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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 36     A borrower in a fixed-price or competitive bid transaction shall, through a securities firm and via the TWSE securities lending system, repay the lender in the following manner any cash dividends, stock dividends, or other benefits that the lender would have received if it had not lent the subject securities:
  1. In the case of cash entitlements:
    1. The TWSE will, no later than 5 business days before the distribution date, notify the borrower through its securities firm.
    2. The borrower shall through its securities firm credit the cash amount to the TWSE's designated bank account, and have the securities firm enter the information on the return of entitlements into the TWSE securities lending system, on the same day when the distribution is made, and the TWSE upon confirmation of accuracy will afterwards, either on that day or on the next business day, transfer the amount to the lender through its securities firm. Notwithstanding, distribution will be postponed to the day trading resumes or to the nextbusiness day in the event the securities market is closed due to an act of God on the distribution day.
  2. In the case of securities entitlements:
    1. The TWSE will notify the lender through its securities firm after the holder-of-record date, and if the lender, within 3 business days starting from the date of the notice from the TWSE, enters a message into the TWSE securities lending system indicating its option to have securities or cash of equivalent value returned, the TWSE will give notice to the borrower through its securities firm to that effect, and give further notice to the borrower through the securities firm 3 business days prior to the distribution date. The TWSE will cause securities to be returned if the lender fails to enter the message indicating its option within the time limit.
    2. To return securities, the borrower shall give notice through its securities firm and via the TWSE securities lending system to the central securities depository within 3 business days starting from the distribution date, instructing it to effect a book-entry transfer of the securities to the lender from the borrower's CSD account, or in the case of returning cash of equivalent value, effect the return on the distribution date in the same manner as cash entitlements, in an amount determined based upon the ex-rights reference price.
  3. In the case of rights to subscribe to newly issued securities:
    1. The TWSE will, 5 business days prior to the end of the period for subscribing to securities in a new issue, notify the lender through its securities firm and the lender shall, 3 business days prior to the end of the subscription period, declare its intention to subscribe, if so desired, by giving notice through its securities firm to the TWSE and, also through its securities firm, credit the money to the TWSE's designated bank account, to be further transferred via the TWSE securities lending system and through the securities firm to the borrower, for the latter to subscribe to the securities, or otherwise to buy in the securities in the market, for the account of the lender.
    2. The TWSE will, no later than 3 business days prior to the distribution date for the newly issued securities, give notice to the borrower through its securities firm and the borrower must, within 3 business days starting from the distribution date, give notice through the securities firm via the TWSE securities lending system to the central securities depository to effect a book-entry transfer of the securities to the lender from the borrower's CSD account.
    3. The lender shall be deemed to have waived the right to subscribe to the newly issued shares if it tardily declares or fails to declare its intention to subscribe or if it, having so declared, fails to pay the subscription price within the required time limit.
    To exercise the right to subscribe the newly issued securities stated in the Subparagraph 3, Paragraph 1 of this Article,a borrower in a fixed-price or competitive bid transactionshall ask for returning the securities before the last holder-of-record dateand actively join the subscription, if the subscribed shares are the preferred sharesof a issuing company or the newly issued shares of a company that is not listed on the Taiwan Stock Exchange, nor traded on theTaipei Exchange; failing to do so, the lender shall be deemed to have waived the right to subscribe to the newly issued shares.
    In a negotiated transaction, the borrower and the lender shall negotiate and agree between themselves on how to deal with any cash entitlements, securities entitlements, and subscription rights for newly issued securities that the lender would have received if it had not lent the securities, as well as on the exercise of any rights attaching to shares. In the case of securities entitlements, the TWSE will calculate the amount by reference to the number of subject securities borrowed and not yet returned by the borrower, exclusive, however, of any securities entitlements not yet repaid or returned by the borrower. If any such securities entitlements require a book-entry transfer, the transfer shall be made through the TWSE securities lending system.

Interpretation: