The Financial Supervisory Service required major domestic asset management firms to submit materials related to exchange-traded funds (ETFs). This is interpreted as a move to examine the actual conditions in light of recent incidents and cutthroat competition in the asset management industry.
According to the asset management industry on the 15th, the FSS recently requested major domestic asset managers to provide details about synthetic ETF swap collaterals, stock lending transaction records, ETF setting and redemption details, and ETF premium disclosure records.
The FSS is expected to examine the appropriateness of collateral assets provided to investors and the credit risk levels based on the collaterals for synthetic ETFs. It may also review the setting practices among liquidity providers (LP) at securities firms that supply liquidity to the fund. Concerns have been raised that asset management firms are pressuring LPs to set ETFs due to competition for entrusted assets or limiting participation in specific ETFs if they refuse.
The FSS's request for this data seems to be a response to the repeated noise in the ETF market. Recently, there was an instance where the intraday real-time net asset value (iNAV) of an ETF was incorrectly estimated at a higher value than its actual worth. When iNAV is overvalued, investors end up purchasing the ETF at a price higher than its actual value. There have also been controversies surrounding the cutthroat competition for reducing fees among major asset management firms and discussions regarding Mirae Asset Global Investments' reduction in dividend payments.
The FSS has sent several warnings to the asset management industry. Lee Bok-hyun, the head of the FSS, mentioned product management and the review of management systems during the 'CEO meeting of asset management firms' on the 10th, stating, "Errors are repeatedly occurring in fund price calculation, which is fundamental to management, and this undermines investor trust from the very foundation."