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GreTai Securities Market Regulations Governing Over-the-Counter Trading of Financial Derivatives by Securities Firms(2010.10.28) |
| Date： |
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Article 38
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When the securities firm elects to sell shares of the underlying security by borrowing from security holders in a securities borrowing and lending transaction, if the security is an exchange-listed or OTC-listed stock, it shall first establish a contract for the securities loan in accordance with Article 32-1, paragraph 2 of the Regulations Governing Securities Firms. The lender shall then apply, through its securities firm, to the Taiwan Securities Central Depository Co., Ltd. for a transfer of all loaned shares into the hedge account of the securities firm, or shall first earmark the loaned shares and then, as required for hedging purposes, transfer the shares into the hedge account in separate lots upon application by the securities firm.
When the securities firm elects to short-sell shares in an exchange- or OTC-listed stock, it shall open a margin account with another securities firm or with a non-affiliate securities finance company, and report information relating to such account by letter to the GTSM and the TWSE.
The opening of the aforementioned margin account shall be carried out in accordance with the Operating Regulations for Securities Firms Handling Margin Purchases and Short Sales of Securities, the Terms for Establishment of Margin Accounts With Securities Firms for Margin and Stock Loans, and the provisions of the various securities finance companies related to the aforesaid Regulations and Terms.
The securities broker at which the aforementioned margin account is opened may only accept short sale orders or buy-to-cover orders from securities firms seeking to hedge structured instruments and applications to cover short sales with spot securities. When the securities firm uses the margin account to engage in short sales or buy-to-cover transactions for the purpose of hedging, reports of out-trades and account number corrections may not be filed for this account, except in cases where the appointed securities broker has committed an error.
The holders of the underlying security referred to in paragraph 1 may not be any person regulated under Article 22-2, paragraph 1 or 3 of the Securities and Exchange Act.
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