The Taiwan Monthly - Special Edition
Trading Policies
Frequently asked questions (FAQs) about Taiwanese SBL market
Recently, many new global investors show great interest in Taiwanese SBL market, and inquire some current practices about the SBL market. The TWSE summarizes several frequently asked questions and introduces in the article below:
1.Are all FINIs able to participate in the TWSE SBL System?
Yes, since relaxation of qualification for participating in the securities lending system put into force on July 31, all FINIs can participate in the TWSE SBL System.
2.How to open an SBL account?
An SBL participant is required to enter into a “Letter of Entrustment for Securities Borrowing and Lending Transaction” with a securities firm, which handles the linkage with the TWSE SBL System. The securities firm shall submit the required documents of the participant to TWSE to open an SBL account.
3.Are there any restrictions on short selling borrowed stocks?
There are three ceilings adopted to monitor the volume of short selling borrowed shares over the whole market:
- Daily maximum short selling of borrowed stocks cannot exceed 30% of their average daily trading volume over the previous 30 trading sessions;
- Maximum for short selling of borrowed stocks cannot exceed 10% of outstanding shares per lending stock;
- The total volume of short selling borrowed stocks and margin short sales cannot exceed 25% of outstanding shares per stock.
4.How do lenders early recall loaned securities?
By giving a 1-day, 3-day or 10-day prior notice period, lenders can early recall loaned securities in fixed-rate or competitive bid transactions. For recalling securities on loan in negotiated transactions, lenders shall follow the agreement reached between the parties.
5.What is the process for dealing with default matters?
In fixed-rate and competitive bid transactions, when a borrower fails to fulfill his or her obligations in a timely manner, such as returning loaned securities or manufactured dividends, providing additional collateral, or paying related fees, TWSE shall dispose of the provided collateral to buy the loaned securities back. If any shortfall is left, TWSE will notify the borrower. If the borrower fails to bridge the shortfall by a prescribed deadline, TWSE shall deem the borrower to be in breach of the contract and terminate his or her SBL participation. In negotiated transactions, upon any event of default, either party shall forthwith report to TWSE on the handling of the default event.
For more details, please check our websites:
http://www.twse.com.tw/en/page/products/sbl/edu.html