Title: Operating Rules of the Taiwan Stock Exchange Corporation(2003.05.30)
Article 82-2   Securities borrowing applied for by a principal to meet strategic transaction needs shall be conducted in accordance with the provisions of the Securities Lending and Borrowing Regulations of this Corporation.
A strategic transaction referred to in the preceding paragraph shall mean any of the following:
1. An act of arbitrage by trading index futures and the underlying securities, index options or options of a single stock and the underlying securities, overseas and domestically issued convertible corporate bonds and the underlying securities, call/put warrants and the underlying securities, overseas issued depositary receipts and the underlying securities, or beneficiary certificates of exchange traded funds and an underlying equity portfolio representing a basket of stocks;
2. An act of hedging by holding a put warrant writer's position or a long position in index futures, index options, options of a single stock, overseas and domestically issued convertible corporate bonds, overseas issued depositary receipts, or beneficiary certificates of exchange traded funds;
3. An act of exercise of options of a single stock or call warrants;
4. Any other transactions as approved by the competent authority.
Article 109    Where the securities provided by the securities firm representing the seller have any of the following circumstances, and cannot be used for settlement, it shall borrow securities on a daily basis pursuant to the "Measures Governing the Borrowing of Securities" as stipulated by this Corporation; in case there is still shortfall, it may then apply with this Corporation for correction of such shortfall:
 1. The securities are damaged and incomplete or illegible.
 2. The securities are not certified by an entity authorized for certification of securities.
 3. The securities are issued by the same listed company but contain different rights.
 4. The face value does not conform to the trading unit.
 5. The securities are not accompanied by the form "Application for Transfer."
 6. The chop of the transferor is not affixed, or the chop is illegible on the securities or on the form "Application for Transfer".
 7. The chop of transferor as affixed on the securities is not identical with that affixed on the form "Application for Transfer."
 8. the listed company has not affixed its chop for registration of transfer.
 When a securities firm representing a seller proceeds with the securities borrowing and defect correction procedures, it shall provide in accordance with the following manners security equal to 120% of the closing price of the securities borrowed on the date of borrowing:
 1. In the form of a sight check issued by a bank designated by this Corporation or in cash (with the amount being not more than NT$100,000).
 2. Where the security is provided by the securities firm through wire transfer, other relevant rules shall be complied with.
 After having verified the correction procedures made under the preceding Paragraph without discovering any error, this Corporation will fill out and forward a "Securities Delivery Voucher" to the securities central depositary enterprise for safekeeping on behalf of the securities firm representing the purchaser as an alternate voucher for settlement, and will notify the securities firm representing the purchaser to make necessary notations in the "Report on Settlement" to be delivered to its principal. The securities firm representing the seller shall, within the committed time limit, deliver the securities in exchange for the return of the foregoing "Securities Delivery Voucher" and the refund of the security. In the event the securities firm which has completed the settlement process through borrowed securities is unable to extend the term of borrowing of the borrowed securities on the business day immediately following the date of settlement, and thus is unable to deliver the securities, this Corporation may fill out a "Securities Delivery Voucher" as a tentative substitution for settlement on its behalf.
 The immediately preceding three Paragraphs shall apply mutatis mutandis to failure to settle on time due to reporting of error account or other justifiable causes after evidential documents have been submitted to and approved by this Corporation.
 In the event that the security which shall be provided by a securities firm may not be remitted or cashed, this Corporation may tentatively retain a portion of the proceeds and securities with a value equal to the amount of such security payable by the said securities firm from those which fall within the same clearing period and shall be delivered to the securities firm.
 In the event that the security sum referred to in the preceding Paragraph has not been remitted or cashed before the end of the business hours of banks for the day on which the security sum should have been provided by such securities firm, it shall be deemed as a breach of its obligations for settlement.
Lending auctions, negotiated lending, and tender offers carried out to cover stock loan shortfalls of securities finance enterprises shall be conducted in compliance with this Corporation's Regulations Governing Lending and Borrowing of Securities.
 The Regulations Governing Lending and Borrowing of Securities will be separately stipulated by this Corporation and submitted to the Competent Authority for approval and shall take effect after they are publicly announced.