如何監管單股槓桿ETF？週四，全市場都盯著韓國政府這場會

Original Author: Long Yue

Original Source: Wall Street CN

A financial product launched just one and a half months ago has put South Korea's top economic decision-making bodies on emergency alert.

South Korea's "F4" high-level coordination mechanism will hold a meeting this Thursday to discuss response plans regarding the impact of single-stock leveraged ETFs on the stock market. This is the first time this issue has officially entered the highest-level economic coordination platform, involving the Ministry of Economy and Finance, the Financial Services Commission, the Bank of Korea, and the Financial Supervisory Service.

The trigger for the incident is clear: The KOSPI index plummeted over 8% on a single day this Monday, triggering its seventh circuit breaker of the year, with market blame squarely placed on single-stock leveraged ETFs. These products amplify the daily price movements of individual stocks, accelerating price deviations during periods of sharp volatility, creating a magnifying effect where they "fuel rallies on the way up and exacerbate declines on the way down." Single-stock leveraged products were officially launched on May 27, allowing investors to place 2x bets on the price movements of Samsung Electronics and SK Hynix. The returns of these products are tied to a multiple of the daily price change of the underlying asset. To match these returns, the underlying assets must be bought or sold daily, further amplifying market volatility.

Prior to Thursday's meeting, South Korean securities firms and asset management companies have planned to hold an industry meeting on Tuesday to discuss leveraged ETF issues and overall market conditions, providing a preliminary assessment ahead of the government meeting.

Regulatory Language Escalates, "Regret" is Uttered, an Exceedingly Rare Move

The regulator's stance has shifted from "concern" to "self-reprimand," even directly acknowledging a structural dilemma.

On July 13, Financial Supervisory Service Governor Lee Bok-hyun chaired a closed-door meeting at the Yeouido Financial Investment Association, attended by representatives from 20 asset management companies. During the meeting, he admitted, "There are structural issues, so it's unlikely we can provide a clear answer." He further stated, "Under the current circumstances, this problem cannot be resolved in one go; it requires continuous monitoring, revision, and improvement." This reflects the deep-seated predicament faced by financial authorities in proposing concrete solutions.

Regarding the so-called "structural issues," Lee did not elaborate. External interpretations generally point to two main factors: First, individual investors have net purchased nearly 10 trillion Korean won in these products, making forced liquidation nearly impossible. Second, these products were launched only after joint revisions to enforcement decrees by the Presidential Office, the Financial Services Commission, and the Korea Exchange; forced delisting would undermine the legal credibility of the relevant regulations.

He also stated, "This does not seem to be an area where a single person can make the final decision. The authorities (Financial Services Commission) may also need to conduct extensive deliberation. We (the Financial Supervisory Service) will do our best, but for now, we are in a position to accept criticism. Asset management companies should candidly share their practical demands and suggestions regarding the system, which will serve as important references for policy decisions."

During a regular press conference on the 22nd of last month, Financial Supervisory Service Governor Lee Bok-hyun stated bluntly: "I regret not having fought harder to prevent the launch of single-stock leveraged ETFs." This choice of words is exceptionally rare in the context of South Korean financial regulation. However, the very next day after his statement, the KOSPI index crashed 10%. From the 22nd of last month to the 13th of this month, the KOSPI index has accumulated a decline of over 25%.

Earlier this month, he further stated that regulators are "seriously reviewing the unintended consequences that have emerged since the launch of these products."

South Korean Deputy Prime Minister and Minister of Economy and Finance, Koo Yun-cheol, also expressed at a National Assembly meeting last week, "Given the numerous issues raised by various parties, we are currently negotiating plans for remediation and minimizing related problems."

Presidential Office Policy Chief Kim Yong-beom clearly stated at a press conference that the F4 meeting is currently conducting an in-depth study of the issue of single-stock leveraged ETFs exacerbating market volatility. "If remedial measures are deemed necessary, a decision will be made at the F4 market condition review meeting."

Three Parallel Paths Underway: Raising Margin Requirements, Imposing Price Limits, Adjusting Leverage Ratio Caps

Prior to Thursday's meeting, regulators have been advancing countermeasure research through several parallel paths.

According to sources from the South Korean financial investment industry, financial authorities have formally requested asset management companies to submit specific improvement suggestions regarding the potential market volatility caused by single-stock leveraged ETFs. The authorities will compile industry opinions before officially launching the formulation of measures.

Possible measures currently under market discussion include three categories: raising margin requirements, limiting daily price fluctuation ranges, and adjusting the upper limit of leverage ratios.

On the 14th, the Financial Services Commission will convene experts from major securities firms and asset management companies to discuss supplementary measures for single-stock leveraged products. Specific proposals include raising the minimum margin requirement (i.e., the threshold for funds investors must pre-deposit into their accounts) and strengthening pre-investment education.

However, regulatory officials have also acknowledged that the aforementioned plans "may only serve as temporary fixes, rather than addressing the structural root causes of market volatility." This implies that even if decisions are made at Thursday's meeting, subsequent policies may still face further adjustments.

Data Confirms the Impact: Circuit Breaker Frequency Reaches Historic Highs

The data comparison of market volatility before and after the launch of single-stock leveraged ETFs is striking. According to statistics from NH Investment & Securities, in the 96 trading days prior to the product launch, the KOSPI index experienced a daily change exceeding 3% on 27% of the days (26 days). In the 33 trading days following the launch up to the 13th, this ratio surged to 52% (17 days). In comparison, the S&P 500 index in the U.S. has yet to see a single day with a 3% daily change so far this year.

Data from the Korea Exchange shows that as of the 13th, the securities market has triggered a "sidecar" (temporary trading halt mechanism, including 17 buy-side triggers and 18 sell-side triggers) 35 times this year. This is significantly higher than the mere 3 times recorded for the entire last year, and has already surpassed the historical record of 26 times set during the 2008 global financial crisis, even before the end of July. The circuit breaker mechanism, which fully halts market trading, has been triggered 7 times this year, exceeding half of the total 13 triggers accumulated since its introduction in 2000.

The Wall Street Journal has also pointed out: "The volatility of the South Korean stock market has been further amplified by leveraged products tied to Samsung Electronics and SK Hynix."

Product Launched for a Month and a Half, Triggers Top-Level Decision-Maker Intervention

It has been approximately one and a half months since single-stock leveraged ETFs were listed in South Korea, and regulatory pressure has rapidly escalated from the level of the Financial Supervisory Service to the highest economic decision-making echelons.

Kim Yong-beom pointed out at the press conference, "These products have been operational for about a month and a half. The F4 will carefully assess their actual impact on the market."

Currently, market expectations for tighter restrictions on this type of product are heating up. Stricter leverage ratios, higher investor entry thresholds, or other structural constraints are all within the scope of discussion. As the market continues to experience intense shocks, external criticism regarding the hasty launch of these products in under five months is also growing louder.

The future direction of policies will depend on the conclusions drawn from the evaluation by the South Korean F4 meeting on Thursday.