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Article 15
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When a securities firm accepts a customer's application to borrow securities, it shall collect collateral from the customer with a value calculated at an initial collateral ratio of not less than 140 percent of the auction reference price at market opening or the base price for first trading of the security on the given day.
The "auction reference price at market opening" or the "base price for first trading" in the preceding paragraph shall be determined pursuant to Article 58-3, paragraph 2 of the TWSE Operating Rules, or Article 60-1 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM.
A securities firm shall notify the TWSE or GTSM regarding the delivery information of the loan securities and the collateral securities (except for book-entry central government bonds), and forward such notice to the TDCC to immediately conduct the securities transfer procedures. The TDCC shall annotate the borrowed securities. Central government bonds shall be handled using the title transfer registration method pursuant to the Directions for the Operation of Book-Entry Central Government Bonds.
It is prohibited to transfer or withdraw securities that have been annotated, except for those used for purposes listed under Article 24 of the Regulations Governing Securities Lending by Securities Firms.
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Article 19
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When handling securities lending business, a securities firm may accept the following types of assets as collateral, to be valued at the valuation percentages indicated:
1. Cash.
2. Book-entry central government bonds. Calculate at 90 percent of face value.
3. Securities eligible for margin purchases and short sales. The collateral value of securities eligible for margin purchase and short sale transactions shall be 70 percent of the most recent closing price if they are TWSE listed securities, or 60 percent of the most recent closing price if they are GTSM listed securities.
The "most recent closing price" in subparagraph 3 of the preceding paragraph shall mean, prior to the close of market on the given day, the closing price for the preceding business day, and after the close of market on the given day, shall mean the closing price on the given day. The aforesaid closing price shall be set pursuant to Article 58-3, paragraph 3 of the TWSE Operating Rules or Article 35, paragraph 3 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM .
If no closing price is available for the preceding business day, the price determined by the principles under Article 58-3, paragraph 2, subparagraph 2 of the TWSE Operating Rules or Article 57, paragraph 1 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM shall substitute for the closing price.
If the closing price for a given day is not available, the most recent closing price shall be determined by one of the following principles:
1. When, on the day the security is loaned, the highest bid price at market close is higher than the auction reference price at market opening or the base price for first trading, the highest bid price shall be used.
2. When, on the day the security is loaned, the lowest ask price at market close is lower than the auction reference price at market opening or the base price for first trading, the lowest ask price shall be used.
3. When neither of the above circumstances applies, the auction reference price at the opening of market or the base price for first trading shall be used.
The preceding paragraph shall apply mutatis mutandis to the current day closing price referred to in Articles 25 and 37 herein.
Securities collateral that a securities firm collects from a customer shall be limited to securities that the customer itself owns.
The collateral valuation percentages in paragraph 1 may be adjusted by the TWSE in conjunction with the GTSM based on the condition of the collateral. The lender and borrower may separately agree to a collateral valuation percentage lower than the prescribed percentage.
The collateral under paragraph 1, subparagraph 1 shall be limited to new Taiwan dollars. Notwithstanding the foregoing, an offshore overseas Chinese or foreign national may pledge US dollars as collateral, subject to regulations separately adopted by the TWSE.
A securities firm may refuse to accept, or lower the valuation percentage for, the collateral listed in paragraph 1, subparagraph 3, depending on the market liquidity and risk status of that collateral.
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Article 25
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A securities firm shall calculate on a daily basis, for each customer, the collateral ratio for the customer's securities borrowing and lending account as a whole and for each securities loan made through it, based on the closing prices published by the TWSE or the GTSM, according to the following formula:
Collateral ratio = (total collateral value of the collateral － securities lending fees payable ) ÷ (market value of the loaned securities ＋ market value of stock dividend shares to be returned ＋ cash dividends to be returned) × 100%
Except in the case of a cash capital increase, for the 6 business days prior to any ex-dividend or ex-rights date for a security that is provided as collateral, its market value shall be calculated at the valuation percentage specified in Article 19, based on the respective current day's closing price minus the value of the dividend or minus the value of the right determined based on the current day's closing price.
Where a customer's overall account collateral ratio is lower than the 120 percent collateral maintenance ratio, the securities firm shall promptly notify the customer to provide additional collateral within 2 business days from the day the notice is delivered to make up the collateral shortfall for each individual securities lending transaction that does not meet the required collateral maintenance ratio, so as to bring the individual collateral ratios thereof above the initial collateral ratio.
The collateral maintenance ratio of the preceding paragraph and the initial collateral ratio of Article 15 may be adjusted by the TWSE in consultation with the GTSM based on market circumstances.
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