TechFlow news, July 19, according to Korean media KBS, Kim Yong-beom, Chief of the Policy Office at the South Korean Presidential Office, stated in an interview with KBS TV today that regarding the single-stock leveraged ETFs that have recently sparked controversy over stock market volatility, the government will study additional improvement measures, but realistically it is difficult to take delisting measures. Currently, the scale of single-stock leveraged ETFs has exceeded 10 trillion Korean won, and investors are already participating in trading. If delisting is forced, it "will itself cause a huge shock to the market," therefore delisting is not realistic. These products were launched after full discussion previously. Besides meeting investment demands, there is also a policy purpose of attracting funds flowing to overseas markets back to the Korean market, so it is not a policy mistake.
Kim Yong-beom pointed out that these products possess structural risks and still require further optimization, especially the "deviation rate" management mechanism between the ETF and the underlying asset price. Leveraged ETFs may conduct concentrated trading during periods of rapid market volatility to maintain the target multiple, thereby leading to increased selling pressure in a short time. Regulatory agencies, asset management companies, and securities companies need to further discuss how to reduce the impact of products on the market during specific periods, including whether to limit adjustments to be completed within 30 minutes, whether adjustment time can be extended, and whether risk management can be conducted through other derivative methods, etc.
