Korea's Financial Services Commission Urges Diversification of Single-Stock Leveraged ETF Rebalancing Across Full Trading Day

Odaily reported that, according to Yonhap News, Financial Services Commission Chairman Lee Eog-weon on Tuesday urged asset management companies to diversify their rebalancing trades for single-stock leveraged ETFs across the entire trading day, in order to curb severe price volatility caused by a concentration of large orders at the close. Fund management firms typically conduct most of their rebalancing operations between 3:20 PM and 3:30 PM local time to achieve an investment goal of double the daily return of the underlying stock. If these trades are concentrated just before the market closes, it could accelerate upward momentum and deepen downturns. Lee Eog-weon stated, "There are concerns that concentrating rebalancing operations just before market close could amplify market volatility. The timing of trades needs to be diversified." He also noted that some products involve over 20 liquidity providers, leading to excessive turnover, increased trading among themselves, and expanded arbitrage activities.