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Article NO. Content

Title:

Operating Rules for Securities Lending by Securities Firms  CH

Amended Date: 2019.10.29 (Articles 8 amended,English version coming soon)
Current English version amended on 2018.12.24 
Categories: Securities Exchange Market > Borrowing of Securities
Article 19     A securities firm borrowing securities from customers shall pay a performance bond to the TWSE pursuant to Article 38, paragraph 1. When lending securities to customers, a securities firm may accept the following types of assets as collateral, to be valued at the valuation percentages indicated:
  1. Cash.
  2. Book-entry central government bonds. Calculate at 90 percent of face value.
  3. Securities eligible for margin purchases and short sales. The collateral value of securities eligible for margin purchase and short sale transactions shall be 70 percent of the most recent closing price if they are TWSE or GTSM listed securities.
  4. Bank guarantee.
    The "most recent closing price" in subparagraph 3 of the preceding paragraph shall mean, prior to the close of market on the given day, the closing price for the preceding business day, and after the close of market on the given day, shall mean the closing price on the given day. The aforesaid closing price shall be set pursuant to Article 58-3, paragraph 3 of the TWSE Operating Rules or Article 35, paragraph 3 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM .
    If no closing price is available for the preceding business day, the price determined by the principles under Article 58-3, paragraph 2, subparagraph 2 of the TWSE Operating Rules or Article 57, paragraph 1 of the GreTai Securities Market Rules Governing Securities Trading on the GTSM shall substitute for the closing price.
    If the closing price for a given day is not available, the most recent closing price shall be determined by one of the following principles:
  1. When, on the day the security is loaned, the highest bid price at market close is higher than the auction reference price at market opening or the base price for first trading, the highest bid price shall be used.
  2. When, on the day the security is loaned, the lowest ask price at market close is lower than the auction reference price at market opening or the base price for first trading, the lowest ask price shall be used.
  3. When neither of the above circumstances applies, the auction reference price at the opening of market or the base price for first trading shall be used.
    Securities collateral that a securities firm collects from a customer shall be limited to securities that the customer itself owns.
    The collateral valuation percentages in paragraph 2 may be adjusted by the TWSE in conjunction with the GTSM based on the condition of the collateral. The lender and borrower may separately agree to a collateral valuation percentage lower than the prescribed percentage.
    A securities firm may reject, or lower the valuation percentage for, any security that would otherwise be eligible collateral under paragraph 2, subparagraph 3 if the securities firm so deems appropriate having regard to the market liquidity and risk status of that collateral; if any such security has been accepted and received as collateral for a lending transaction, the securities firm may notify the borrowing party to replace the collateral.
    Where a security eligible for margin purchases and short sales under paragraph 2, subparagraph 3 is during a trading halt announced by the TWSE or GTSM, that security may not be the collateral for a lending transaction; if any such security has been accepted and received as collateral for a lending transaction, the securities firm may proceed with the collateral in accordance with the preceding paragraph.