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South Korea to expand single-stock leverage ETF trading units to 20 shares
South Korean financial authorities are preparing to expand the minimum trading unit for single-stock leverage ETFs from one share to 20 shares to curb market overheating. The Financial Services Commission is expected to announce detailed implementation plans next month.
To protect investors currently holding between one and 19 shares, regulators are considering allowing these odd lots to be sold through after-hours closing price trading for a specific period. This measure aims to provide an exit strategy before the new 20-share minimum becomes mandatory.
Market data indicates that the volatility associated with these products has already begun to subside. The combined market capitalization of 16 such ETF products, which peaked at 16.5 trillion won in late June, has recently fallen to between 6 and 7 trillion won. Similarly, the KOSPI 200 volatility index (VKOSPI) dropped significantly from a June peak of 96.9% to 41.0% in early August.
During a recent National Assembly audit, lawmakers criticized the impact of these ETFs, with some alleging they caused approximately 54 trillion won in losses to individual investors. While the 20-share rule is pending, other measures such as increasing the mandatory cash deposit to 30 million won have already been implemented.
Entities
Bae Jun-young · Financial Services Commission · KOSPI 200 · National Assembly · South Korea
Claims
What the coverage asserts, and how many sources carry each claim.
- [○ 1 SOURCE] The basic deposit requirement for single-stock leverage products was increased from 10 million won to 30 million won in cash.
- [○ 1 SOURCE] Single-stock leverage ETFs caused approximately 54 trillion won in losses to individual investors due to amplified volatility. www.sportalkorea.com
- [● 2 SOURCES] The combined market capitalization of 16 single-stock leverage ETF products peaked at 16.5 trillion won on June 25.
- [● 2 SOURCES] Authorities are considering allowing investors holding fewer than 20 shares to sell those odd lots through after-hours closing price trading for a limited period.
- [● 2 SOURCES] The Financial Services Commission will announce detailed plans next month regarding the expansion of trading units for single-stock leverage ETFs to 20 shares.
- [● 2 SOURCES] The KOSPI 200 volatility index (VKOSPI) dropped from a peak of 96.9% on June 29 to 41.0% by early August.