai Securities Market (GTSM):
1. Equity options.
2. Exchange traded funds (ETFs).
3. Domestic and overseas convertible and exchangeable corporate bonds.
4. Overseas depositary receipts.
The subject securities as set forth in the preceding paragraph shall be those as announced by the TWSE and subject to any further adjustment by the TWSE having regard to the market situation.
Where a subject security set forth in paragraph 1 is during a halt to trading announced by the TWSE or GTSM, that security shall also be halted from securities borrowing and lending transactions.
A quote to borrow securities through a fixed-price or competitive auction transaction shall be valid only for the day on which the quote is submitted, while a quote to lend securities through such a transaction shall remain valid until cancelled. Notwithstanding the foregoing, where a subject security is halted from borrowing and lending transactions, any quote for the subject security that has already been submitted before the halt occurs but is not yet executed shall become invalid.
A negotiated transaction shall be conducted in the following manner:
1. A borrower and a lender shall negotiate and agree between themselves 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 (in the form set out in Appendix 3 hereto), under which the borrower shall provide collateral to the lender.
2. The borrower and the lender shall respectively instruct their authorized securities firm to submit on their behalf regulatory filings reporting the execution of the borrowing transaction and reporting the execution of the lending transaction by entering the information of the regulatory reports into the TWSE securities lending system, specifying therein such information as the name of securities, borrowing/lending quantity, lending fee rate as executed for the transaction, return date, securities book-entry transfer date, collateral margin, the borrower's securities borrowing and lending account and that of the lender, and the securities book-entry transfer date, which transfer date may be either the report filing date or the next following business day; and the borrower and the lender may submit their respective regulatory filing reporting the execution of the negotiated transaction through the same or through different securities firms.
3. Where the securities book-entry transfer date of the filed regulatory report on the execution of the lending transaction is the report filing date, the TWSE will thereupon notify the central securities depository to put the subject securities on hold to make them available for lending; the lending transaction report will become invalid if the lender does not have sufficient securities on deposit in its CSD account.
4. No change may be made to the loan terms and conditions stated in the filed regulatory report on the execution of the negotiated transaction once the TWSE confirms that those in the regulatory report on the execution of the borrowing transaction are consistent with those in the regulatory report on the execution of the lending transaction. If the securities book-entry transfer date is the next business day following the report filing date, the lender and the borrower may, acting jointly, apply for withdrawal of that negotiated transaction report at any time from the TWSE's confirmation until before 10 am on the securities book-entry transfer date.
5. Where the securities book-entry transfer date of the regulatory reports on the execution of the negotiated transaction is the report filing date, the TWSE upon confirmation will notify the central securities depository to transfer the securities.
6. Where the securities book-entry transfer date of the regulatory reports on the execution of the negotiated transaction is the next business day following the report filing date, the TWSE will give notice to the central securities depository at 10:30 am on that day advising it to transfer the securities; the negotiated transaction report will become invalid if the lender does not have sufficient subject securities on deposit in its CSD account, in which case the TWSE will not execute the transaction and will thereupon issue a notice to the lender and borrower through their securities firm(s).
7. With respect to a subject security halted from borrowing and lending transactions, any report on the execution of the negotiated transaction that has already been entered into the TWSE computer system before the halt occurs but the paired trade is not yet approved shall become invalid.
In a fixed-price or competitive auction transaction, the subject securities shall be returned within the following timeframe, and in the following manner, as the case may be:
1. Return of securities on due date: the TWSE will, 10 business days prior to the scheduled return date, notify the borrower through the securities firm to return the subject securities.
2. Return of securities before due date: the borrower may return the subject securities, in whole or in part, at any time from the next business day following the borrowing date.
3. Lender's request for early return of securities: the lender may initiate a request for early return of securities on any date which is one, three, or 10 business days prior to the date to be scheduled as the early return date in accordance with the terms and conditions under which the borrowing/lending application is made; the borrower shall return the subject securities as requested, in one or more batches, starting from the next business day following the receipt of the notice.
4. Compulsory early return of securities:
(1) When upon review the subject securities are no longer found eligible or are found halted from lending transactions, the TWSE may notify the borrower to return securities in satisfaction of the loan within a specified period of time.
(2) If the issuer of the subject securities undergoes a merger or consolidation, capital reduction, or any other event affecting the exercise of shareholder's rights by the lender, the borrower shall return securities in satisfaction of the loan by the sixth business day before the book closure date.
(3) If the subject securities are the subject of an announcement of suspension of trading, where the time for resumption of trading is not specified, or of delisting from the TWSE or GTSM, the borrower shall return securities in satisfaction of the loan within a period of time specified by the TWSE.
(4) If due to a natural disaster or other emergency, the trading on the securities market is suspended across the board and the time for resumption of trading is not specified, the borrower shall return securities in satisfaction of the loan within a period of time specified in a TWSE announcement.
Upon receipt of a regulatory report on securities return filed by the borrower through its securities firm via the TWSE securities lending system, the TWSE will notify the central securities depository to effect a book-entry transfer of the securities to be returned, from the CSD account of the borrower back to that of the lender, with a notice to the borrower and the lender respectively through their securities firms.
The borrower's obligation, liability, and duty arising from its borrowing of securities are not satisfied unless and until all subject securities borrowed, all entitlements incurred during the borrowing period, and all relevant fees and expenses are fully returned or paid.