FAQ

Clearing and Settlement

  1. When shall investors complete fund and securities settlement? For overseas investors who the broker reports to TWSE for delayed settlement(failed trade), what is their settlement time?
  2. When shall securities firms complete fund and securities settlement?
  3. In terms of clearing and settlement, what shall securities firms do to lower the settlement risk when taking selling orders from investors?
  4. What time can securities firms receive their due fund/securities on T+2 ?
  5. When is the cutoff time for the securities firms to report the default of investors to the TWSE?
  6. What shall brokers do if they find clients are unable to complete securities settlement before 10 a.m. of T+2?
  7. How is collateral calculated for use in the securities settlement borrowing system ? When shall it be delivered to TWSE?
  8. What is the source of the eligible securities to be lent in the securities settlement borrowing system? What is the borrowing procedure? How to calculate the securities borrowing fee?
  9. When can securities lenders retrieve their securities which were lent for the settlement purpose ? When can the retrieved securities be sold?
  10. After investors have applied for lending specific securities for settlement, would the lending necessarily occur?
  11. For investors who lent their securities for the purpose of settlement, is there any risk of not retrieving the securities?
  12. For lenders, what's the incentive for lending the securities for settlement purpose ? How to calculate it ? For securities firms, what's the processing fee for processing lending securities?
  13. When can lenders receive the lending revenue of lending securities for settlement purpose?
  14. How to pay tax for the lending revenue resulting from lending securities?
  15. If any investor is interested in lending his/her securities, how to apply for joining the securities-lending for the settlement purpose?
  16. If securities firms are closed due to natural disasters, how do investors complete fund and securities settlement ?
  17. What shall the securities firm do when it receives fake or counterfeit securities?
  18. How do securities firms complete fund and securities settlement on T+2 when market is closed due to natural disaster?
  19. Is there any prefunding regulation that requires investors to pay the principal of securities purchased one day before settlement day?

1. When shall investors complete fund and securities settlement? For overseas investors who the broker reports to TWSE for delayed settlement(failed trade), what is their settlement time?

Investors shall complete their securities and fund settlement before 10 a.m. of T+2 .Overseas investors who are reported by the broker to TWSE for delayed settlement (failed trade) are allowed to complete settlement before 6 p.m. on T+3.

2. When shall securities firms complete fund and securities settlement?

Securities shall be settled before 10 a.m. of T+2 ;fund shall be settled before 11 a.m. of T+2.

3. In terms of clearing and settlement, what shall securities firms do to lower the settlement risk when taking selling orders from investors?

  1. In accordance with the Article 79-1 of TWSE Operating Rules, with exceptions specified in the same article, brokers shall confirm that the amount of securities consigned to sell does not exceed the sum of both the balance and the securities to be deposited in their book-entry accounts in TDCC.
  2. If the broker consents to the request of their clients to transfer the securities away before the settlement day, it shall make sure that the broker can complete securities settlement before 10 a.m. of T+2.

4. What time can securities firms receive their due fund/securities on T+2 ?

TWSE pays fund/ securities to the securities firms which have completed settlement on thex"first come, first pay" basis. If securities firms complete their settlement in the early morning of T+2, TWSE will transfer the fund/securities to them as soon as TWSE receives fund and securities to be paid from the securities brokers and dealers. The transfer starts from 9:00am on the T+2 day.

5. When is the cutoff time for the securities firms to report the default of investors to the TWSE?

11 a.m. of T+2.

6. What shall brokers do if they find clients are unable to complete securities settlement before 10 a.m. of T+2?

They can apply to TWSE for borrowing securities before 10 a.m. of T+2 , by reporting the following to TWSE:erroneous trades, investors'default, or delayed settlement (failed trade) of overseas investors . If the broker fails to make the above reporting, TWSE will automatically initiate securities borrowing after 10 a.m. to cover the securities settlement shortage of the securities firms. In both cases, securities firms have to deposit collateral with TWSE for the securities borrowed.

7. How is collateral calculated for use in the securities settlement borrowing system ? When shall it be delivered to TWSE?

The collateral of the securities settlement borrowing is calculated with the following equation:The closing price of borrowed securities on T+1 x the number of shares borrowed x 120%. Any amount under 1 NT dollar will be ignored. The collateral must be delivered to TWSE before 11 a.m. of T+2.

8. What is the source of the eligible securities to be lent in the securities settlement borrowing system? What is the borrowing procedure? How to calculate the securities borrowing fee?

Any natural person, company, overseas Chinese or foreign investor who has a depository account in TDCC can be the lender in the securities settlement borrowing system by filling out thex"Client Securities Lending Agreement Form". The eligible securities to be lent are the unsold securities in the above TDCC account. The amount of securities to be borrowed are to match the lending quotes from all lenders, in ascending order of lending rates. The securities settlement lending fee shall be calculated as follows: Securities Lending Fee=T+2 closing price of lending securities x the quantity lent x the average lending rate. The average lending rate is the average of different lending rates of the same stock borrowed from different lenders.

9. When can securities lenders retrieve their securities which were lent for the settlement purpose ? When can the retrieved securities be sold?

The securities are lent after the market closes. The securities lent shall be returned the next trading day. The lending would not affect the trading and settlement of lenders.

10. After investors have applied for lending specific securities for settlement, would the lending necessarily occur?

On the day that the borrower/securities firms apply for the securities borrowing in the Securities Borrowing System, the system would match all available lending quotes, in ascending order of lending rates. If the total number of all lending quotes at the same rate exceed the borrowing demand, lending quotes will be selected on a random basis for the match. Therefore, lenders may not always succeed in having their securities lent.

11. For investors who lent their securities for the purpose of settlement, is there any risk of not retrieving the securities?

Upon the borrowing of securities, securities firms shall deposit with TWSE collateral equivalent to 120% of the closing price of the borrowed securities on T+1 multiplied by the number of shares borrowed. The price of collaterals held by TWSE will be marked to market daily. TWSE may use the collateral to buy back securities to return to lenders if the borrowers cannot return the securities.

12. For lenders, what's the incentive for lending the securities for settlement purpose ? How to calculate it ? For securities firms, what's the processing fee for processing lending securities?

For lenders, the lending revenue is the amount of the closing price of the securities lent on the trading day timed by the lending fee rate assigned by the lenders on the lending agreement form, which shall not exceed 7% of the closing price. For securities firms, they can charge a processing fee not to exceed 10% of the lending revenue.

13. When can lenders receive the lending revenue of lending securities for settlement purpose?

The lenders would receive the lending revenue on the next trading day after the lending day.

14. How to pay tax for the lending revenue resulting from lending securities?

  1. The revenue of lending securities belongs to the category ofx"rent"for which ax"withholding exemption certificate" shall be issued by the broker to the lender.
  2. In the event that each lending produces revenue above NT 20,000 dollars, the broker shall withhold the taxed amount, which is ten percent of the the revenue.

15. If any investor is interested in lending his/her securities, how to apply for joining the securities-lending for the settlement purpose?

Investors shall fill out thex"Client Securities Lending Agreement Form" offered from their securities brokers, then they are eligible to participate in securities lending. Securities brokers will help the investors to register relevant information into TDCC's Securities Borrowing Computer System to complete the application of securities-lending. Investors may cancel or withdraw their agreement of securities-lending before their securities are borrowed.

16. If securities firms are closed due to natural disasters, how do investors complete fund and securities settlement ?

Investors can postpone settlement to the next business day and fulfill their settlement obligation on that day.

17. What shall the securities firm do when it receives fake or counterfeit securities?

The securities firm has to engage in initial examination. If any suspicion is raised regarding the authenticity of the securities, it may deliver these securities certificates to related departments of securities companies for examination. If these securities certificates are confirmed to be fake or counterfeit, the securities firm must refuse to accept, and notify the police station and TDCC.

18. How do securities firms complete fund and securities settlement on T+2 when market is closed due to natural disaster?

Investors can postpone settlement to the next business day and fulfill their settlement obligation on the next business day.

19. Is there any prefunding regulation that requires investors to pay the principal of securities purchased one day before settlement day?

There's no regulation regarding prefunding in Taiwan's market. A securities broker accepting a trading order under normal settlement terms shall collect the securities sold or the purchase price of the securities from the investor when the order is transacted or prior to 10 a.m. on the second business day after the trade date. However, NTD is not freely convertible in the foreign exchange market. Therefore, some brokers or custodian institutes require prefunding to prevent default.

Investors are advised to maintain good credit with brokers and custodian institutes in order to be exempt from the prefunding requirement. If an investor can't deliver the principle on time, the investor can apply for delayed settlement or T+5 short-term financing with brokers. In the mentioned circumstances, brokers are required to carry out settlement procedures on the investor's behalf.

Top