||Operating Rules for Securities Business Money Lending by Securities Firms(2009.08.10)
In securities business money lending conducted by a securities firm, a customer posting collateral in the form of securities that it holds shall file an application prior by 12 noon on the first business day after the transaction date of its securities purchase, and have the securities firm or custodian institution transfer the customer's collateral to the loan collateral account opened by the securities firm at the Taiwan Depository & Clearing Corporation (TDCC). The customer's financing period may not exceed 6 months, and the ratio of the collateral value to the financing amount provided by the securities firm to the customer may not be lower than that provided in Article 18.
When the customer of the preceding paragraph submits the application to borrow money by a method other than in person, the provisions of Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
Before the expiration of the financing period in paragraph 1, the customer may file an application to extend the period, and the securities firm may grant a single, six-month extension depending on the customer's creditworthiness.
Collateral referred to in paragraph 1 shall be limited to the following:
1. Common stock of the TWSE-announced component companies of the Taiwan 50 Index, Taiwan Mid-Cap 100 Index, or Taiwan Technology Index; exchange-traded funds (ETFs) and common stock of their component companies, and offshore ETFs.
2. Common stock of MSCI Taiwan Index component companies announced by Morgan Stanley Capital International.
3. Government strip bonds.
4. Other collateral approved by the competent authority.
Collateral posted by a customer under the preceding paragraph may be replaced during the financing period. The method for applying for replacement shall be stipulated between the parties.
When a customer makes partial repayment prior to the expiration of the financing period, the securities firm shall return to the customer the securities it originally posted as collateral on a proportional basis, provided that increments of less than one trading unit may not be returned.
For each loan of money using the financing method set out in paragraph 1 herein, the securities firm shall notify the customer in writing 10 business days before the expiration of the financing period.
In securities business money lending conducted by a securities firm, if the customer posts collateral in the form of securities that it holds, the financing calculation standards for the collateral provided by the customer shall be as listed below:
1. Common stock of TWSE-announced component companies of the Taiwan 50 Index, Taiwan Mid-Cap 100 Index, or Taiwan Technology Index; ETFs and common stock of their component companies, offshore ETFs; and common stock of MSCI Taiwan Index component companies announced by Morgan Stanley Capital International, shall be calculated at 60 percent of the closing or reference price on the business day prior to the financing, excluding any portion of less than one trading unit.
2. Government strip bonds shall be calculated at 80 percent of their face value.
The closing price and reference price referred to in subparagraph 1 of the preceding paragraph shall be set in accordance with Article 58-3 of the TWSE Operating Rules or Article 57 of the GTSM Rules Governing Securities Trading on Over-the-Counter Markets.
The financing calculation standards for collateral set out in paragraph 1 may be adjusted by the TWSE in consultation with the GTSM based on the circumstances regarding that collateral.
When the competent authority approves and announces suspension of trading, or termination of exchange or OTC listing, of a security that a customer has posted as collateral, or when government strip bonds that a customer has posted as collateral mature, the suspension or delisting date, or the maturity date, of that security shall be deemed the expiration date of the financing period. After being notified by the securities firm, the customer shall repay the money lent and the interest by the 10th business day before the trading suspension or listing termination date or the government strip bonds' maturity date, provided that this requirement shall not apply if the customer has replaced the collateral, or in cases where the issuing company of an OTC-listed security is applying to convert the security to an exchange-listed security, or where the securities of both the surviving and non-surviving listed (or OTC) companies in a merger qualify as collateral.
When during the collateral period, the customer replaces collateral it provided with common stock of a component company of the Taiwan 50 Index, Taiwan Mid-Cap 100 Index, or Taiwan Technology Index; common stock of any MSCI Taiwan Index component company announced by Morgan Stanley Capital International Inc. ("MSCI"), or common stock of a component company of an ETF, the securities firm may accept that collateral until the expiration date of the financing period.
In securities business money lending conducted by a securities firm, if a customer posts collateral in the form of securities that it holds, the additional collateral securities that the customer shall provide to cover a collateral shortfall under Article 23 shall be limited to common shares of TWSE Taiwan 50 Index, TWSE Taiwan Mid-Cap 100 Index, or TWSE Taiwan Technology Index component companies, ETFs and common shares of their component companies, offshore ETFs, common shares of MSCI Taiwan Index component companies announced by Morgan Stanley Capital International, government strip bonds, or other collateral approved by the competent authority.
The valuation percentage for calculating the collateral value of additional collateral securities under the preceding paragraph shall be subject, mutatis mutandis, to Article 18, paragraph 1.
Securities to which either of the circumstances listed below applies may not be used as additional collateral:
1. Securities comprising less than one trading unit.
2. Where the securities are registered shares of the issuing company acquired by its shareholders or capital contributors as a result of that company's conduct of a capital increase from earnings, capital increase through contributions by that company's employees out of their bonuses to the industry in which they serve, or capital increase by a venture capital company out of undistributed earnings pursuant to Article 13 of the Statute for Encouragement of Investment or Articles 16 and 17 of the Act for Upgrading Industries, and such shares have not been transferred or reported for taxes.
When calculating a customer's overall account collateral maintenance ratio, a securities firm is not required to apply a haircut to the value of the additional collateral securities.
If the rate of bonus shares or stock dividend shares distributed on collateral or additional collateral securities provided by a customer is 20 percent or higher, except where the Competent Authority has imposed restrictions on trading of the securities, all such new shares shall serve as collateral, and the right to defer income tax shall be waived. The Taiwan Depository & Clearing Corporation shall transfer the shares by book-entry transfer into the segregated loan collateral account opened by each securities firm, and the provisions of Article 33 of the Regulations Governing the Handling of Stock Registration and Transfer Services by Public Companies shall not apply.
Bonus shares or stock dividends referred to in the preceding paragraph may not be used as collateral for borrowing securities from the TWSE securities lending system or for obtaining refinancing from a securities finance enterprise.
The provisions of Article 24 shall not apply to bonus shares or stock dividend shares used as collateral. After ex-rights trading has commenced, the market value of such shares shall be calculated at 60 percent of the closing price or reference price of the exchange-listed or OTC-listed securities. After the shares have been transferred to the securities firm's segregated loan collateral account, the haircut need not be applied to the calculation of their value.
The provisions of Article 18, paragraph 2 shall apply mutatis mutandis to paragraph 1 and the preceding paragraph.