Taiwan set to allow active ETFs into booming retail market

Taiwan’s Financial Supervisory Commission is planning to finalise proposals to allow active exchange traded funds this year.

Chang Chen-shan, director general of the Securities and Futures Bureau, said the FSC was aiming to finalise the proposal to allow active ETFs by June, but did not expect a decision before then.

The FSC had collected industry players’ views, it was now investigating the regulatory developments of active ETFs in different markets and a “clearer direction” would be announced later, Chang said during a press conference.

“For the active ETF proposal, we are now investigating product design, information disclosure regulation and the possible interaction between active and passive funds in the market,” Chang said.

This article was previously published by Ignites Asia, a title owned by the FT Group.

The announcement means that Taiwan will this year become the latest Asian market to permit listing of active ETFs, after Japan and Singapore. But significantly it will open a new channel in a market where appetite for ETFs has been running red-hot.

Robin Chou, professor of finance at National Chengchi University, has said that he expected Taiwan to experience another wave of “bloody” competition after the approval of active ETFs, as it provides a new opportunity for global asset managers to enter the market.

Taiwan’s ETF market has experienced huge growth in recent years, with total ETF assets surging more than 64 per cent last year to reach NT$3.85tn ($123.1bn). ETF assets accounted for an all-time high of 57 per cent share of the entire Taiwan onshore fund market by end of 2023.

The regulator is also planning to set up regulations for virtual asset service providers and has commissioned a feasibility study, which is expected to be released in September.

The FSC released “industry self-discipline” guidelines for virtual asset service providers in September. But questions have been raised as to whether these current rules are sufficient to protect investors.

FSC chairman Huang Tien-mu also said the FSC “does not believe that self-regulation is the ultimate framework for managing the crypto industry”, pointing out the advantage of establishing regulation now on the crypto industry. Huang said proceeding with establishing rules now would mean that references could be made to the scope and depth of such regulation in other markets.

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Taiwanese crypto firms have filed an application to establish an industry association, The Taiwan Virtual Asset Platform and Transaction Business Association, which is expected to be approved in the first quarter.

However, Huang’s term will end in May and he stated that final decisions relating to crypto regulation would be left to the new chairperson.

The FSC also announced that securities and futures brokerages and investment trusts recorded a 51 per cent year-on-year growth for combined pretax profit, from NT$66.1bn in 2022 to NT$99.8bn in 2023, on the back of a local stock market boom.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com.