When placing an order with a securities firm to submit a quote for borrowing securities through a fixed-price or competitive bid transaction, a borrower shall provide collateral to the TWSE in an amount equivalent to the current day's auction reference price at market opening or base price for first trading of the subject securities multiplied by the quoted quantity and further by the original margin (140 percent). From the day on which the securities loan transaction is executed, the total collateral value for the given securities borrowing transaction shall be marked to market daily using the current day's closing price, and a ratio shall then be calculated by dividing the total collateral value thus obtained, after deduction of relevant fees and expenses required for the borrowing of securities, by the sum of the total value of the subject securities plus total cash dividends; if the ratio thus obtained falls below the maintenance margin (120 percent), then upon receipt of a notice from the TWSE as forwarded by the securities firm, the borrower shall provide additional collateral on the next business day to cover the shortfall, so that the collateral value will be brought back to the original margin level or above.
The term "total collateral value" referred to in the preceding paragraph shall be equal to the sum of the current day's closing price of collateral securities multiplied by quantity and further by a valuation percentage, plus the par value of book-entry central government bonds multiplied by quantity and further by a valuation percentage, plus the total cash collateral, and plus the total bank guarantee amount.
The value of a cash collateral provided or an additional cash collateral provided to cover a shortfall, by a borrowerin foreign currency pursuant to paragraph 1, is the value as converted into New Taiwan Dollars at the buying rate upon closing of the previous business day of a bank designated by the TWSE.
Of the "total collateral value" referred to in paragraph2, the foreign currency collateral value is the value as converted into New Taiwan Dollars at the buying rate at 3:30 pm of the current day of a bank designated by the TWSE. Fractions of a dollar do not count
If a circumstance arises where a collateral security is traded ex-rights or ex-dividend, with the exception of cash capital increases, then for the 3 business days prior to the ex-rights or ex-dividend date, the collateral value shall be calculated using the respective current day's closing price minus the value of the dividend or the value of the rights, as the case may be.
If the closing price referred to in paragraphs 1, 2 and 5 of this article and in Articles 44 and 47 is not available for the given day, the closing price shall be determined by one of the following principles:
The valuation percentage for collateral securities shall be 70 percent for -listed securities, 60 percent for GTSM-listed securities, and 90 percent for book-entry central government bonds. The valuation percentages may be adjusted by the TWSE with regard to market liquidity or risk status.
- When the highest bid price at market close on the day the security is loaned is higher than the auction reference price at market opening or the base price for first trading, the highest bid price will be the closing price.
- When the lowest ask price at market close on the day the security is loaned is lower than the auction reference price at the opening of market or base price for first trading, the lowest ask price will be the closing price.
- When neither of the above circumstances applies, the auction reference price at market opening or the base price for first trading will be the closing price.
In a negotiated transaction, the lender and the borrower shall negotiate and agree between themselves on the terms and conditions, and the margins required, as to the collateral and shall between themselves arrange for the furnishing of the collateral.