The Financial Services Commission is considering allowing after-hours trading of single-stock leveraged exchange-traded funds (ETFs) in units of 20 shares, enabling investors holding fewer than 20 shares to sell their positions.
According to the Financial Services Commission on October 5, the agency plans to announce details next month regarding the expansion of trading units for single-stock leveraged ETFs.
In July, the commission announced measures to strengthen investment requirements for single-stock leveraged ETFs, deciding to increase the trading unit to 20 shares.
Currently, single-stock leveraged ETFs are issued and traded at prices similar to the typical issuance price of 10,000 to 20,000 won, allowing investment at lower prices than the underlying assets, such as Samsung Electronics and SK Hynix.
The authorities believe this structure has encouraged small-scale and short-term trading, leading to market overheating.
However, increasing the trading unit to 20 shares could create difficulties for investors holding fewer than 20 shares in disposing of their holdings.
To address this issue, the authorities are considering allowing exceptions for selling shares in units of less than 20 through after-hours trading at the closing price for a limited period.
Specifically, investors holding 1 to 19 shares would be able to sell their holdings at the day's closing price during after-hours trading from 3:40 PM to 4:00 PM, as they would not be able to sell during regular trading hours from 9:00 AM to 3:30 PM.
However, after-hours trading would only allow transactions at a single price, which may impose restrictions on investors.
As a result, the authorities are also considering a grace period of several months before implementing the expanded trading unit to minimize investor inconvenience and adequately inform them of the changes.
Once the period for resolving fractional shares through after-hours trading concludes, it is expected that individual requests for fractional share purchases will be handled by brokerage firms.
Meanwhile, following the announcement of supplementary measures for single-stock leveraged ETFs in July, the related market has shown signs of stabilization.
The combined market capitalization of 16 single-stock leveraged ETFs surged from 4.4 trillion won on their listing date, May 27, to 16.5 trillion won by June 25, but has recently decreased to between 6 trillion and 7 trillion won.
Trading volume also increased to 19.4 trillion won by the end of June but has since dropped to between 500 billion and 800 billion won.
As the overheating of single-stock leveraged ETFs has calmed, market volatility has decreased.
The KOSPI 200 Volatility Index (VKOSPI) soared to 96.9% on June 29, a period of extreme volatility, but fell to 41.0% as of October 2.
This year, circuit breakers have been triggered nine times, and sidecars have been activated 49 times in the securities market, but there have been no additional activations since July 29 for circuit breakers and August 20 for sidecars.
As the KOSPI reclaimed the 7,000 mark on October 2, interest has recently spread to mid- and small-cap stocks, alleviating the concentration on Samsung Electronics and SK Hynix.
The market capitalization share of these two stocks decreased from 57.1% at the end of June to 50.8% at the end of last month.
* This article has been translated by AI.
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