Despite various challenges, Asian ETF exchanges are promoting ETF markets, according to panellists from the Tokyo Stock Exchange, Singapore Exchange and Taiwan Stock Exchange at The Asset 4th ETF Asia Summit in Taipei, 27 June 2018.

In Japan most ETF trading activity centres on the top 20 players by assets under management (AUM), prompting liquidity issues. "We have engaged market participants at the Tokyo Stock Exchange to use a market maker scheme, due in July 2018. Our exchange has been working with regional and online brokers," says Mark Lee, chief representative, Hong Kong office, Tokyo Stock Exchange.

In Taiwan, as demand from domestic ETF investors evolves, new asset classes such as fixed income ETFs are enjoying increasing demand from institutional investors like insurance companies. While fixed income ETFs only account for 25% of total AUM, the proportion has been expanding since inception. "Last year the Taiwan government exempted securities transaction tax on fixed-income ETFs," says Pony Huang, senior vice-president, corporate planning and strategy department, Taiwan Stock Exchange. "Tax-exception matters to both investors and issuers."

Taiwan has introduced inverse/leveraged ETFs, encouraging other stock exchanges to promote new types of ETFs. "We learned a lot from inverse/leveraged ETFs in Taiwan. This helped in our discussions with regulators," says Bella Chiu, director, sales and client, Singapore Exchange. "Investors now have more bargaining power. The driving force is investor demand, and investors want international products."

ETF exchanges plan to collaborate more. "The Taiwan Stock Exchange wants to share its experience about ETFs with institutional investors," says Huang. "I think that exchanges should join forces to harness the opportunities of ETFs," adds Chiu.