Taiwan's Financial Supervisory Commission now welcomes the trading of exotic ETFs.

The Financial Supervisory Commission of Taiwan, the country's financial regulatory agency, has opened up opportunities for asset managers to launch exotic exchange traded funds, in response to the growing demand for alternative asset classes.

Exotic ETFs refer to leveraged and inverse ETF products. Leveraged ETFs are designed to follow the daily changes in an index, while inverse ETFs are made to perform as the inverse of whatever benchmark they track. 

According to the FSC, by introducing new types of ETFs, alongside commodity-based funds, the country's ETF market becomes more comprehensive. The Taiwan Stock Exchange also expects this move to boost the trading volume from the current one per cent total turnover to five per cent in two to three years. 

The regulator has been steadily opening up its local financial markets to new investment opportunities in the past year, as it seeks to become more globally competitive. In 2013, the FSC broadened the scope of the RMB derivatives business to include more domestic designated banking units to promote the offshore RMB market locally.