The financial investment industry discussed investor protection measures to respond to overheated investment in single-stock leveraged exchange-traded funds (ETFs). Proposals included raising the basic deposit to curb excessive leveraged investment and spreading out liquidity providers' (LPs) rebalancing transactions, which tend to concentrate right before the close, to minimize market impact.
On the 14th, the Korea Financial Investment Association convened the heads of 10 securities firms, including Daishin Securities, Samsung Securities, and Mirae Asset Securities, to review conditions in the single-stock leveraged ETF market and discuss ways to strengthen investor protection.
At the meeting, various measures to prevent overheated investment were discussed. The industry agreed to strengthen investor-specific risk warnings and improve investor education. It also decided to review investor protection mechanisms such as raising the basic deposit to prevent excessive leveraged investment. They also agreed to provide accurate investment information regarding false or exaggerated advertising about products and the market.
In addition, considering that rebalancing transactions may cluster at the closing price and amplify market volatility, participants discussed ways to strengthen LPs' market-stabilizing functions and to disperse the timing of transactions to minimize the impact on the underlying asset market.
The Korea Financial Investment Association and the securities industry will continue to monitor transaction trends and investment behavior in single-stock leveraged ETFs and will actively cooperate if the government takes additional action.
Korea Financial Investment Association Chairman Hwang Seong-yeop said, "Single-stock leveraged products can be a useful tool that broadens investors' choices, but the industry's role in protecting investors is just as important," and added, "We will strengthen each firm's investor protection efforts and improve the system to create a market environment investors can trust."