13 February 2017
Reporter: Drew Nicol

Taiwan overhauls lending rulebook

The Taiwan Stock Exchange (TWSE) has implemented fresh amendments to its securities lending rules and overhauled its regulatory interpretations interface in a bid to improve transparency and attract more lenders to the market.

In total, the exchange reviewed 14 articles in three chapters of its rulebook, most of which favoured lenders, with the new rules effective from 6 February.

TWSE clarified that banks acting as agent lenders must adhere to the reforms.

The rules for securities firms and futures commission clients, regarding opening securities borrowing and lending accounts and internal book-entry transfers, were reformed to allow lenders in a fixed-price or competitive bid transaction to request an early redelivery of securities.

Rules regarding wire transfers by virtual account for securities borrowers providing cash collateral, paying borrowing fees and entitlement compensation on behalf of clients, and providing performance bonds for borrowing securities from clients, were also reviewed.

Further restrictions were also implemented to ensure that no additional loan is allowed within the 10 business days preceding a mandatory return date.

Finally, the 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, were refreshed.

As part of its transparency boosting initiative, TWSE collected 14 letters of interpretation regarding the practical aspects of securities lending and placed these letters under the respective chapters and articles.

The latest amendments to Taiwan’s securities lending rules come as part of long-term effort to bolster and streamline the market’s regulatory framework.

Previous amendments allowed brokers to borrow securities directly from customers and extend the rollover limit from once to twice, from 1 February 2016.

Borrowing limits placed on customers were also removed, while the range of securities eligible for securities lending was expanded.

In 2015, onshore Taiwanese banking rules were relaxed to allow them to set more flexible margin levels and also to accept more currencies than just Taiwanese dollars.

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