| Title： |
Operating Rules for Securities Business Money Lending by Securities Firms(2020.12.31) |
| Date： |
|
|
Article 16
|
In securities business money lending conducted by a securities firm, a customer applying for a financing period not exceeding 6 months shall file an application prior to 12 noon on the first business day after the transaction date of its securities purchase. If the customer posts collateral in the form of securities or other commodities that it purchases or holds, the securities firm or custodian institution shall transfer the customer's collateral to the loan collateral account opened by the securities firm at the TDCC or central government securities settlement bank. A customer posting a collateral in foreign currency for an offshore overseas Chinese or foreign national shall deposit the collateral in the foreign currency loan collateral account opened by the securities firm at the bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business. Collateral financing shall be calculated according to the standards provided in Article 18.
No collateral is required from the above new applicant posting, for money lending purposes, collateral in the form of securities or other commodities or foreign currencies that it purchases, if the maintenance ratio of the financing collateral combined with the collateral for the purposes of calculation of said ratio pursuant to Article 23 is 166 per cent or above.
Subject to the customer posting securities or other commodities or foreign currencies that it holds as collateral, a securities firm conducting securities business money lending may accept the customer’s application for financing in the form of public subscription or competitive auction of new shares (including cash capital increase). The financing scope includes the bond for competitive auction and the award price after award less the bond, and the subscription price deducted by the bank on the day immediately preceding the lot drawing for subscription, provided the customer shall maintain sufficient collateral in the securities firm’s collateral account at the time of the customer’s application and on the date of disbursement by the securities firm, with a collateral maintenance ratio not lower than the minimum prescribed by Article 23, paragraph 3; transfer to the collateral account in paragraph 1 of new shares allotted is not required, provided the securities firm must strengthen its credit check and KYC in respect of applying customers and its internal control and regulation, to control risks.
Subject to the customer posting securities or foreign currencies that it holds as collateral, a securities firm conducting securities business money lending may accept the customer’s financing application for subscription for beneficial certificates of open-end securities investment trust funds and those of futures trust funds and directly deliver such beneficial certificates to the customer.
In securities business money lending conducted by a securities firm, if a customer posts as collateral the beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are purchased on the customer’s order in the securities firm’s name, the authorized securities firm shall keep a registration log for management purposes and inform relevant information to the TDCC, and the requirement in paragraph 1 that the securities firm transfer the collateral provided by the customer to the securities firm’s loan collateral account at the TDCC does not apply.
When a securities firm lends money to a customer to pay for the settlement price, and the customer has yet to obtain the securities that it has purchased, other securities, foreign currencies, or commodities that the customer holds shall be used as collateral.
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 6-month extension depending on the customer's creditworthiness. After the expiration of one-year period, the securities firm may review the customer's creditworthiness and then grant the customer's application for a 6-month extension.
Collateral referred to in paragraph 1 shall be limited to the following:
- TWSE and TPEx listed securities, excluding EFT beneficial certificates traded in foreign currency and shares subject to an altered trading method or TPEx managed stocks.
- TPEx traded beneficial certificates of open-end funds or physical gold.
- Beneficial certificates of open-end securities investment trust funds and those of futures trust funds that are offered and invest domestically.
- Offshore overseas Chinese and foreign nationals may post foreign currencies as collateral. Currencies received are limited to U.S. Dollar, Euro Dollar, Japanese Yen. British Pound, Australian Dollar, and Hong Kong Dollar. The foreign currency collateral account shall be opened with a bank permitted by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business.
- 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. Notwithstanding, the customer may agree with the securities firm that subject to repayment by the customer of the loaned funds, the securities firm is exempt from returning the collateral in whole or in part, and the customer may apply to the securities firm for a loan pursuant to paragraph 1 in respect of the collateral that is not 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.
|
|
Article 17
|
In securities business money lending conducted by a securities firm, if the customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, funds derived from any sale of those collateral securities prior to the expiration of the financing period shall first be used to repay the money lent, provided that this condition shall not apply if the customer has already replaced the collateral securities before repayment is made.
The securities firm may stipulate with the customer that prior to the expiration of the financing period as referred to in the preceding paragraph, the customer's securities trading balance will be used to repay the money lent. The scope of the securities trading balance shall be stipulated between the parties.
|
|
Article 18
|
In securities business money lending conducted by a securities firm, if the customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, the financing calculation standards for the collateral shall be as listed below, save in the event of fractions of one trading unit or of one unit of beneficial rights:
- The value of TWSE and TPEx traded securities except central book-entry bonds, municipal bonds, common corporate bonds and financial bonds is 60 percent, and that of securities not eligible for margin purchase and short sale is 40 percent, of the closing price on the business day immediately prior to the application for financing.
- The value of beneficial certificates of open-end funds traded on the TPEx is 60 percent of their NAV of the business day immediately prior to financing. The value of physical gold is 60 percent of the Closing Average of the business day immediately prior to the application for financing.
- The value of beneficial certificates of open-end securities investment trust funds and those of futures trust funds is 60 per cent of the NAV of the business day immediately prior to the application for financing.
- The value of central book-entry bonds is 80 percent of their face value.
- The value of municipal bonds, common corporate bonds and financial bonds is 60 per cent of their face value.
- The value of a foreign currency collateral is the spot rate – buying as at the date of application for financing of the bank with which the foreign currency collateral account is opened. No haircut is applied to the value of an additional collateral.
A securities firm may adjust the calculation standard in the preceding paragraph as a stricter standard subject to the market condition of the collateral and the customer’s credit risk.
With respect to subparagraph 1 of the first paragraph and Article 13, paragraph 4, if there is no closing price of the business day preceding the financing date, it shall be replaced by the price determined by the principles set out in Article 58-3, paragraph 4, subparagraph 2 of the TWSE Operating Rules or Article 57, paragraph 1 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM.
The financing calculation standards for collateral set out in paragraph 1 may be adjusted by the TWSE in consultation with the TPEx based on the circumstances regarding that collateral.
|
|
Article 20
|
When the customer repays money lent, it shall fill out a Loan Repayment Application Form, and shall deposit (remit) the repayment money into the financial institution account designated by the securities firm by 3:30 PM of the application date. After the securities firm verifies that the financed amount and interest have been properly credited to its account, it shall transfer the collateral and additional collateral securities or other commodities or foreign currencies to the depository account or central government securities account opened by the customer, or deposit the same in the foreign currency demand account opened by the customer with the bank, in the currency of the foreign currency collateral furnished by the customer, by the first business day after the repayment application date.
If the customer is not itself the owner of the additional collateral securities or other commodities referred to in the preceding paragraph, the securities firm shall transfer the collateral to the depository account or central government securities account opened by the owner.
When a customer referred to in the first paragraph submits the application to repay money by a method other than in-person, Article 13, paragraphs 2 and 3 shall apply mutatis mutandis.
|
|
Article 21
|
A securities firm shall keep detailed and accurate records and receipt/payment vouchers for securities business money lending, and shall compile on a daily basis the following statements:
- Daily operations report for loan transactions.
- A summary statement and itemized statement of additions to, repayments of, and balances of, loan accounts.
- Itemized statement of receipt/payment, disposition, and utilization of collateral for loan accounts.
- Summary statement of collateral shortfalls and covering thereof.
- Itemized statement of additional collateral securities or other commodities or foreign currencies.
|
|
Article 22
|
Each business day, a securities firm shall compile statements and computer data based on the balance of the collateral and additional collateral securities or other commodities or foreign currencies deposited by a customer that has applied to borrow money, and transmit them to the TWSE.
|
|
Article 23
|
In securities business money lending conducted by a securities firm, if a customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchase or holds, the customer's overall-account and individual-transaction collateral maintenance ratio for money lent to the customer shall be calculated as follows:
Collateral maintenance ratio = (market value of the collateral + market value of additional collateral securities or other commodities or foreign currencies) divided by the financing amount, and multiplied by 100 percent.
In regard to the collateral referred to in the preceding paragraph, the market value of TWSE and TPEx listed securities is the closing price of the current day; that of central book-entry bonds is 80 per cent of their face value; that of municipal bonds, common corporate bonds and financial bonds is 60 percent of their face value; that of physical gold is the Closing Average of the current day; that of TPEx traded beneficial certificates of open-end funds, open-end securities investment trust funds and futures trust funds is the NAV of the preceding business day; and that of foreign currency collaterals is calculated at the current spot rate – buying of the bank with which the foreign currency collateral account is opened. If there is no current day's closing price for a given TWSE or TPEx security, the market value shall be determined by the following principles:
- If the current day's highest buy order price at the close of market is higher than the current day's auction reference price at market opening for a TWSE listed security, or than the current day's benchmark price at trade opening for a TPEx listed security, use the highest buy order price.
- If the current day's lowest sell order price at the close of market is lower than the current day's auction reference price at market opening for a TWSE listed security, or than the current day's benchmark price at trade opening of trading for a TPEx listed security, use the lowest sell order price.
- When neither of the above circumstances applies, use the current day's auction reference price at market opening for a TWSE listed security, or the current day's benchmark price at trade opening for a TPEx listed security.
If the customer has applied for a financing period not exceeding 6 months and posted collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, the securities firm shall mark-to-market the customer's collateral maintenance ratio each business day. If the customer's collateral maintenance ratio is lower than 130 percent due to a change in the value of the collateral or additional collateral securities or other commodities, or the customer is an offshore overseas Chinese or foreign national as in paragraph 7 with a collateral maintenance ratio lower than as agreed, the securities firm shall notify the customer to cover the collateral shortfall and bring the collateral maintenance ratio above 166 percent within 2 business days from receipt of the notice, and shall further comply with the following provisions:
- If the customer fails to cover the collateral shortfall within 2 business days from the date upon which the notice is served and the collateral maintenance ratio is still lower than 130 percent, beginning from the third business day, the securities firm shall dispose of the customer's collateral beginning from the third business day under the mutatis mutandis application of Article 27, paragraph 1.
- If the customer fails to cover the collateral shortfall within 2 business days from the date on which the notice is served and the collateral maintenance ratio has risen to 130 percent or higher, the securities firm may temporarily refrain from disposing of the collateral on the third business day. However, on any subsequent business day in which its collateral maintenance ratio is again lower than 130 percent and where the customer does not deposit additional collateral on its own initiative on the afternoon of that day, its collateral shall be disposed of beginning on the next business day under the mutatis mutandis application of Article 27, paragraph 1.
- If the collateral maintenance ratio returns to 166 percent or higher even though the customer has not covered, or has covered only a portion of, the collateral shortfall, or if the customer makes successive collateral deposits sufficient in total to cover the shortfall as stated in the notice prior before its collateral has been disposed of under the preceding subparagraphs, the record of the collateral call shall be expunged.
Any and all individual loans of funds in the financing account for which the collateral maintenance ratio is below 130 percent are shortfalls that are required to be covered pursuant to the preceding paragraph, and shall be subject to a collateral call.
If, as a result of any change in share price, there is an increase in the net value of the collateral in a customer's financing account less the customer's obligations, the securities firm is prohibited from delivering to the customer any cash or securities equivalent to the amount of the increase.
The disposal of collateral under paragraph 3, subparagraphs 1 and 2 shall be carried out in accordance with Article 27 of the Operating Rules. If such disposal is insufficient to make repayment, the customer shall be notified to make repayment within a certain time period, with interest accruing at the financing interest rate from the date on which the claim occurred until the date of repayment.
A securities firm may agree on the collateral maintenance ratio with offshore overseas Chinese and foreign nationals meeting the following qualification requirements, provided such ratio may not be lower than 110% and is subject to necessary adjustment by the TWSE in relation to financial market volatility:
- A qualified institutional investor designated by the competent authority in accordance with Article 4, paragraph 2 of the Financial Consumer Protection Act.
- A member of a foreign securities exchange designated by the competent authority in accordance with Article 5, paragraph 1 of the Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities, or a liquidity provider.
|
|
Article 25
|
In securities business money lending conducted by a securities firm, if a customer applies for a financing period not exceeding 6 months and posts collateral in the form of securities or other commodities or foreign currencies that it purchases or holds, the additional collateral securities or other commodities or foreign currencies that the customer shall provide to cover a collateral shortfall under Article 23 shall be limited to the collateral in Article 16, paragraph 9.
The valuation percentage for calculating the collateral value of additional collateral securities or other commodities or foreign currencies under the preceding paragraph shall be subject, mutatis mutandis, to Article 18, paragraph 1.
The collateral in paragraph 1 to which either of the circumstances listed below applies may not be used as additional collateral:
- Securities comprising less than one trading unit.
- 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 or other commodities or foreign currencies.
If the rate of bonus shares or stock dividend shares distributed on collateral or additional collateral securities or other commodities 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 TDCC 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 of the TWSE or TPEx 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.
|
|
Article 27
|
When any of the circumstances listed below applies to a customer, at market opening on the business day on which disposal is required, the securities firm shall, through the Money Lending Default Handling Account opened with another securities broker, dispose of the respective collateral and additional collateral securities or other commodities on the TWSE centralized exchange market or through the TPEx Securities market trading system, with the exception of central book-entry bonds, municipal bonds, common corporate bonds and financial bonds, which may be subject to price negotiation and trading with the bond dealers at the place of business. If an order to dispose of the collateral is not executed, it shall continue to be quoted on the next business day, and the related processing fees and tax shall be borne by the customer, unless the parties agree otherwise.
- Repayment has not been made at the expiration of the financing period.
- The money lent has not been repaid pursuant to Article 19.
- A collateral shortfall has not been covered pursuant to Article 23.
- Replacement of additional collateral securities or other commodities has not been made pursuant to Article 26.
Where a securities firm disposes of securities pursuant to the preceding paragraph and such disposal is insufficient to offset the debt, it shall notify the customer to cover the shortfall on the next business day. If the customer fails to do so, the securities firm may dispose of the collateral and additional collateral securities or other commodities or foreign currencies provided by that customer up to the amount required to repay the debt. If any surplus remains, it shall be returned to the customer; if any shortfall remains, the customer shall be notified to repay it within a prescribed time period.
Where any of the following circumstances applies to a customer during the financing period, the securities firm shall notify the customer to settle the obligation the next business day, and shall terminate the loan contract that it has entered into with the customer. In case the customer fails to settle the obligation, the securities firm shall close out the lending transactions the next business day through mutatis mutandis application of the provisions of paragraph 1:
- Failure to perform settlement obligations on time as specified in Article 91 of the Operating Rules of the TWSE, Articles 87 and 89 of the GTSM Rules Governing Securities Trading on the GTSM, or Article 58 of the Operating Rules of the Taiwan Futures Exchange Corporation.
- Any default or violation specified in Article 81 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities, Article 33 of the Operating Rules for Securities Lending by Securities Firms, or Article 26 of the Rules Governing the Lending of Book-Entry Central Government Bonds by Securities Firms.
During the financing period, if a customer’s participation in securities lending transactions is halted or terminated by the TWSE pursuant to Article 42, 45, or 49 of the TWSE Securities Borrowing and Lending Rules, or if any of the following circumstances applies to the customer at another securities firm, futures commission merchant, or securities finance enterprise, the securities firm shall halt the provision of any new securities business money lending to the customer:
- Any default specified in Article 76, paragraph 3, subparagraph 1 or 3 of the Operating Rules of the TWSE or Article 47, paragraph 2, subparagraph 1 or 3 of the GTSM Rules Governing Securities Trading on the GTSM.
- Any default or in violation specified in Article 81 of the Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities, Article 33 of the Operating Rules for Securities Lending by Securities Firms, Article 26 of the Rules Governing the Lending of Book-Entry Central Government Bonds by Securities Firms, or Article 28 of these Operating Rules.
- Any default specified in a securities finance enterprise's operating rules for handling margin purchases and short sales, securities settlement financing rules, or rules of operation for securities lending, or violation of a type comparable to that referred to in the preceding subparagraph.
Before a case of a default or violation under the preceding paragraph is closed, the customer may have the collateral and additional collateral securities or other commodities it provided sold by the securities firm through the Money Lending Default Handling Account opened with another securities broker to repay the money lent.
Where the registration of an overseas Chinese or a foreign national has been cancelled by the TWSE or the TAIFEX, the securities firm, after receiving notice of such cancellation, may not accept such customer's request for new loan transactions, and shall notify such customer to close out any loan transactions, and terminate the loan contract after the closeout.
|