The Taiwan Monthly
Market & ETP Overview
TWSE ready to list Active ETFs and Passive Multi-Asset ETFs : A new milestone for Taiwan's ETF market
In order to promote the diversification of financial market products and create an Asian asset management center with Taiwanese characteristics, the Financial Supervisory Commission (FSC) announced revisions to several related regulations on December 25, 2024. These revisions allow actively managed exchange-traded funds (active ETFs) and to relax the criteria for passive ETFs to include both stocks and bonds in their benchmark indices (passive multi-asset ETFs). This initiative will further enrich Taiwan's ETF market, meet diverse investor needs, and attract participation from international asset management institutions.
Active ETFs – Innovation and Diversity
Active ETFs are managed by fund managers who actively construct and adjust portfolios based on investment objectives and strategies, breaking through the limitations of traditional passive ETFs that merely track index performance. Key features include:
l Transparency: Fully transparent (the actual investment portfolio disclosed on the security investment trust company's website every business day after the net asset value, NAV, is calculated).
l Flexibility: There is no mandatory requirement for a specific benchmark, offering greater strategic flexibility.
l Product Identification: Equity active ETFs will have "A" as the sixth code in the ticker, while bond active ETFs will use "D."
Passive Multi-Asset ETFs – Balanced Allocation to Meet Investor Needs
Passive multi-asset ETFs are traditional passive ETFs that track indices composed of both stocks and bonds, providing investors with diversified asset allocation. Key characteristics include:
l Balanced Allocation: Index rules must specify a fixed allocation ratio of stocks to bonds or set criteria with applicable ratios under each condition.
l Product Identification: The sixth code in the ticker will be "T."
Policy Implementation to Drive Market Growth
In line with the policy revisions, the Taiwan Stock Exchange (TWSE) has adjusted relevant regulations, including the "Operating Rules," "Rules Governing Review of Securities Listings" and the "Rules Governing Trading of Beneficiary Certificates." These updates were announced on December 31, 2024, and were effective immediately.
The TWSE stated that the introduction of active ETFs and passive multi-asset ETFs will not only enhance the depth and breadth of Taiwan's ETF market but also attract international asset management firms, fostering the internationalization of Taiwan’s capital market. Furthermore, the TWSE will promote investor education through various outreach activities to raise awareness and acceptance of these new ETF products, supporting industry efforts to launch new products and driving Taiwan towards becoming an Asian asset management center.
The TWSE reminds investors that ETFs do not guarantee profits or dividends and investors should carefully assess the associated risks by thoroughly reviewing the prospectus before investing. The TWSE will continue to provide updated information through the ETF section on its official website, the ETFortune platform and official Facebook page.