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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, with the original bank letter of guarantee submitted to the TWSE or electronically transmitted by the securities firm through the bank to the finance blockchain platformrecognized by the TWSE (Blockchain Platform),for approval by the TWSE in reply.
- 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.
TheTWSE 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 33-2
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If the fixed-price or competitive bid transaction contemplated by a quote for securities borrowing is not executed, then upon application by the borrower, the TWSE shall return the collateral furnished by the borrower in the following manner:
- In the case of cash, a money transfer will be made on the next business day directly into a bank account designated by the borrower. A foreign currency collateral shall be returned in the original foreign currency, and the borrower may not apply for converting said collateral into New Taiwan Dollars.
- In the case of collateral securities, a notice will be given to the central securities depository to transfer the collateral securities from the TWSE custodial account exclusively used for collateral securities against securities borrowing, back to the borrower's CSDaccount.
- In the case of a bank guarantee, on the next business day, the original guarantee documentation will be returned to the borrower, or the borrower may apply on the Blockchain Platformthrough the bank for return, subject to approval by the TWSE in reply.
- In the case of book-entry central government bonds, if they were provided as collateral through creation of a pledge, the creation of the pledge will be deregistered on the current day, or if they were provided as collateral through transfer of ownership, a notice will be given to the clearing bank to register a re-transfer in favor of the borrower.
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Article 55-2
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A borrowing securities firm providing a bank guarantee to satisfy a requirement for securities borrowing collateral or for covering of a shortfall in securities borrowing collateral arising from a reborrowing of securities or to replace any non-cash collateral, shall first complete the guarantee procedures with a bank, and then submit the original bank letter of guarantee to the TWSEor transmit said original letter electronically through the bank to the Blockchain Platform for approval by the TWSE in reply,by 11 am on the borrowing or reborrowing date, as the case may be.
TheTWSE may refuse to accept the bank guarantee provided by the securities firm, or demand the securities firm to replace it within a specified period of time.
The bank guarantee may be denominated only in New Taiwan Dollars (NTD), and shall be in units of thousands of NTD.
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Article 55-5
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The securities borrowing collateral or non-cash collateral for which a borrowing securities firm submits a refund or withdrawal application pursuant to Article 54, paragraph 3 will be returned in the following manner when the TWSE has verified the receipt of any and all fees payable by the securities firm for borrowing of securities:
- In the case of securities borrowing collateral, the cash collateral will be transferred to the securities firm's bank account.
- In the case of a bank guarantee, the original guarantee documentation will be returned to the securities firm, or the securities firm may apply on the Blockchain Platform through the bank for return, subject to approval by the TWSE in reply.
- In the case of book-entry central government bonds, registration of cancellation of the pledge will be made, and the bonds will be transferred, after cancellation by the clearing bank of the restricted transfer registration, to the clearing bank book-entry central government bond account designated by the securities firm.
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Article 59
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A securities finance enterprise, by 2 pm on the competitive bid loan application date, shall deposit cash collateral with the TWSE in the amount of 120 percent of the closing price of that security on that day multiplied by the number of shares of the winning bid(s); provided that if no closing price is available for a given day, the provisions of Article 33-1, paragraph 4 shall apply mutatis mutandis.
Upon delivery of cash collateral by the securities finance enterprise, the TWSE will give notice to the central securities depository advising it to transfer the shares of security underlying the winning lending bid(s) to the securities finance enterprise's dedicated account at the central securities depository on the next business day following the competitive bid loan application date (the next business day hereinafter referred to as "the lending date").
Certificates of deposit or pledged book-entry central government bonds, to be valued at 90 percent of the face value of the non-cash collateral, as well as bank guarantees, may be posted as collateral in lieu of the cash collateral described in the preceding paragraph.
In regard to bank guarantees referred to in the preceding paragraph, the securities finance enterprise shall, upon completion of guarantee procedures with a bank, submit the original bank letter of guarantee to the TWSE or transmit said original letter electronically through the bank to the Blockchain Platform for approval by the TWSE in reply. The TWSE may refuse to accept the bank guarantee provided by the securities finance enterprise, or demand the securities finance enterprise to replace it within a specified period of time. Bank guarantees may be denominated only in New Taiwan Dollars (NTD), and shall be in units of thousands of NTD.
The lent securities shall be returned to the lender through the central securities depository on the next business day following the lending date; provided, however, that securities borrowed through competitive bid loan on the first settlement day that follows the last trading day before the Lunar New Year holiday, shall be returned on the second trading day after the Lunar New Year holiday.
By 10 am on the next business day following the lending date, the securities finance enterprise shall pay the securities lending fee (securities lending fee = lending rate x quantity) to the lender in Article 56, paragraph 1, subparagraph 1 through the lender's securities firm or to the lender in Article 56, paragraph 1, subparagraph 2 directly, whereupon the TWSE will return the cash collateral to the securities finance enterprise.
The securities firm of the lender may charge the lender a service fee at a rate of not more than 10 percent of the lending fee.
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