FSS Chief Lee Chan-jin Reviews Status of Single-Stock Leveraged ETFs

Lee Chan-jin, head of the Financial Supervisory Service (FSS), will hold a meeting with the CEOs of asset management companies to review the status of single-stock leveraged Exchange Traded Funds (ETFs), which have garnered significant interest from individual investors, and to discuss countermeasures.

Leveraged ETFs that invest solely in specific stocks like 'Samsung Electronics' and 'SK Hynix' are favored by investors seeking high short-term returns. However, according to the Korea Exchange, they have recorded a high average daily trading turnover of 122.5%, leading to criticism that this has primarily boosted commission revenue for securities firms.

FSS Governor Lee Chan-jin expressed regret over not being able to block the introduction of such products and emphasized the need for additional safeguards and consumer protection measures.

On June 24, the FSS held a meeting with risk management executives from major securities firms, urging them to refrain from practices that encourage margin trading and to establish measures for investor protection.

Currently, the FSS is reviewing measures to raise entry barriers, such as increasing the basic deposit requirement and strengthening investor education.

As the high turnover and volatility of single-stock leveraged ETFs are identified as a cause of volatility in the domestic stock market, the FSS is moving to strengthen its management.