South Korea’s single-stock leveraged ETF market has exceeded 10 trillion won, making delisting measures difficult to implement

Odaily Planet Daily News: Kim Yong-beom, Chief of Policy Room at the Presidential Office of South Korea, stated today that in response to the single-stock leveraged ETFs which have recently sparked controversy over stock market volatility, the government will study additional supplementary measures, but realistically, implementing delisting measures is difficult. The current size of single-stock leveraged ETFs has exceeded 10 trillion won, and investors have already participated in trading. Forced delisting "would itself cause a huge shock to the market," making it impractical. These products were launched after thorough discussion, serving not only to meet investment demand but also the policy objective of attracting funds that had flowed to overseas markets back to the South Korean market, representing no policy failure.

Kim Yong-beom pointed out that these products carry structural risks requiring further optimization, particularly the management mechanism of the "deviation rate" between the ETF and the underlying asset price. To maintain the target multiple, leveraged ETFs may concentrate trading during periods of rapid market fluctuations, thereby intensifying short-term selling pressure. Regulators, asset management companies, and securities firms need further discussions on how to mitigate the impact of these products on the market during specific periods, including whether to limit the adjustment period to 30 minutes, whether to extend the adjustment time, and whether risk management can be conducted through other derivatives methods. (KBS)