South Korea's Single-Stock Leveraged ETF Scale Surpasses 10 Trillion KRW, Making Withdrawal Measures Unfeasible

Odaily News Kim Yong-beom, head of the policy office at the South Korean presidential office, stated today that regarding the single-stock leveraged ETFs that have recently sparked controversy over stock market volatility, the government will study and implement additional improvement measures. However, it is realistically difficult to take delisting measures. Currently, the scale of single-stock leveraged ETFs has exceeded 10 trillion KRW, and investors have already participated in trading. Forcible delisting "would itself cause a massive shock to the market," making it impractical. Such products were launched after thorough discussion, serving not only to meet investment demand but also to attract capital that had flowed to overseas markets back to the Korean market—a policy objective, not a policy failure.

Kim Yong-beom pointed out that these products carry structural risks and still require further optimization, particularly the management mechanism for the "deviation rate" between the ETF price and the underlying asset price. To maintain the target leverage multiple, leveraged ETFs may concentrate trading during periods of rapid market fluctuations, thereby intensifying selling pressure in a short time. Regulators, asset management firms, and securities companies need further discussion on how to mitigate the market impact of such products during specific periods. This includes debating whether adjustments should be completed within 30 minutes, whether the adjustment period can be extended, and whether risk management could employ other derivatives. (KBS)