South Korea's Financial Services Commission Urges Diversification of Single-Stock Leveraged ETF Rebalancing Trades Across the Entire Trading Day

According to Yonhap News Agency, Financial Services Commission Chairman Lee Eog-weon urged asset management companies on Tuesday to diversify the rebalancing trades of single-stock leveraged ETFs across the entire trading day to curb extreme price volatility caused by a concentration of large orders before the market close. Fund management firms typically concentrate most of their rebalancing operations between 3:20 PM and 3:30 PM local time to achieve the investment goal of doubling the daily return of the underlying stock. If these trades are concentrated just before the close, they could accelerate upward trends and deepen downturns. Lee Eog-weon stated, "There are market concerns that concentrated rebalancing operations before the close amplify market volatility. The timing of trades needs to be diversified." He also pointed out that some products involve over 20 liquidity providers, leading to excessive turnover rates, increased trading among themselves, and expanded arbitrage activities.