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Article 38
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Counterparties with whom a securities finance enterprise may engage in securities borrowing and lending transactions shall be limited to the following:
- Customers who have had an established a brokerage contract with the securities finance enterprise for a period of 3 months or more.
- Securities firms or other securities finance enterprises that conduct securities borrowing and lending business or securities margin purchase and short sale business.
- Other counterparties who are approved by the competent authority.
"Securities borrowing and lending" in the preceding paragraph refers to business in which a securities finance enterprise borrows securities from, or lends securities to, a customer, a securities firm, or another securities finance enterprise, with a stipulation for repayment of securities of the same kind and quantity.
When a securities finance enterprise handles securities borrowing and lending through an agent securities firm, it shall sign an agency agreement with that securities firm and submit the agreement to the competent authority for approval.
When the securities firm of the preceding paragraph is authorized by the competent authority to engage in securities borrowing and lending business, the securities finance enterprise shall terminate the agency relationship with the securities firm. For an unsettled balance on a securities borrowing transaction by a customer for which the securities firm acted as agent prior to the termination, however, the securities firm may continue to act as agent until the full settlement of the balance.
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