The Democratic Party's K-Capital Market Special Committee has decided not to pursue immediate delisting or a reduction in leverage ratios for single stock leverage products, opting instead to first evaluate the effectiveness of the government's announced supplementary measures. However, the committee stated that using the term 'ETF' (exchange-traded fund) for these products is inappropriate and plans to redefine the terminology and promote self-regulation against exaggerated advertising.
On July 27, the K-Capital Market Special Committee held a closed meeting in Yeouido, Seoul, with representatives (CEOs) from major securities and asset management firms to discuss the operational status of single stock leverage products and ways to mitigate market volatility.
Attendees included Committee Chair Oh Gi-hyung, Secretary Kim Nam-keun, and other committee members, along with Hwang Seong-yeop, chairman of the Korea Financial Investment Association, and representatives from Kiwoom, Shinhan Investment, Kyobo Securities, Samsung, Mirae Asset, and KB Asset Management.
The committee has drawn a line against previously considered measures such as reducing the leverage ratio from the current 2x to 1.5x or delisting. After the meeting, Oh told reporters, 'We are not currently considering adjusting the leverage ratio. We will first confirm whether the government's measures have a stabilizing effect on the market before determining the need for additional measures.'
Secretary Kim also stated, 'Discussing immediate delisting could actually undermine market confidence. We are not considering reducing the existing 2x leverage ratio, and there is a common view among asset managers and securities firms that the current measures can sufficiently provide stability.'
The committee and industry representatives expressed optimism that the government's proposed measures, including raising the basic deposit requirement to 30 million won and enhancing investor education, will significantly reduce market volatility when implemented in August.
Kim noted, 'Raising the deposit requirement to 30 million won is expected to reduce the number of accounts from 100,000 to about 10,000 (a tenfold decrease) and daily trading volume by approximately 60%. We will observe the initial effects and consider raising the deposit requirement to 50 million won if necessary.'
Meanwhile, the committee strongly criticized the structural issue of marketing single stock leverage products under the ETF label.
Oh emphasized, 'ETFs are fundamentally designed for diversified investment across multiple stocks, so using the ETF name for single stock leverage products is inappropriate. We need to redefine the terminology to reflect the high-risk nature of these derivative financial products that expose investors to concentrated investment risks.'
He added, 'To protect general investors, we will voluntarily limit excessive advertising and marketing, and we will also reconsider the use of the term ETF. If necessary, we will pursue related regulatory amendments.'
* This article has been translated by AI.
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