Taiwan Stock Exchange: Securities borrowing and lending(SBL) rules now all in one place

To make it easier for market participants to look up rules and regulations, the Taiwan Stock Exchange (TWSE) collected 14 letters of interpretation regarding the practical aspect of SBL and placed these letters under the respective chapters and articles. In addition, relevant articles were amended to reflect the practical needs of SBL, and the amendments became effective upon release on February 6.

The collection of letters that were included in the appropriate chapters and articles is described briefly as follows.

(1) Rules for securities firms and futures commission merchants regarding opening SBL accounts and regarding internal book-entry transfers.

(2) Lenders in a fixed-price or competitive bid transaction may demand an early redelivery in part.

(3) Rules regarding wire transfers by virtual account for securities borrowers providing cash collaterals, securities firms paying securities borrowing fees and entitlement compensation on behalf of their clients, and securities firms providing Performance Bond for borrowing securities from clients.

(4) Requirements to be met by a bank from which a guarantee is issued for the borrower.

(5) Calculation of collateral value related to submission, withdrawal, and marking-to-market of foreign currency collaterals and rules regarding borrowers applying for return of foreign currency collaterals.

(6) Calculation and collection of fees charged for lending/borrowing services and fees charged by securities firms.

Further additions have also been made to reflect the practical needs of SBL. These two additions are the restriction that no additional loan will be allowed within the ten business days preceding a mandatory return date and the rules regarding handling cash entitlements in case of a natural disaster coinciding with a cash dividend date of a security. A total of three existing chapters, including the “Securities Borrowing and Lending Rules”, the “Operating Rules for Securities Lending by Securities Firms”, and the “Regulations Governing Performance Bonds of Securities Firms and Securities Finance Enterprises Engaging in Securities Lending”, or 14 articles, have been amended.

TWSE also states that the goal is to have all SBL rules in one place. In addition to taking inventory of all relevant rules in order to clearly identify areas to be reviewed or improved and corrected, TWSE has improved the services for the SBL market by making it easier for market participants to quickly search through the rules.

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