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Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules(2017.03.28) |
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Article 10
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An SBL participant, if and only if a juristic person or fund, may authorize and empower a securities firm to act on its behalf in submitting an application to the TWSE for opening a securities borrowing and lending account, in obtaining the eligibility as a participant in the securities borrowing and lending market, in conducting fixed-price and competitive bid transactions for borrowing and lending of securities, and in submitting regulatory filings reporting the execution of negotiated transactions.
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Article 12-1
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No director, supervisor, officer, or shareholder with more than 10% shares of an issuer of the subject securities may engage in borrowing and lending transactions or sale of borrowed securities involving such subject securities, whether in its own name or in the name of a domestic or offshore company directly or indirectly incorporated.
With the exception of the following designated institutional investors, an SBL participant shall advise the TWSE in the manner prescribed in Article 12 of the names and nationalities of the top three shareholders in terms of shareholding, each holding up to 30% or more of shares. Juristic-person shareholders shall also advise the names and nationalities of the top three natural-person shareholders in terms of shareholding, each holding up to 30% or more of shares. The government uniform invoice number of a profit-seeking enterprise or national ID number shall further be provided in the event of an R.O.C. shareholder; the national ID number and government uniform invoice number of a tax withholding agent shall be provided in the event of an offshore overseas Chinese or foreigner that has completed registration:
- Lender: an insurance company, bank, trust investment company, securities firm, futures commission merchant, securities investment trust fund, futures trust fund, securities finance enterprise, designated offshore foreign institutional investor, government fund, trust enterprise, and others as approved by the competent authority.
- Borrower: a bank, securities firm, futures commission merchant, securities investment trust fund, securities finance enterprise, designated offshore foreign institutional investor and others as approved by the competent authority.
For purposes of the preceding paragraph, a designated offshore foreign institutional investor denotes an offshore foreign institutional investor in the capacity of a foreign bank, insurance company, securities firm, fund manager, foreign government investment institution, pension fund, mutual fund, unit trust, investment trust, trust company, academic or charity institution, and privately placed mutual fund and unit trust.
The shares held by a shareholder as mentioned in paragraph 2 shall include those held by its spouse and minors and in others' name.
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Article 25
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The period of a securities loan may not exceed 6 months in maximum, starting from the execution date of the loan transaction.
The borrower may return the borrowed securities any time during the agreed period.
If the lender does not make a recall request during the term of the loan, the borrower may, at any time during the period from the tenth business day before expiration of the loan term to the expiration date, submit a notice through the TWSE to the lender requesting renewal of the loan; the lender shall be deemed to have refused to grant consent if it does not otherwise indicate upon receipt of the notice.
The request for renewal of a loan under the preceding paragraph may be granted with two extensions each not more than 6 months, and no term or condition of the loan may be changed except solely for the loan period.
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Article 33
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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:
- Cash, which may only be New Taiwan Dollars. However, an offshore foreign institutional investor or a securities borrowing and lending account of a securities firm or of a securities finance enterprise may provide foreign currency as collateral. The types of foreign currency are limited to the United States Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), and Hong Kong Dollar (HKD).
- Collateral securities, which may only be securities eligible for margin purchases and short sales, and shall only be Taiwan 50 Index constituent stocks and securities investment trust fund beneficial certificates issued by such index if the borrower is not a designated institutional investor or designated offshore foreign institutional investor as mentioned in Article 12-1.
- Bank guarantee issued by a Taiwan bank or a Taiwan branch of a foreign bank, which bank is accredited by the TWSE.
- Book-entry central government bonds.
The collateral under the preceding paragraph shall be provided in the following manner:
- 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.
- 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.
- 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.
- 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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Article 49-1
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If any of the following circumstances applies to an SBL participant, and the case is not yet closed, the TWSE shall halt the SBL participant's participation in securities borrowing and lending transactions:
- Any breach specified in Article 76, paragraph 3, subparagraph 1 or 3 of the TWSE Operating Rules or Article 47, paragraph 2, subparagraph 1 or 3 of the GTSM Rules Governing Securities Trading on the GTSM.
- Any default or violation specified in Article 81 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities, Article 28 of the Operating Rules for Securities Business Money Lending by Securities Firms, or Article 33 of the Operating Rules for Securities Lending by Securities Firms.
- Any default or violation specified in an individual securities finance enterprise's operating rules for handling margin purchases and short sales, operating rules for securities settlement financing, or operating rules for securities lending.
If participation in any securities loan transaction by a borrower in a fixed-price or competitive bid transaction is halted by the TWSE pursuant to the preceding paragraph, thereby rendering it impossible for the borrower to return securities in satisfaction of a securities loan, the borrower may request the TWSE to apply mutatis mutandis the provisions of Article 39, paragraph 1 with respect to the disposal of loan collateral and the buying in of subject securities for return to the lender.
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Article 56
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If a shortfall occurs in a security due to a securities finance enterprise's operation of margin purchase and short sale business, securities lending business and refinancing business (hereinafter, "shortfall in securities in margin and short trading"), or, if the securities finance enterprise is engaged by a securities firm to handle on its behalf any open position that still remains after sell-first buy-later day trading (hereinafter, "shortfall in securities in day trading"), the securities finance enterprise shall initiate a competitive bid loan from the following lenders as from 9 am on the next business day, and if a shortfall still exists, shall arrange for negotiated transaction with any specified persons no later than 2 pm on that day.
- owners of that type of securities.
- securities firms or securities finance enterprises operating securities lending business or margin purchase and short sale business.
With the exception of a shortfall in securities in day trading, if the shares of the given security obtained following the procedures described in the preceding paragraph are still insufficient in amount, the securities finance enterprise shall engage a securities firm to conduct a purchase of shares by reverse auction at the TWSE by 2:30 pm on the same day.
Any borrowing of securities through competitive bid and negotiated transaction and any purchasing of securities by reverse auction under the preceding two paragraphs shall be suspended for a given security on the second business day preceding the first day of a book closure, except when book closure occurs due to the convening of a special shareholders meeting by the issuer or for reasons that do not affect the exercise of shareholder rights.
The calculation of the business day referred to in the preceding paragraph shall be in accordance with Article 76 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities.
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