Hua Nan seeks custody for exotic Taiwan ETFs

27 August 2014   Category: News, Asia, Global, Japan, Korea, Taiwan, USA, Europe   By Hui Ching-hoo

Taiwan’s Hua Nan Bank is looking to team up with local ETF sponsors as the custodian bank for the imminent launch of leveraged inverse ETFs, according to a report from Commercial Times

The Taiwan Stock Exchange and the Financial Supervisory Commission are striving to promote alternative ETFs as part of their aim to boost trading volumes from the current 1% of daily turnover to 5% in two-to-three years.

ETF giant Yuanta Securities Investment Trust Co has submitted its application to regulators to roll out the first leveraged inverse ETF by the end of this year. 

The island’s regulatory watchdog has recently amended the ‘Regulations Governing Securities Trust Funds’ to incorporate exchange-traded futures trust funds in order to formalise exotic ETFs, including leveraged inverse products.

A Hua Nan Bank spokesperson told local media that it is in talks with ETF sponsors. He explained that the growth of domestic mutual funds has been tapering off since the global financial crisis, and that this has eroded at its custodian fee income. The bank, therefore, will seek to raise its exposure to innovative financial products.   

The development of alternative ETFs in Taiwan has lagged behind the US, Europe and individual Asian countries, such as Korea and Japan. According to data from Boost, there were a total of 835 leveraged and inverse ETFs issued worldwide by the end of 2013. Their total AUM was more than US$54.8 billion, an increase of 22% from the previous year.