Financial Authorities Begin Probe into Inflated Trading of Some Samsung Electronics and SK hynix Leveraged ETFs

Signs of Potential Wash Trading by LPs Detected

As Samsung Electronics and SK hynix single-stock leveraged exchange-traded funds (ETFs) showed signs of overheating immediately after their initial listing, financial authorities have begun examining trading activities. This is due to suspicions that, amid competition among asset management firms to capture market share, liquidity providers (LPs) may have artificially inflated trading volumes.

According to the Financial Supervisory Service (FSS) on May 28, the relevant department at the FSS is reviewing related trades involving Samsung Asset Management and others. An FSS official stated, "We are checking for any violations of the law by asset managers and LPs," adding, "It is still early, so it is not the right time to discuss whether a formal investigation will be launched."

On the 28th, dealers are working in the dealing room at the Hana Bank headquarters in Seoul. Photo by Yonhap News

On the previous day, eight domestic asset management companies, including Samsung Asset Management and Mirae Asset Global Investments, simultaneously listed 18 single-stock leveraged and inverse ETF products on the domestic stock market. Among them, 'KODEX SK hynix Single-Stock Leverage' ranked first in trading volume on its debut day.

Meanwhile, as some small- and mid-sized securities firms appeared on both the top buyers and sellers lists, suspicions of wash trading arose within the financial investment industry. There are concerns that, during the process of Yuanta Securities, LS Securities, and SK Securities participating as LPs, trading may have been made to appear more active than the actual investment demand suggested.

LPs play a role in the ETF market by providing bid and ask quotations to facilitate smooth trading. Therefore, simply being listed as both a buyer and a seller is not illegal in itself. However, if the same entity repeatedly places buy and sell orders to boost trading volume, it could spark controversy over wash trading. Wash trading refers to a market-disrupting activity in which the same investor simultaneously buys and sells to artificially inflate trading volumes.

Samsung Asset Management has denied these allegations. A company representative stated, "The system makes it impossible for LPs to engage in wash trading," adding, "It is fundamentally not possible."

This content was produced with the assistance of AI translation services.