Securities Borrowing System

Settlement-Coverage Securities Borrowing System

  • Settlement-Coverage Securities Borrowing System: If the securities firm can not fulfill settlement obligations of securities because of the client’s default, erroneous trade, or other reasons, it may apply to TWSE for borrowing securities to complete the settlement through securities borrowing system.
  • Collateral: When the securities firm applies for borrowing securities, it shall deposit with TWSE collateral equivalent to 120% of the closing price of the borrowed securities on the trade day multiplied by the number of shares borrowed. The securities firm can use bank guarantee or government bond as collateral.
  • Due bill: When the securities firm can not borrow sufficient amount of securities through securities borrowing system, TWSE will issue the due bill to cover the gap. The securities firm has to hand in the collateral as well.

Rules of Investors Applying for Lenders:

  1. Advantages of Investors Applying for Lenders:

    • No limit of identity: investors owning depository account in TDCC are capable to apply for lenders.
    • Convenience of applying procedure: investors may ask for letter of lending entrustment, filling out all requested information to complete the authorization procedure.
    • Easy of fee-receiving procedure: The lender may receive the lending fee on the next business day following the lending date.
    • Fairness of borrowing logic: The system's logic is based on the match against one or more of the lending quotes available from among all lenders, in ascending order of lending rate; if the borrowing quantity is reached at a rate at which the total quantity from all lending quotes at that rate is higher than the quantity needed to be borrowed, one or more of those lending quotes will be selected on a random basis for matching, until the needed quantity is reached.

  2. Procedure of Investors Applying for Lenders:

    • Investors can ask their correspondent securities firms for letter of lending entrustment, filling out all requested information to register as the lender. The correspondent securities firm shall then input relevant information into the TDCC SBL system to finish the authorization procedure.

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