The expandingof securities sources for securities firms to operate the securities borrowing and lending business will be implemented from February1.
In order to improve the efficiency and expand the business scope of the securities firms,the securities firmswill be allowed to operate the securities borrowing and lending (SBL)businesswith additional securities sourcesthroughborrowingsecurities from customersand borrowing or lending securities from/to other securities firms or security financial enterprises from February 1, 2016.
The TWSE indicated that since the securities firms were allowed tooperate the securities borrowing and lending businessfrom 2006, an investor, either a retailer or an institutional one , who has a brokerage contract with the securities firm that has been in effect for a period of more than 3 months may borrow securities from the same securities firm for the purposes such as shortsale, redelivery securities borrowed or compensation for securities entitlements, fulfillment of exercise obligations associated with financial derivatives, and application for creation of exchange traded fund (ETF). However, at that time,a securities firm was allowed to lend only the securities held for its own account,securities borrowed through the securities lending system of the TWSE or collateral securities obtained in connection with margin purchases, and those securities sources could not satisfy investors’ increasing demands for securities lending.As a result,securities were often found insufficient for borrowingin the market.
In view of thecontribution to market liquidity by securities lendinggraduallybeing understood,theCompetent Authority has included the measure to expand the securities sources for securities firms that conduct securities borrowing and lendingbusinessin the “program to boost securities market.” Italso amended the “Regulations Governing Securities Lending by Securities Firms” to allow the securities firms not only to lend securities to their customers, but also borrow securities from customers and borrow or lend securities from/to other securities firms or security financial enterprises, which will beimplemented from February1, 2016.
After the measure to expand the securities sources becomeeffective, any idle shares held by investors may be lent the securities firms, which conduct securities borrowing and lendingbusiness as the securities sources. Thisnot onlycanincrease lending revenue and enhance the efficiency of securities operations, but also facilitate the circulation of more sharesin the market, and thus contribute to strengtheningthe liquidity inTaiwan’s securities market.
The TWSE remindsinvestors that they shouldbe careful to follow the relevant laws and regulations before engaging in the securities borrowing and lending transactions.Directors, supervisors, managers, or shareholders holding more than ten percent of the shares of public companiesshall not engage in the securities borrowing and lending transactions as required by regulations. Even after the shares are transferred to the trustee, theshares are not allowed to be lent; that is, the trustee shall not apply for securities lending of those shares.