The size of single-stock leveraged ETFs in South Korea has already exceeded 10 trillion won, making delisting measures realistically difficult to implement

Odaily reported that Kim Yong-beom, Director of the Presidential Office Policy Room of South Korea, stated today that regarding the single-stock leveraged ETFs that have recently sparked controversy over stock market volatility, the government will study additional improvement measures. However, it is realistically difficult to take delisting measures. The current size of single-stock leveraged ETFs has already exceeded 10 trillion won, with investors already involved in trading. Forcibly delisting them "would itself cause a massive shock to the market," making delisting unrealistic. These products were launched after sufficient discussion and, besides meeting investment demand, also serve the policy purpose of attracting capital that flowed to overseas markets back to the South Korean market; it is not a policy failure.

Kim Yong-beom pointed out that these products have structural risks requiring further optimization, especially the management mechanism of the "deviation rate" between the ETF and the price of the underlying asset. To maintain the target multiple, leveraged ETFs may conduct concentrated trading during periods of rapid market fluctuations, thereby intensifying selling pressure in a short period. Regulators, asset management companies, and securities firms need further discussions on how to reduce the product's impact on the market during specific periods, including whether adjustments should be completed within 30 minutes, whether the adjustment period can be extended, and whether risk management can be conducted using other derivative instruments. (KBS)