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Article 16
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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 stocks, EFT beneficial certificates traded in foreign currency, and shares subject to an altered trading method or TPEx managed stocks, of an innovation board listed company and an innovation board primary listed company.
- 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.
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Article 18
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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, secured convertible (exchangeable) 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, secured convertible (exchangeable) 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.
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Article 24
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A securities firm conducting securities business money lending may, except in the case of a cash capital increase, beginning from 6 business days before the ex-dividend date of the collateral and additional collateral securities or other commodities provided by a customer, calculate the collateral maintenance ratio for each day based on that day's closing price or NAV of each security on each given day minus the value of the share rights or dividends, and the provisions of the preceding article shall apply mutatis mutandis.
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Article 25
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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.
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