The Taiwan Monthly

Trading Policies

Enhancing investment accessibility: offshore foreign institutional investors (FINIs) now permitted to utilize Taiwan stocks as collateral

To enhance market accessibility and increase the flexibility of foreign investors’ capital, offshore foreign institutional investors (FINIs) have been allowed to use Taiwan stocks as collateral for offshore investment activities since August 28, 2023.

The Financial Supervisory Commission (“the FSC”) announced in March that offshore FINIs can further utilize Taiwan listed stock as collateral for offshore investment activities. This means that if a FINI needs funding for conducting offshore investment activities, it can use onshore listed stocks as collateral to secure offshore funding without selling its holdings in Taiwan-listed stocks.

The TWSE has introduced the “Operating Rules for Overseas Chinese and Foreign Nations Using Onshore Securities as Collateral for Offshore Investment Activities” and key measures of this new rule are outlined below:

1.    Basic Structure

To use onshore listed stocks as collateral for offshore investment activities between the collateral provider and collateral receiver outside Taiwan, an offshore collateral manager must be appointed to oversee collateral management. The Offshore Collateral Manager must appoint a Taiwan custodian to handle custody of the onshore stock collateral.

2.    Offshore investment activities

Offshore investment activities between a collateral provider and a collateral receiver are limited to three types of activities: (i) offshore derivatives transactions; (ii) offshore securities borrowing and lending transactions; and (iii) offshore foreign currency loans.

3.    Scope of Eligible Onshore Collateral

Eligible onshore stock collateral is limited to TWSE listed stock and Taipei Exchange (“TPEx”) listed stock which are eligible for margin trading transactions in Taiwan. Onshore borrowed stock is not permitted to be used as collateral.

4.    Qualification Criteria of Collateral Provider and Receiver

    Both the collateral provider and receiver must be a qualified FINI. If a collateral receiver is a lender of a foreign currency loan to a collateral provider, such collateral receiver must be licensed by the relevant offshore financial authority to operate as a bank or securities firm. 

For further inquiries, please contact Mr. Chen at rickychen@twse.com.tw