"Exchange-traded fund (ETF)" refers to a fund which tracks, simulates, or replicates the performance of an index and is traded on a securities exchange market, with subscription and redemption of ETF units carried out through physical delivery or by the method prescribed in the trust agreement.
The component securities of the subject index of the preceding paragraph include stocks, bonds, and other securities approved by the FSC.
The subject index of paragraph 1 shall meet the conditions given in Article 32, paragraph 2.
An ETF may be linked to a single offshore ETF that complies with the requirements of Article 26 of the Regulations Governing Offshore Funds.
If any event in Article 12, paragraph 6 of the Regulations Governing Offshore Funds occurs with respect to a single offshore ETF that is linked to by an ETF as described in the preceding paragraph, the SITE shall, after receiving notice of a meeting of beneficial owners issued by the offshore fund entity or any other relevant notice, report to the FSC for approval, and make a public announcement within 3 days from the date of occurrence of the event.

A SITE offering an ETF that tracks, simulates, or replicates a multiple of the performance of an index ("leveraged ETF") or a multiple of the inverse performance of an index ("inverse ETF") shall comply with the following provisions in addition to these Regulations and the securities investment trust contract:
1.The name of a leveraged or inverse ETF shall clearly indicate the multiple of the daily performance or inverse performance of the underlying index that is being tracked, simulated, or replicated
2.To meet investment strategy needs, the total amount invested by a leveraged or inverse ETF in beneficial certificates of other funds need not be restricted by the main provision of Article 10, paragraph 1, subparagraph 11, provided that the amount may not exceed 30 percent of the total net asset value of the leveraged or inverse ETF.

In addition to compliance with Article 2, paragraph 1 herein, the trust agreement for an ETF offered by a SITE shall additionally set forth essential matters relating to its trading on a securities exchange market, the method of subscription and redemption, the index licensing agreement, and the participant agreement, provided that the essential matters relating to the index licensing agreement may be omitted in the case of an ETF that complies with Article 37, paragraph 4.
A SITE offering an ETF need not set forth the total face value, total number of beneficiary units, or whether there will be additional future issues.

Given compliance with the following provisions, a SITE investing an ETF may borrow domestic securities and provide fund assets as collateral without regard for the restrictions of Article 10, paragraph 1, subparagraph 2 herein:
1.Only when the purpose of borrowing securities, as set forth in the ETF trust agreement, is to meet an insufficiency in the fund shareholdings needed for physical delivery in redemptions.
2.The total value of securities borrowed by an ETF may not exceed ten percent of the net asset value of the fund.
A SITE borrowing domestic securities against fund assets shall do so in accordance with the applicable TWSE and GTSM regulations.

When an ETF under SITE management borrows securities, the SITE shall draft measures governing risk monitoring and management in securities borrowing as a part of its internal control system and submit those measures to the board of directors for passage.

The provisions of Articles 33-35 shall apply mutatis mutandis to ETFs.