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Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules
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Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules(2011.04.29)
A borrower placing an order with a securities firm to submit a quote for borrowing securities through a fixed-price or competitive auction 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 or a securities borrowing and lending account of a securities firm or of a securities finance enterprise 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.
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English version of regulations are translated by Baker McKenzie Taipei Office.