The Taiwan Monthly

Feb. 2021

Trading Policies

Taiwan to allow foreign currencies as collateral for specific foreign institutional investors to buy securities

At present the "Regulations Governing Borrowing or Lending Money in Connection with Securities Business by Securities Firms” only allow domestic natural persons, domestic juristic persons and onshore Chinese or foreign nationals to apply for securities business money lending with collateral of securities or other commodities that they purchase or hold.

To reduce the cost of foreign exchange settlement, enhance the competitiveness of domestic securities firms, and expand the scale of the Taiwan capital market, the Financial Supervisory Commission (FSC) approved on October 15, 2020 that specific foreign institutional investors can use foreign currencies as collateral in securities business money lending.

According to the FSC’s regulations, the Taiwan Stock Exchange (TWSE) announced, on December 31, 2020, the amendments to relevant Articles of the "Operating Rules for Securities Business Money Lending by Securities Firms" and supplementary measures. The preceding rules and supplementary measures will be effective on April 1, 2021. More details are as follows:

  1. Specific foreign institutional investors include qualified institutional investors, defined in Paragraph 2 of Article 4 of the "Consumer Protection Act", and members or liquidity providers of foreign stock exchanges, defined in Paragraph 2 of Article 5 of the  "Regulations Governing Securities Firms Accepting Orders to Trade Foreign Securities".
  2. Specific foreign institutional investors are allowed to provide foreign currencies as collateral in addition to TWSE and Taipei Exchange (TPEx) listed securities, TPEx traded beneficial certificates of open-end funds or physical gold, beneficial certificates of open-end securities investment trust funds and those of futures trust funds. The types of foreign currencies are limited to the United States Dollar (USD), Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Australian Dollar (AUD), and Hong Kong Dollar (HKD). Foreign currencies are deposited in the securities firm’s collateral accounts at authorized banks, approved by the Central Bank of the Republic of China (Taiwan) to engage in foreign exchange business.
  3. Compared to the other collateral, the value of the foreign currencies, using the spot exchange rate, is not discounted. The maintenance ratio of the foreign currencies is 110 percent.


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