President Lee Jae-myung Orders Measures on Leveraged ETFs

President Lee Jae-myng has instructed financial authorities to devise measures against 'leveraged ETFs' that are rattling the Korean stock market. 'Leveraged ETFs' are products that rise more than the underlying stock when prices go up, and fall more than them when prices go down, leading to growing concerns that they are destabilizing the entire market. Approximately one-third of the total KOSPI trading volume was attributed to 16 single-stock leveraged ETF products that bet on Samsung Electronics and SK Hynix. It has been reported that the frequency of sidecar activations has increased significantly since these products were listed.

Domestic experts also point to leveraged products as the cause of the sharp volatility in the Korean stock market. Lee Jin-woo, head of the Meritz Securities Research Center, diagnosed that a pattern of increasing volatility is repeating even without special issues in the market. He added that the volatility of semiconductor stocks themselves has expanded globally due to the artificial intelligence craze.

Financial Supervisory Service (FSS) Governor Lee Chan-jin recently remarked at a meeting that it does not seem a clear answer will emerge. Previously, he had stated that they should have blocked it "even if they had to lie down to do so."

President Lee Jae-myng ordered the swift preparation of measures during a policy briefing. In response, FSS Governor Lee Chan-jin replied that he would gladly accept the instruction as he has a responsibility as the market manager. The Financial Investment Association is understood to be discussing self-regulatory measures with securities firms, centered on raising the current deposit requirement threshold of 1 million won.