- Generally Securities Trading
- Margin Trading
- Securities Listing
- Broker Management
- Securities Lending
- Clearing and Settlement
- What is Taiwan Stock Exchange Securities Borrowing and Lending System(TWSE SBL System)?
- What is settlement coverage SBL?
- What are the criteria for participants in TWSE SBL System?
- What are the transaction types of TWSE SBL System?
- What kinds of tax are levied on TWSE SBL System?
1. What is Taiwan Stock Exchange Securities Borrowing and Lending System(TWSE SBL System)?
It's a platform where qualified institutional investors can lend and/or borrow eligible securities.
2. What is settlement coverage SBL?
Where a securities firm is unable to complete the delivery of securities for reasons that an error occurs to an entrusted transaction or to a transaction of its own, that a client fails to complete the settlement on time, that the securities provided by the securities firm has any of the conditions set forth in Paragraph 1 of Article 109 of the Operation Rules of TWSE, or for any other probable causes, the securities firm shall borrow securities to fulfill the settlement obligation.
3. What are the criteria for participants in TWSE SBL System?
The participants are limited to specific institutional investors:
- Lender: an insurance company, bank, trust investment company, securities firm, futures commission merchant, securities investment trust fund, futures trust fund, securities finance enterprise, designated offshore foreign institutional investor, government fund, employee stock ownership trust agreement, customer securities trust agreement, and any other entity as approved by the competent authority.
- Borrower: a bank, securities firm, futures commission merchant, securities investment trust fund, securities finance enterprise, designated offshore foreign institutional investor, and any other entity as approved by the competent authority.
4. What are the transaction types of TWSE SBL System?
There are three types:
- Fixed-rate: Transactions are executed at a fixed-ratepublicly announced by the TWSE. The current rate is 3.5% per annum.
- Competitive bid: The SBL fee rate should be determined by the bids and offers quoted by the borrower and the lender subject to a maximum interest rate of 20% per annum.
- Negotiated transaction: all the terms and conditions, including the loaned securities, traded volume, SBL fee rate, collateral ratio, return date etc., are negotiated and determined by the counterparties.
5. What kinds of tax are levied on TWSE SBL System?
- The SBL fee received by the lender shall be subject to business tax and enterprise income tax.
- Manufactured dividends are treated as lenders'dividend income or capital gains depending on whether borrowers hold borrowed securities as of the record date. If held on the record date, manufactured dividends are treated as lenders'dividend income and are subject to income tax. If sold, manufactured dividends are deemed to be capital gains, which are currently tax free in Taiwan. In addition, no business tax is levied on dividend income or capital gains.
- The interests on the cash collateral shall be subject to enterprise income tax. However, if the borrower is a financial institution or trust investment company, business tax shall also be levied.
- No securities trading tax or capital gain tax will be levied on the SBL transactions. If, however, the borrower defaults, and equivalent cash instead of the physical securities, is returned to the lender, it shall be deemed that the lender has sold the loaned securities and shall be subject to securities trading tax.