Active ETF
About Active ETF
An Active ETF is a fund traded on the securities market and managed by a securities investment trust company based on a specific investment strategy, where active analysis is used to make decisions.
Underlying Securities
- Under current regulations, a TPEx-listed active ETF can be either an active equity ETF or an active bond ETF.
- The security code of an Active Equity ETF ends with the letter 'A', while the security code of an Active Bond ETF ends with the letter 'D'.
Information Disclosure
- The actual portfolio holdings of a TPEx-listed active ETF must be disclosed daily on the website of the securities investment trust firm (fully transparent ETF).
- The fund name of an active ETF must include the term 'active.'
- Details regarding the characteristics and reference benchmarks (if applicable) of an active ETF must be fully disclosed in the prospectus.
Trading Mechanisms
- The trading mechanisms of an active ETF and a passive ETF are basically the same. Investors can buy and sell ETF in both primary and secondary markets. In the primary market, investors can buy ETF at the issue price from distributors (banks or securities firms) or directly from the ETF issuers (securities investment trust firms) at the time of ETF issuance. After the ETF is listed, the investor can also buy or sell the ETF in large amounts from or to the ETF issuers through the participating dealers. Investors can also buy or sell ETF in the secondary market.
- ETF trading in the secondary market is similar to the stock trading system that many investors are familiar with, except that daily price fluctuation limit and tick size of ETF and stocks are slightly different.
- To increase liquidity in the secondary market, ETF is designed with a liquidity provider system. For each ETF, there must be liquidity providers that give quotes during trading hours. Liquidity providers are required to maintain the quality and efficiency of quotation that will facilitate fast and effective execution of orders placed by investors.
- Secondary Market Trading Mechanisms:
| Trading method | Through the stock brokerage account, the same as stock trading. |
|---|---|
| Trading hours | 9:00 AM - 1:30 PM, the same as stock trading. |
| Trading unit | The board lot for trading ETFs consists of 1,000 beneficial units; however, odd-lot trading is also permitted, the same as stock trading. |
| Margin trading and day trade | Margin trading and day trading are permitted for ETFs after they are listed, the same as stock trading. |
| Fees (commission) | Set by the securities brokers but capped at 0.1425%, the same as stock trading. |
| Securities transactions tax rate | 0.1% of the transaction price (levied on the sale side), which is less than the tax rate of trading stocks |
| Daily price fluctuation limit |
ETF comprising only domestic securities - 10%; ETF comprising foreign securities - no upside/downside limit. |
| Tick size | The tick size for trading ETFs is NT$0.01 for market prices below NT$50 and NT$0.05 for market prices of NT$50 or higher, both of which are smaller than the tick sizes for stocks. |
| RP/RS trade | RP/RS trading of bond ETFs is allowed for over-the-counter transactions. |
| Liquidity provider | A liquidity provider mechanism has been established to ensure market liquidity. |
| Creation/redemption system | Investors can create and redeem ETFs through participating dealers. |
| Over-the-counter (OTC) transactions | TPEx-listed ETF are allowed to be traded over-the-counter (OTC). |