A securities firm may only use the following bonds as a source for its conduct of book-entry central government bond borrowing and lending business.
1.Book-entry central government bonds held for its own account.
2.Bonds borrowed through the securities lending system of an over-the-counter securities market.
3.Bonds acquired through reverse repo trades.
4.Bonds borrowed from a customer.
5.Bonds borrowed from other securities firms or securities finance enterprises that conduct securities borrowing and lending business.

A securities firm conducting book-entry central government bond borrowing and lending business shall enter into a borrowing and lending agreement with each customer.
The borrowing and lending agreement under the preceding paragraph shall at least contain the following:
1.Methods of trading and confirmation.
2.Information to be included in a trade confirmation document.
3.Borrowing or lending period.
4.Handling fee rate, and lending fee rate expressed as an annual percentage rate.
5.Method of redelivery and conditions for early redelivery.
6.Collateral type, substitution, ratio, and maintenance ratio.
7.Method of transfer or delivery of the subject securities and collateral.
8.Calculation and payment of interest on cash collateral.
9.Compensation of entitlements and actions upon event of default.
10.Handling of customer information.
11.Cause for termination.

A securities firm conducting book-entry central government bond borrowing and lending business shall collect collateral from the customer, or require the customer to provide a bank guarantee, and only the following types of collateral are accepted:
1.Cash.
2.Book-entry central government bonds.
The collateral under the preceding paragraph may not be used for purposes other than:
1.As collateral to borrow securities through the securities lending system of an over-the-counter securities market.
2.Bank deposits.
3.Purchase of short-term bills.
A securities firm shall pay interest on cash collateral it collects from a borrower at a rate agreed between the two parties.
A securities firm borrowing book-entry central government bonds from customers shall allocate on a monthly basis a performance bond that accounts for a certain percentage of the total monetary amount of the borrowed book-entry central government bonds.
The performance bonds under the preceding paragraph shall be deposited with the TPEx. The regulations governing the deposit, custody, payment, and return of the performance bonds shall be drafted by the TPEx, and submitted to the competent authority for final approval.

Book-entry central government bonds may be loaned only for a period of no more than 6 months starting from the execution date of a lending transaction, and such period may not overlap with the period of 2 business days prior to any coupon payment date of the subject bonds or of any book-entry central government bonds used as collateral, if applicable, in that transaction. However, if the securities firm has reached a prior written agreement with the customer as to taxation on the payment of principal and coupon interest on the bonds and other relevant fees, such agreement may control.

The delivery and redelivery of book-entry central government bonds in a lending transaction shall be made through title transfer registration as provided in the Directions for the Operation of Book-Entry Central Government Securities. However, in the case of government strip bonds, the delivery and redelivery shall be made by book-entry transfer.

Book-entry central government bonds that are subject to a pledge may not be borrowed or lent, nor may they be used as collateral.

The outstanding balance of a securities firm's loans of book-entry central government bonds plus repo transactions may not exceed 600 percent of its net worth. However, a financial institution concurrently operating securities business is separately subject to the applicable rules set out by the competent authority.

The provisions of Article 7; Article 11, paragraphs 1, 3, and 4; Article 15, paragraph 2; Article 19; Article 21; Article 25, and Article 26 hereof shall apply mutatis mutandis to book-entry central government bond lending business.
This Chapter, except for Article 11, paragraphs 1, 3, and 4, and Article 33, paragraphs 1 to 3, shall apply mutatis mutandis where a securities firm borrows or lends book-entry central government bonds from or to another securities firm or securities finance enterprise conducting securities borrowing and lending business.