SFC and Taiwan FSC sign deal to facilitate cross listing of ETFs

The Securities and Futures Commission (SFC) and the Taiwan Financial Supervisory Commission (FSC) have today signed and exchanged a Side Letter to a bilateral Memorandum of Understanding (MOU) which will facilitate cross listing of exchange-traded funds (ETF) in the two markets (Notes 1 and 2).

Under the terms of the Side Letter, ETFs listed on the Hong Kong or Taiwan stock exchange and managed by asset managers licensed respectively by the SFC or the FSC will be mutually recognised in each other’s jurisdiction for the purpose of cross listings and offerings (Note 3). The MOU was entered into by the two financial regulators in 1996.

The Side Letter will also strengthen regulatory co-operation between the SFC and the FSC, in particular arrangements relating to information sharing and confidentiality regarding management of ETFs.

“This Side Letter marks a milestone in the regulatory co-operation with our Taiwan counterpart since the signing of the MOU. This is a major step forward to consolidate Hong Kong’s position as a preferred ETF platform with exposure to markets in Hong Kong, the Mainland and Taiwan. The fund management industry will benefit not only from the diversified product markets, but also increased investment flows resulting from the new measure,” said Mr Eddy Fong, the SFC’s Chairman.

“I am greatly honoured to represent the Financial Supervisory Commission in signing this Side Letter with Mr Fong, Chairman of the Securities and Futures Commission of Hong Kong, under the framework of the MOU signed by the two sides in 1996. The signing of the Side Letter will facilitate cross offerings of ETFs listed on the exchange in Taiwan and in Hong Kong, marking a milestone in our bilateral ties. I am confident that the Side Letter will facilitate our financial co-operation in future, and will help cement stronger ties between Taiwan and Hong Kong,” said Mr Sean C Chen, the FSC’s Chairman.

Welcoming the exchange of the Side Letter, the Financial Secretary, Mr John C Tsang said, “The Government attaches great importance to the co-operation between Hong Kong and Taiwan in the financial services sector. We look forward to the listing of Hong Kong / Taiwan ETFs in each other’s stock exchange as soon as possible, so that market participants from both sides could benefit from a more diversified market.”

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Notes :

1. Under the arrangement, Taiwan ETF operators, such as investment managers and custodians, and the acceptability of indices which the ETFs seek to track will be considered having complied with the relevant requirements under the SFC’s Code on Unit Trusts and Mutual Funds.
2. Similarly, SFC-licensed investment managers, trustees/custodians and the underlying indices of Hong Kong ETFs will be recognised by the FSC.
3. At the signing of the Side Letter, 16 ETFs listed in Hong Kong and 11 ETFs listed in Taiwan are qualified to cross list in the other jurisdiction.