The Taiwan Monthly

Dec. 2017

Trading Policies

The evolution of SBL in Taiwan

Recognizing the importance of SBL in the capital market, the Taiwan Stock Exchange (TWSE) has been dedicated to promoting the development of SBL for years. In this light, the developing process of Taiwanese SBL market will be introduced in the article below.


In 2003, the TWSE launched a centralized SBL system to meet the needs of qualified institutional investors while the TWSE serves as an intermediary. Moreover, qualified securities firms and securities finance companies were allowed to conduct SBL business acting as principal starting in July 2007. Ever since then, Taiwanese SBL market has evolved in several aspects, especially in the last three years.


Recently, the TWSE has made many amendments in SBL, creating a more open and flexible environment to market participants. For instance, foreign currencies including USD, EUR, JPY, GBP, HKD and AUD were accepted as SBL cash collateral beginning in 2015. Also, brokers were allowed to negotiate collateral ratio when lending to professional institutional investors. In 2016, brokers were allowed to borrow securities from customers, expanding the securities pool and increasing market liquidity. In Feb. of this year, the daily SBL short selling ceiling was relaxed from 20% of average trading volume during the previous 30 business days to 30%, giving investors more capacity to enforce their investment strategies. Furthermore, QFII restrictions on participants in the TWSE SBL system were abolished, and the roll-over limit of the TWSE SBL system was extended from once to twice. Due to the efforts mentioned above, the SBL on loan balance has grown rapidly from 10.63 billion USD in Dec. 2014 to 17.48 billion USD in Oct. 2017, a growth rate of about 65%.


In conclusion, the TWSE will endeavor to bring the Taiwanese market in line with developed markets, continually increasing market liquidity and transparency in the future.