Korean government official: The size of leveraged ETFs on a single stock has already exceeded 10 trillion won, making it difficult to take delisting measures

Deep Tide TechFlow news: On July 19, according to South Korean media outlet KBS, Kim Yong-beom, head of the policy office at the Office of the President of South Korea, said in an interview with KBS TV today that, regarding a single-stock leveraged ETF that has recently sparked controversy due to market volatility, the government will study additional and further improved measures. However, in reality, it is difficult to implement delisting measures, in practice. At present, the size of single-stock leveraged ETFs has already exceeded 10 trillion won, and investors are already participating in trading. If such ETFs were forcibly delisted, “by itself it would cause a huge shock to the market,” so delisting is not realistic. These products were launched after thorough discussion, and besides meeting investment needs, they also have a policy objective of attracting funds from overseas to return to the Korean market; they are not a policy mistake.

Kim Yong-beom noted that such products have structural risks and still need further optimization, especially with regard to the “deviation rate” management mechanism between an ETF and the price of its underlying assets. To maintain the target multiple, leveraged ETFs may concentrate trading during periods of rapid market fluctuations, which can increase selling pressure in the short term. Regulators, asset management companies, and securities firms need to further discuss how to reduce the impact these products may have on the market during specific periods, including whether adjustments need to be completed within 30 minutes, whether the adjustment time can be extended, and whether risk can be managed through other derivatives.