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Article 32-1
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As needed for hedging in the issuance of call (put) warrants and exchange traded notes and in the operation at its place of business of structured instruments and equity derivatives, a securities firm may borrow and sell, or sell short, the underlying securities, exempt from the restriction that the selling price of the securities borrowed or sold short may not be lower than the closing price of the previous business day.<br/>A securities firm, for purposes of providing bid and ask quotes or meeting hedging needs in its capacity as a market maker, may borrow and sell the underlying securities, exempt from the restriction that the selling price of the securities borrowed may not be lower than the closing price of the previous business day.<br/>A securities firm selling securities by borrowing them as referred to in the preceding two paragraphs shall enter into a loan contract with the lender of the securities. The following particulars shall be specified in the loan contract:<br/>1. Name, volume, period, and rate of the loaned securities.<br/>2. Means of exercise of shareholders' rights of the loaned underlying securities.<br/>3. The means of reimbursement by the securities firm of the rights/dividend value to the lender for ex-rights/ex-dividend dates of the loaned securities (including the means of calculation, whether reimbursement is to be made in cash or securities, and the reimbursement date).<br/>4. Means stipulated between the parties for return of the securities upon expiry of the contract (including whether or not the securities may be refunded as cash).<br/>5. Means stipulated between the parties for handling of breach and related matters of damages.
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