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Title: Taipei Exchange Rules Governing Bond Repurchase and Reverse Purchase Transactions on Over-the-Counter Markets
Date: 2005.10.07 ( Announced )
Date: 2014.01.02 ( Amended )

Article Content

 
Article 1     These Rules are adopted pursuant to Article 79, paragraph 5, of the Taipei Exchange Rules Governing Securities Trading on Over-the-Counter Markets (hereinafter, the “Trading Rules”).
Article 2     For any matters on which these Rules are silent with respect to bond repurchase and reverse repurchase (RP/RS) transactions, the GreTai Trading Rules shall apply.
Article 3     A customer conducting bond RP/RS transactions with a securities dealer for the first time shall enter into a Master Contract for Bond RP/RS Transactions therewith, annexing a photocopy of the national ID card or business license. The customer is not required to open an account.
    The Master Contract for Bond RP/RS Transactions under the preceding paragraph shall be subject to separate determination by the TPEx.
Article 4     (deleted)
Article 5     Upon executing a bond RP/RS transaction, a securities dealer shall promptly enter the transaction information into the TPEx information system at the time and in the format prescribed by the TPEx.
Article 6     The ownership of the underlyings of a bond RP/RS transaction shall belong to the buyer before the repurchase date. Where a buyer acquires book-entry central government bonds in a bond RP/RS transaction, and where the agreed period is less than one month, the buyer may, as stipulated in the Addendum to the Master Contract for Bond RP/RS Transactions, further sell such bonds outright to others.
    As regards bonds traded under the preceding paragraph, a bond passbook issued by a custodian institution designated by the securities firm or a certificate of RP/RS transactions of book-entry central government bonds issued by a book-entry central government bond clearing bank may be used in lieu of delivery, or delivery may be made by transferring such bonds into buyer's account through book-entry transfer, or a bond passbook issued by the securities firm pursuant to the requirements of the Taiwan Depository & Clearing Corporation (hereinafter, "TDCC") may be used in lieu of delivery. If a bond passbook or a certificate of RP/RS transactions of book-entry central government bonds is used by a securities firm in lieu of delivery, and the customer is a natural person, the securities firm shall, after obtaining the customer’s written consent, provide the customer’s name and national identity number to the relevant custodian institution, the book-entry central government bond clearing bank, or the TDCC. If delivery is made by transfer registration through a book-entry central government bond clearing bank, the dollar amount in the government bond account designated by the buyer shall be recorded additionally.
    When a stipulation is made under paragraph 1 allowing further sale of book-entry central government bonds outright to others, the interest rate on the RP/RS transaction shall be divided, based on the respective nature of each transaction, into the interest rate on cash financing and the fee rate for loaning of bonds, wherein the dollar amount at maturity shall be calculated as the initial dollar amount plus the interest on cash financing and minus the fee for loaning of bonds.
    The Addendum to the Master Contract for Bond RP/RS Transactions under paragraph 1 shall be subject to separate determination by the TPEx.
    The ownership of the underlyings of a bond RP/RS transaction shall belong to the buyer before the repurchase date. Where a buyer acquires book-entry central government bonds in a bond RP/RS transaction, and where the agreed period is less than one month, the buyer may, as stipulated in the Addendum to the Master Contract for Bond RP/RS Transactions, further sell such bonds outright to others.
    As regards bonds traded under the preceding paragraph, a bond passbook issued by a custodian institution designated by the securities firm or a certificate of RP/RS transactions of book-entry central government bonds issued by a book-entry central government bond clearing bank may be used in lieu of delivery, or delivery may be made by transferring such bonds into buyer's account through book-entry transfer, or a bond passbook issued by the securities firm pursuant to the requirements of the Taiwan Depository & Clearing Corporation (hereinafter, "TDCC") may be used in lieu of delivery. If a bond passbook or a certificate of RP/RS transactions of book-entry central government bonds is used by a securities firm in lieu of delivery, and the customer is a natural person, the securities firm shall, after obtaining the customer’s written consent, provide the customer’s name and national identity number to the relevant custodian institution, the book-entry central government bond clearing bank, or the TDCC. If delivery is made by transfer registration through a book-entry central government bond clearing bank, the dollar amount in the government bond account designated by the buyer shall be recorded additionally.
    When a stipulation is made under paragraph 1 allowing further sale of book-entry central government bonds outright to others, the interest rate on the RP/RS transaction shall be divided, based on the respective nature of each transaction, into the interest rate on cash financing and the fee rate for loaning of bonds, wherein the dollar amount at maturity shall be calculated as the initial dollar amount plus the interest on cash financing and minus the fee for loaning of bonds.
    The Addendum to the Master Contract for Bond RP/RS Transactions under paragraph 1 shall be subject to separate determination by the TPEx.
Article 7     Where bonds under an RP/RS transaction are to be delivered through book-entry transfer, upon settlement of the payment by the buyer, the securities dealer shall notify the TDCC to transfer the bonds from the seller's account to the buyer's account, or a bond passbook issued pursuant to the requirements of the TDCC may be used in lieu of physical delivery.
    In an RP/RS transaction between securities dealers, the notice under the preceding paragraph shall be made by the seller securities dealer. If the seller securities dealer has notified the TDCC of the buyer's custodial book-entry account number, it shall notify the buyer to inquire about, print out and check the entries in its bond passbook through its corresponding securities firm or custodian institution by means of a computer connection with the TDCC. If the seller securities dealer has not notified the TDCC of the buyer securities dealer's custodial book-entry account number, it shall notify the buyer to make use of the TDCC's Internet or telephone voice-inquiry system to confirm the entries in its bond passbook.
    Where an RP/RS transaction of book-entry central government bonds is settled by transfer registration, the securities dealer shall, either on its own behalf or as per instruction by the customer, request a book-entry central government bond clearing bank to transfer the bonds in question from the seller's government bond account to that of the buyer.
Article 7-1     A securities dealer using a bond passbook in lieu of physical delivery under the preceding article shall observe the following provisions:
  1. The bond passbook shall be signed or sealed by the rights owner and then delivered to and retained by the customer.
  2. The securities dealer shall not withdraw the physical bonds or apply for book-entry transfer operations before expiration of the RP/RS transaction, except as applied for by or agreed in writing by the customer and where the TDCC's requirements are satisfied.
  3. The passbook may be cancelled at expiration of the RP/RS transaction, except where the repurchase payment has not been made. When giving the bond passbook to the customer, the securities dealer shall make known the provisions of this paragraph.
  4. Upon expiration of the RP/RS transaction, the securities dealer, except in circumstances where no funds are to be returned to the customer, shall transmit the information related to the bond passbook cancellation application to the TDCC’s computer system, including the amount of the remittance, the remittance method, and the time the bank was notified to make the remittance, in order to carry out passbook cancellation.
  5. To carry out early termination of the contract, the bond passbook retained by the customer shall be taken back. If the passbook is not taken back in due time, a certificate of payment to the customer (except where a new transaction is undertaken with the customer under the original terms and conditions and where a separate passbook is issued, during which period no funds are returned) and a facsimile copy of undertaking signed by the customer to indicate acknowledgement thereof shall be obtained before such early termination may be made; nevertheless, the passbook and the original undertaking shall be delivered to the TDCC within five business days after the early termination day.
Article 8     The dollar amount at maturity of a bond RP/RS transaction shall be calculated as the initial dollar amount plus the RP/RS interest.
    The interest under the preceding paragraph shall be calculated at the RP/RS interest rate on the basis of a year of 365 days, and for the actual number of days elapsed from and including the transaction date to and excluding the maturity date.
Article 9     During the period of a bond RP/RS transaction, the interest is calculated based on the actual number of days based on a 365-day year.
Article 10     Where bond RP/RS transactions are settled by book-entry transfer, unless the underlying assets are corporate bonds or financial bonds, for those transactions for which settlement is completed two business days prior to repayment of the principal and payment of interest, the price receivable/payable shall include the dollar amount of the principal repaid and interest paid, and the current-period principal and interest shall still belong to the person as registered in the central custody account at close of business two business days prior to such repayment of principal and payment of interest.
    Where RP/RS transactions of corporate or financial bonds are settled by book-entry transfer, for those transactions for which settlement is completed one business day prior to repayment of principal and payment of interest, the price receivable/payable shall include the dollar amount of the principal repaid and interest paid, and the current-period principal and interest shall still belong to the person as registered in the central custody account at close of business one business day prior to such repayment of principal and payment of interest.
    Where RP/RS transactions of book-entry central government bonds are settled by transfer registration, for those transactions for which settlement is completed one business day prior to repayment of principal and payment of interest, the price receivable/payable shall include the dollar amount of the principal repaid and interest paid, and the current-period principal and interest shall still belong to the person as registered in the book-entry government bond account at a registration institution at close of business one business day prior to such repayment of principal and payment of interest.
Article 11     Where the regulatory capital adequacy ratio of a securities firm falls under Article 65 of the Regulations Governing Securities Firms, the aforementioned limit on the outstanding balances of RP and RS transactions may be lowered to 3.5 times its net worth; where the regulatory capital adequacy ratio of the securities firm falls under Article 66 of the Regulations Governing Securities Firms, the TPEx may, considering the actual situation, further lower the aforementioned multiplier of outstanding balances of RP and RS transactions. However, if its statements filed on a monthly basis show that the reason for such adjustment has been extinguished, the multiplier may be adjusted according to the extent of the extinguishment.
    If, according to the Rules Governing Early Warning of Overall Operational Risk of Securities Firms, the bond business ratio of a securities dealer has reached the specified early warning threshold and an early warning message appears, for which a TPEx audit finds any matter requiring improvement, but the securities dealer fails to make improvement or provide explanation within a specified time limit, the TPEx may lower the transaction multiplier as applied to the securities dealer under paragraph 1.
    The agreed repurchase or resale period for a bond RP or RS transaction may not exceed one year.
    With the exception of a financial institution concurrently engaging in securities business and being subject separately to relevant requirements prescribed by the competent authority with jurisdiction over the relevant business segment, the ceiling on the cumulative balance of a securities dealer's outright sales to others, under Article 6, of bonds that it acquires through RP/RS transactions may be set at the securities dealer's net worth or the total of its proprietary positions in bonds, whichever is higher.
    When conducting RP/RS transactions of bonds with a customer, a securities dealer shall make sure that the transfer of payments on the transactions are made only with the name of the customer and shall on the relevant date of resale transfer the dollar amount at maturity of an RP/RS transaction of bonds to, and only to, the customer.
Article 11-1     When a securities firm conducts RS transactions in which the underlying involves any financial asset beneficial securities, asset-backed securities, or real estate asset trust beneficial securities it underwrites, it shall observe the following limits as set out in its internal control system:
  1. The ceiling on the amount of RS transactions.
  2. When the securities firm conducts RS transactions with a juristic person, the limit on the percentage of the RS transaction amount to the net worth of the securities firm and the net worth of the juristic person respectively.
  3. When the securities firm conducts RS transactions with a natural person, the limit on the percentage of the RS transaction amount to the net worth of the securities firm.
Article 11-2     When a securities firm enters into an RP/RS transaction with a party related to it in any of the following ways, the conditions of the transaction may not be more favorable than those for other counterparties of the same kind of transaction:
  1. A director, supervisor, or managerial officer of the securities firm, or a shareholder that directly or indirectly holds 10 percent or more of its total shares.
  2. A spouse, minor child, or other nominee in whose name the shares are held, of any of the persons referred to in subparagraph 1.
  3. Any investee company in which 10 percent or more of the total shares are directly or indirectly held by any of the persons referred to in the preceding two subparagraphs.
    Shares held by a shareholder's spouse or any minor child or otherwise held in the name of any nominee shall be included in calculating the shareholder's holding of the total shares under subparagraph 1 of the preceding paragraph.
Article 12     The TPEx will, after close of business each business day, publicly announce the highest, lowest, and average yields and volumes for bond RP/RS transactions of various maturities.
Article 12-1     Except when trading with a financial institution, a securities dealer, when settling trades conducted with the same customer, may not use netting to offset outright purchases/sales against RP/RS transactions of bonds.
    “Financial institution” in the preceding paragraph means a financial institution as defined in Article 4 of the Financial Institutions Merger Act.
Article 12-2     (deleted)
Article 13     A securities dealer may add additional or supplementary provisions to the Master Contract and/or Addendum for Bond RP/RS Transactions it enters into with a customer under Article 3, paragraph 2 and Article 6, paragraph 4, provided that the provisions thus added may not lead to a result less favorable to the investor.
Article 14     These Rules, and any amendments hereto, shall take effect upon ratification by the competent authority after passage by the board of directors of the TPEx.