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Article NO. Content

Title:

Taiwan Stock Exchange Corporation Securities Borrowing and Lending Rules  CH

Amended Date: 2019.09.26 
Categories: Securities Exchange Market > Borrowing of Securities
Article 33     A borrower placing an order with a securities firm to submit a quote for borrowing securities through a fixed-price or competitive bid transaction shall satisfy the requirement of providing sufficient eligible collateral, which may take the following forms only:
  1. Cash, which may only be New Taiwan Dollars. However, an offshore foreign institutional investor or a securities borrowing and lending account of a securities firm or of a securities finance enterprise may provide foreign currency as collateral. The types of foreign currency are limited to the United States Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), and Hong Kong Dollar (HKD).
  2. Collateral securities, which may only be securities eligible for margin purchases and short sales, and shall only be Taiwan 50 Index constituent stocks and securities investment trust fund beneficial certificates issued by such index if the borrower is not a designated institutional investor or designated offshore foreign institutional investor as mentioned in Article 12-1.
  3. Bank guarantee issued by a Taiwan bank or a Taiwan branch of a foreign bank, which bank is accredited by the TWSE.
  4. Book-entry central government bonds.
    The collateral under the preceding paragraph shall be provided in the following manner:
  1. Cash: to be credited by the borrower through book entry transfer directly to a cash collateral account at a bank as designated by the TWSE.
  2. Collateral securities: the TWSE will, based on the name and quantity of the collateral securities entered into the system by the securities firm on behalf of the borrower, give notice to the central securities depository over a computer network instructing it to transfer the borrower-specified collateral securities from the borrower's CSD account to the TWSE custodial account exclusively used for collateral securities against securities borrowing, thereby transferring the collateral securities to the TWSE to serve as security against the loan. The same shall also apply where the borrower uses collateral securities to cover a collateral shortfall.
  3. Bank guarantee: upon completion of guarantee procedures with a bank, the borrower shall file an application through the securities firm and deliver the original bank letter of guarantee to the TWSE.
  4. Book-entry central government bonds: the borrower shall create and register a pledge on, or register a title transfer of, the bonds in favor of the TWSE.
    The TWSE may reject any collateral that would otherwise be eligible under paragraph 1 if it so deems appropriate having regard to its market liquidity or risk status; if any such collateral has been accepted and received as security for a loan, the TWSE may notify the relevant borrower to replace the collateral.