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FSC to relax securities borrowing, lending rules next year

FSC to relax securities borrowing, lending rules next year

Taipei, July 15 (CNA) The Financial Supervisory Commission (FSC), the top financial regulator in Taiwan, said Wednesday that it will relax rules on the securities borrowing and lending (SBL) mechanism starting on Jan. 1, 2016 in a bid to further boost trading activity in the local equity market. The current SBL system only allows retail equity investors to be the borrowers of securities from the Taiwan Stock Exchange, securities companies or other financial firms for a wide range of purposes, such as short sales and then need to return securities to lenders, the FSC said. After the relaxation, retail investors will also be eligible to lend securities to brokerages or other financial firms so the TWSE will not serve as the only securities lending source to brokerages and financial firms, the FSC said. Since the SBL mechanism will allow lending in both directions, securities supplies are expected to be raised at a time when the FSC has relaxed the rules on day trading in which investors of a given stock are allowed to buy first and sell later or sell first and buy later in a single session. Starting in June 2014, the FSC began broadening the day trading coverage, and until now, more than 400 stocks on the main board and the over-the-counter market are eligible for day trading. The FSC said that the move to allow retail investors to lend securities to brokerages is expected to create an alternative profit source from the new business for retail investors, while brokerages are expected to boost their securities stocks and make their investment strategies more flexible. After the relaxation on the SBL rules, the ceiling of NT$20 million (US$645,161) worth of securities that can be borrowed by a single retail investor will be removed so brokerages will have to stay alert for any possible risks in the business, the FSC said. Meanwhile, the FSC will allow retail investors to use their loans extended by brokerages for purchases of more products, not only purchases of shares on the main board and the over-the-counter market, which are the limits of the currently stipulated rules. Retail investors will be allowed to use the borrowed funds to invest in stock mutual funds, futures mutual funds, gold on the OTC market, initial public offerings and secondary public offerings, also starting on Jan. 1, 2016, the FSC said. The relaxed fund borrowing rules will remove the ceiling of NT$80 million a retail investor can borrow, the FSC said, adding that however, brokerages should tighten their risk control after the ceiling removal. (By Frances Huang)


Updated : 2021-09-19 12:32 GMT+08:00