Taiwan

Posted By Steve On Thursday, October 15th, 2009 With 0 Comments

Settlements Cycle

Equities
(incl. convertible bonds and strip bonds): T+1
Bonds: T+2 negotiable
Money Market: T

Over-the-Counter (OTC)
Instruments that can traded off the TSE and the GreTai Securities Market (GTSM) include money market instruments, government bonds, corporate bonds, unlisted stocks, delisted stocks, privately placed local securities, public tender offer, emerging stocks, GTSM stocks with no foreign ownership cap and funds, all of which are available to foreign investors.

For purchase and sale of unlisted stocks by an investor with FIA status, the investors must obtain prior approval from the Ministry of Economic Affairs (via the investor’s local legal agent).

For sale of delisted stocks by foreign institutional investors (who purchased the stocks while they were listed), the exact cash and securities payment dates are negotiable.

For purchase of stocks and beneficiary certificates through initial public offering as well as privately placed local securities, investors should give the sub-custodian (or appointed local agent) instructions to complete subscription forms and make payments. The exact cash payment and securities receipt timing varies according to the prospectus of the securities issues.

For participating in public tender offers, investors should give the sub-custodian (or their appointed local agent) instructions to complete subscription forms and make payments. Pre-delivery of the stocks shall be made to avoid malice.

For purchase and sales of emerging stocks, the investors can trade on or off-GTSM and need not to file any application. If the trade is executed on exchange, the stocks would be exchanged via the TDCC’s book-entry system.

However, for those stocks with foreign ownership caps, they can only be traded through GTSM’s computerized trading system. Cash and securities are exchanged on T to T+2 at the securities company’s counter.

Pricing quotations on off-exchange market instruments can be found in local newspapers and on Reuters.

Trading Hours

1. Regular Trading 9:00-13:30
(Effected from Feb. 20, 2012, whenever the reference price of certain stocks rises or falls more than 3.5 percent of the last reference price one minute before the close (13:29 -13:30), the orders of that stock will be matched at 13:33 for closing, instead of 13:30.)
2. After-hour Fixed Price Trading 14:30
3. Odd-lot Trading 14:30
4. Block Trading (Non-paired Trade) 09:00-17:00
5. Block Trading (Paired Trade) 08:00-08:30 09:00-17:00
6. Auction: After 16:00
7. Tender Offer: After 16:00

Settlement Procedures

Equity settlement procedures: Settlement is on a T+1 basis.

Trade date (T): The client places a trade order with a broker. Upon execution, the broker will send a copy of the execution report to sub-custodian on T-afternoon. Sub-custodian will pre-check the availability of cash/securities in the FINI’s account and advise the client immediately should the account be short for settlement.

T+1: The custodian must receive all settlement instructions by 11:00 Taiwan time at the latest. Upon receipt, sub-custodian will check the instruction against the broker’s execution report to ensure that details are correct and advise clients and brokers immediately if there is any discrepancy.

The market cut-off time is 12:00, Monday to Friday. The market cut-off time can be postponed to 17:00 on T+1 if there are interruptions to telecommunications links or natural disasters in the country of the buyer. For receipts: after trade confirmations between custodian and broker have been completed, the broker confirms to the Taiwan Stock Exchange (TSE) that settlement has been completed before 15:30, Monday to Friday.

For deliveries: after trade confirmations between custodian and broker have been completed, the custodian bank updates the TDCC records by debiting the sub-account with the TDCC before 15:30, Monday to Friday.
The TDCC updates the transaction during its batch run on T+1 after settlement is complete.

T+2: The custodian bank credits funds to the broker’s bank account at 09:00 and the broker credits sale proceeds to the investor’s cash account in the morning/afternoon, via interbank wire transfers. The custodian gets the updated securities position in the morning through a terminal linked to the TDCC.

Bond settlement procedures
T (morning): The client places an order with a broker dealer. Sub-custodian receives the execution report from the broker and checks the availability of cash or securities in the client’s account. All settlement instructions must be delivered to sub-custodian by 11:00 Taiwan time at the latest on SD.

T+2 negotiable (SD): The sub-custodian finishes matching the execution report from the broker with instructions from the client to ensure that details are correct before executing payment or delivering securities. After this, sub-custodian sends a settlement confirmation to the client.

Money market instrument settlement procedures
T (morning): The client places an order with a broker dealer. sub-custodian receives the execution report from the broker and checks the availability of cash or securities in the client’s account. All settlement instructions must be delivered to sub-custodian by 11:00 Taiwan time at the latest on SD.

T (SD) afternoon: sub-custodian finishes matching the execution report from the broker with instructions from the client to ensure that details are correct before executing payment or delivering securities. After this, sub-custodian sends a settlement confirmation to the client.

Bank for International Settlements Model (BIS):

BIS Settlement Model 2 is the current settlement processing of listed equity in Taiwan – systems that settle securities transfer instructions on a gross basis, with final transfer of securities from the seller to the buyer (delivery) occurring throughout the processing cycle, but settle funds transfer on a net basis, with final transfer of funds from the buyer to the seller (payment) occurring at the end of the processing cycle.

Payment Systems
Inter-bank Remittance System of Financial Information Services Corporation
The Inter-bank Remittance System (IBRS) is a system operated by Financial Information Services Corporation (FISC) to facilitate the remittance of transactions among different financial institutions. FISC is established by a fund under the management of the Ministry of Finance. FISC’s IBRS allows real-time transfer of funds between client accounts held with banks.

In Taiwan, this system is used by brokers’ clearing banks and investors’ custodian banks for payments of equities purchased/sold through the stock exchanges and the emerging stock market. Payment of fixed income may be made via this system, CBCs inter-bank fund transfer system, or by cheque. The system generally closes down at 16:30 local time.

Cheques
In Taiwan, cheques drawn on Bank of Taiwan are widely used for settlement of government bonds. Banks and financial institutions maintain accounts with Bank of Taiwan and clear funds by issuing or receiving Bank of Taiwan’s cheques to one another. The cheques shall be deposited in the beneficiary’s account by 15:00 for same day value. A less used method for settlement is by cheques drawn on other banks.

Inter-bank Fund Transfer System of the Central Bank of China
The Inter-bank Fund Transfer System is a large value TWD payment system that was established in 1995 and is operated and governed by the Central Bank of China. It functions electronically on a real-time basis. All licensed banks are members of the system.

This system is used for settlement of government bond only if both counter-parties of a transaction are members of the system. For example, for settlement of commercial paper, NCDs and associated resell/repo agreements, Taiwan Depository & Clearing Corporation (TDCC) clears the funds between bills dealers and the bills clearing banks via the Central Bank’s inter-bank fund transfer system. The system closes at 16:30 local time.

Automated Clearing House of the Taipei Clearing House
Automated Clearing House (ACH) is another clearing system launched by Taipei Clearing House (TCH) in June 2002 for bulk electronic payments. ACH transfers are exchanged bilaterally through TCH, who will store, sort and forward in batch to member banks.

This system settles low-value, high-volume fund transfers on an overnight basis. Funds are available on T+1 for credit transfers and T+2 for debit transfers. ACH’s credit transfer is similar to autopay-out in Hong Kong.

Overdraft Permitted
Generally speaking, foreign investors are not allowed to obtain financing in TWD in Taiwan. The only exception is the purchase of warning/special treatment/full delivery stocks. With effect from July 23, 2004, local financial institutions can provide intra-day TWD financing to foreign investors to cover insufficient fund for settlement due to time zone difference. The scope of this intra-day TWD financing only covers the purchase of warning/special treatment/full delivery stocks, where pre-delivery to a broker of cash prior to trading is required. In this situation, the custodian banks may, after booking a FX by a foreign investor, pay out TWD for the foreign investor during T- day Taiwan time, and then receive the foreign currency payment on T-day Taiwan evening time. Such intra-day financing requires pre-arrangement.

In addition to the OD facility, per the recent relaxations, foreigner investors are now allowed to obtain TWD financing in Taiwan for securities investment, long-term equities investment and real estate investment purposes.

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

All Rights Reserved WIld Wild Web Limited