SLB Service in Taiwan Securities Market

Taiwan Depository & Clearing Co.

ACG New Service Initiative Task Force

History & Development

Stocks SLBSep. 1996 - for “settlement”

Taiwan Stock Exchange initiated the SLB system for completing settlement

TDCC has processed book-entry for SLB transactionsJun. 2003 - for “strategic trading”

SLB system was opened for institutional investors’ arbitrage, hedging or exercise related transaction

June 2005 - for “trading and exercising” “Strategic trading purposes” requirement was abolished The total market volume limit was adopted more eligible securities were added to SLB system

History & Development (Continue)

Bonds SLB (Jan. 2004)

GreTai Securities Market (GTSM) initiated bonds SLB system

Only Federal bonds were eligible

Matching, risk management, guarantee and settlements provide by GTSM

TDCC is not engaged in any services for bonds SLB

Statistic of Stocks Lending & Borrowing

Month (2005) May June July Augu Sept Janu-Sept AverageNo. of Transactions 94 107 64 61 57 903 100Total TradingVolume(1000 Shares) 169,902 140,512 92,453 134,304 143,473 1,524,413 169,379 Total TradingValue(millions) 6,389 5,449 2,838 4,552 3,883 51,920 5,768

Month (2004) May June July Augu Sept Janu-Sept AverageNo. of Transactions 48 90 104 122 200 863 95Total TradingVolume(1000 Shares) 74,909 171,114 236,145 269,025 372,201 2,280,168 253,352 Total TradingValue(millions) 2,766 4,486 7,287 6,641 8,800 60,297 6,699

Factors stagnated the growth of SLB’s turnover volume

Less ECB issued Less volatility of market price Insurance companies suspend securities

lending No short selling under the closing price of

previous trading day Tax Concern

NEXT STEPS

Solve the settlement’s problem on the sales of lent securities

Abolish price limit of indicated short salesAllow foreign private funds to participate in SLB

marketAllow to loan the borrowed securitiesAssist to solve problems with the tax authoritySimplify the pledge procedure

Thanks

Types of SLB Transactions

Settlement Purpose SLBFor a securities firm or a securities financing enterprise to complete settlements

Trading and Exercise Purpose SLB 1. Fixed-rate transactions

2. Competitive-auction transactions

3. Negotiated transactions

Participation -Trading & Exercise Purpose SLB

Permitted Lenders1. Insurance companies2. Financial institutions3. Securities investment trust companies4. Dedicated futures commission merchants, and5. Others approved by the competent authority (Such as foreign institutional investors (FINIs) and 4 governmental funds)

Permitted Borrowers1. Securities dealers2. Securities investment trust companies3. Futures dealers, and 4. Others approved by the competent authority (FINIs)