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Directions for Collateral Management in Fixed-price and Competitive Auction Securities Borrowing and Lending Transactions  CH

Amended Date: 2016.12.20 
Categories: Securities Exchange Market > Borrowing of Securities

Title: Directions for Collateral Management in Fixed-price and Competitive Auction Securities Borrowing and Lending Transactions(2010.01.18)
2 2. Provision of collateral in applications for securities borrowing
2.1 When applying to borrow securities, a borrower shall have its securities borrowing account number, the name and amount of securities borrowed, the redelivery date, and the transaction fees entered into the TWSE securities lending system by its securities firm. At the same time an itemized list of collateral in the form of cash, TWSE listed and GTSM listed securities exclusive of book-entry central government bonds ("TWSE and GTSM listed securities"), book-entry central government bonds, and bank guarantees shall be entered.
2.2 When a borrower provides cash as collateral, the borrower shall remit the cash into the TWSE-designated virtual bank account and request the securities firm to carry out collateral reporting through the TWSE securities lending system. Cash collateral remitted into a single securities borrowing account may be provided, in amounts designated by the borrower, as collateral for different securities borrowing applications.
A borrower that applies to open an account shall designate a bank account, and a corresponding virtual account will be assigned by the TWSE. All submissions of collateral in the form of cash shall be made through the given virtual account.
The currency of cash collateral is the New Taiwan Dollar (NTD), in units no smaller than 1 NTD.
2.3 When a borrower provides TWSE and GTSM listed securities as collateral, then after the name and amount of the TWSE and GTSM listed securities have been entered by the securities firm, the TWSE will notify the central securities depository to transfer the securities into the TWSE securities collateral account.
The TWSE and GTSM listed securities shall be provided in amounts that are integral multiples of trading units. The collateral value of the securities is obtained by multiplying the current day market opening reference price by the valuation percentage.
2.4 A borrower that provides a bank guarantee as collateral shall first complete the guarantee procedures with the bank. After applying to the TWSE through the securities firm, the borrower shall deliver the original of the guarantee document to the TWSE, which will enter the name of the bank, the amount of the guarantee, and the maturity date. Only after these procedures are completed can the bank guarantee be used in applications for securities borrowing.
When multiple bank guarantees are provided as collateral through a single securities borrowing account, the guarantees may be provided, in amounts designated by the borrower, for use in different applications for securities borrowing.
From the second business day before its maturity date, a bank guarantee document may no longer be used as collateral. When multiple bank guarantee documents have differing maturity dates, the earliest of the maturity dates will apply.
The currency of bank guarantee documents is the New Taiwan Dollar, and shall be in units of NTD10,000.
7 7. Disposition of collateral
7.1 When the circumstances under Article 39, paragraph 1 of the Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules occur with respect to a securities borrower in a fixed-price or competitive auction transaction, the TWSE, on the date of the occurrence (T-date), will produce the relevant statements and electronic files and will begin disposition of the collateral on the following business day (T+1), repurchasing securities from the market in order to effect a return of the securities on behalf of the borrower. If the TWSE is unable to repurchase the securities within three business days from the date of occurrence (T+2), it will use the market closing price on the third business day (T+2) as the basis of calculation and reimburse the equivalent value in cash. The repurchase price or the cash reimbursement will be deducted from the collateral or advanced by the TWSE.
7.2 Disposition of TWSE and GTSM listed securities collateral will be handled through a Taiwan Stock Exchange Corporation Securities Borrowing and Lending Transaction Account opened at a securities firm by the TWSE. Beginning from the business day designated for disposition of the securities, the TWSE may engage a securities firm to place a sell order on the TWSE or the GTSM; if no trade is executed after the sell order is placed, the sell order shall be placed again on the following business day and continue to be placed until the trade is executed.
7.3 Dispositions of cash collateral will be made to obtain the repurchase price of securities or to defray related fees; the disposition of bank guarantee collateral will be by direct redemption at the issuing bank by the TWSE.
7.4 Disposition of book-entry central government bond collateral will be effected by TWSE exercise of pledge rights through the clearing bank and subsequent sale of the bonds on the market.
7.5 Any fees incurred by the TWSE as the result of a default shall be borne by the securities borrower.
7.6 After disposition of collateral, the TWSE will return to the securities borrower any excess after clearing of related debts, and will collect from the borrower any funds necessary to clear related debts if proceeds from the disposition are insufficient.