Lee Ok-yeon, the chairman of the Financial Services Commission, urged the financial investment industry to swiftly implement measures to address the overheating of single-stock leverage products. He stated that if market conditions do not stabilize, the commission will consider additional regulations, including raising investment requirements and setting individual investment limits.
On July 28, Lee held a meeting with representatives from the Financial Investment Association, major securities firms, asset management companies, the Financial Supervisory Service, the Korea Exchange, and the Capital Market Research Institute to discuss supplementary measures for single-stock leverage products.
Lee indicated that the commission, in collaboration with relevant agencies, will assess the policy effects of the enhanced basic deposit requirements, which will take effect on July 31. He mentioned that if demand does not sufficiently stabilize, they will prepare to consider additional measures, such as periodic re-education, establishing prior investment experience requirements, and limiting investment sizes to a certain percentage of the total investment amount in financial products.
Regarding market operations, he requested the asset management industry to stagger the rebalancing timing of single-stock leverage products. He expressed concerns that concentrating rebalancing just before market close could increase market volatility and urged for a review of advancing the timing to during trading hours.
Lee also called on the securities industry, which performs liquidity provider (LP) duties, to make autonomous efforts to ensure adequate liquidity for single-stock leverage products.
He announced that the commission has temporarily suspended new listings and advertisements related to supplementary measures and will implement the enhanced basic deposit requirement of 'cash 30 million won' starting July 31. Discussions are ongoing to expedite the expansion of the minimum trading unit.
Additionally, the commission plans to strengthen evaluations of pre-education for single-stock leverage products and quickly implement an additional hour of case-based training. Measures to enhance management of price discrepancies are set to take effect on August 19.
Lee explained that single-stock leverage products were introduced to absorb and manage the investment demand of domestic investors, which had been rapidly increasing as similar products were already listed in overseas markets.
Since their launch on May 27, these products have had a moderating effect on investment demand for similar overseas-listed products. However, the timing of their introduction coincided with increased volatility in the semiconductor sector, leading to a faster-than-expected rise in investment demand and heightened concerns about stock price volatility, prompting the announcement of supplementary measures on July 16.
Representatives from securities firms and asset management companies attending the meeting expressed their agreement with the government's need for market stability and committed to swiftly implementing the supplementary measures for single-stock leverage products. They also stated they would autonomously review and promote measures for staggered rebalancing and adequate liquidity supply to help restore trust in the capital market.
The financial authorities plan to promptly implement supplementary measures, including the enhanced basic deposit requirement, on July 31, while continuously monitoring market conditions and gathering opinions from experts and investors to consider further measures.
* This article has been translated by AI.
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