The Financial Supervisory Commission (FSC) yesterday announced draft guidelines that would allow securities brokerages to issue active exchange-traded funds (ETFs) and passive multi-asset ETFs in Taiwan, paving the way for the new instruments to be listed on local bourses next year and offering investors a diversified mix of investments.
It would take several months for the commission to amend securities investment trust regulations, as well as for stock exchanges and brokerages to adjust their measures and update their back-end systems to accommodate the new ETFs, the commission said in a statement on its Web site.
Taiwan has so far allowed securities brokerages to issue ETFs that track particular indices or sectors with underlying targets, including stocks, bonds and futures. Such funds are known as “passive ETFs” and are popular among investors due mainly to their relatively low management fees.
Photo: Kelson Wang, Taipei Times
With the regulatory easing, the securities brokerages could issue “active ETFs,” which invest in a portfolio of securities that fund managers subjectively choose on their own and allow operational adjustments based on their strategies, rather than following rules-based benchmark indices, the FSC said.
At the same time, securities brokerages could offer passive multi-asset ETFs, which provide more diverse asset allocation options for investors, it said.
The upcoming relaxation is another bid by the commission to help fulfill a major policy proposal made by the Cabinet's Economic Development Committee earlier this month to develop Taiwan into an asset management center in Asia with its unique characteristics.
There is great demand among investors for active ETFs and multi-asset ETFs based on the trends of ETFs abroad, the FSC said yesterday.
If Taiwan aims to become an asset management center in Asia, it must have quality financial products, the commission said, adding that its plans would open a new window of opportunity for local investors.
The ETF market in Taiwan has grown substantially in the past few years.
Securities brokerages had issued 238 ETFs as of the end of last month, with total assets of NT$5.29 trillion (US$161.05 billion), the third-largest in Asia, FSC data showed.
Those ETFs accounted for 62.95 percent of overall securities investment trust funds as of the end of last month, signaling that there is development potential, the commission said.
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