BNY Mellon NetInfo

Taiwan - Relaxation of pre-funding and pre-delivery requirement for alert stocks

Category	NetInfo^® Custody Account - Legal/Regulatory, General/Miscellaneous
Summary	The Taiwan Depository and Clearing Corporation (TDCC) announced the development of new functionalities to allow local brokers to send requests to local custodians for earmarking of foreign investors’ cash and securities positions, which may replace the existing pre-funding and pre-delivery of securities requirement involving alert stocks to brokers prior to trade execution.
Impact	NetInfo^® Custody Account - Taiwan Successful earmarking of cash and securities positions may replace the requirement of pre-funding and pre-delivery of securities involving alert stocks to local brokers.

Under current regulation, foreign investors are required to pre-deliver funds or alert stocks (this refers to stocks subject to the disposition-measures, altered-trading-method, or management-measures as announced by the Taiwan Stock Exchange (TWSE) and the Taipei Exchange) in full to other designated local brokers through the local custodians prior to trade execution.

During industry discussions including BNY Mellon, it was proposed that local custodians earmark foreign investor’s cash and securities positions in their accounts on trade date as an alternative to pre-funding and the pre-delivery of securities.

On March 1, 2024, the TDCC had announced new functionalities which will allow local brokers to send requests to local custodians to earmark foreign investors’ cash and securities positions. Once local custodians complete the earmarking of cash in its cash processing system or securities in TDCC and the local custodians' custody system, the local custodians will notify the local brokers via TDCC’s new functionalities, so that local brokers can then accept orders from the foreign investors.

This relaxation is still subject to regulatory approval. The TDCC is still developing the new functionalities and targeting to implement in May 2024.

We will continue to monitor and advise you as additional information becomes available.

Transmitted on March 5, 2024

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