If the balance of the securities on deposit in the custodial book-entry account of the securities firm representing the seller is insufficient for the performance of settlement obligations, the securities firm representing the seller may apply to borrow securities for settlement pursuant to the TWSE Securities Borrowing and Lending Rules, and shall by 11 a.m. pay the cash collateral required for securities borrowing. the securities firm representing the seller does not apply to borrow securities by 10 a.m. of the second business day following the trade date, and has not completed securities settlement, the TWSE shall by 11 a.m. borrow securities on its behalf.
If the amount of securities borrowed is insufficient, the TWSE will fill out and forward a "Securities Delivery Voucher" to the central securities depository for the portion falling short for safekeeping on behalf of the securities firm representing the purchaser. The borrowing securities firm shall, by 10 a.m. of the following business day, deliver the securities in exchange for the return of the aforesaid "Securities Delivery Voucher" and the refund of the cash collateral required for securities borrowing.
If the borrowing securities firm fails to deliver the cash collateral required for securities borrowing or to provide offsetting collateral by 11 a.m. of the borrowing date, the TWSE may tentatively retain a portion of the proceeds and/or securities equivalent in value to the settlement price payable for that settlement period.
Lending auctions, negotiated lending, and reverse auction carried out to cover shortfalls experienced by securities finance enterprises in securities required for short sales shall be conducted in compliance with the TWSE Securities Lending and Borrowing Rules.
The Securities Lending and Borrowing Rules will be separately adopted by the TWSE and submitted to the Competent Authority for approval and shall take effect after they are publicly announced.