Amid Volatility from Samsung and SK Hynix Leveraged ETFs, Securities Industry to Raise Minimum Deposits

Emergency Meeting of Korea Financial Investment Association and CEOs of Ten Securities Firms
Discussion on Voluntary Investor Protection Measures

Amid growing concerns over investor losses and market volatility surrounding single-stock leveraged Exchange-Traded Funds (ETFs) for Samsung Electronics and SK hynix, the securities industry has decided to implement voluntary investor protection measures, including raising the minimum required deposit.

Hwang Sungyeop, Chairman of the Korea Financial Investment Association, is speaking at an emergency meeting of securities firms held at the Korea Financial Investment Association in Yeouido, Seoul on the 14th. Photo by Yonhap News

The Korea Financial Investment Association and CEOs of ten major securities firms held an emergency meeting on July 14 at the Korea Financial Investment Center in Yeouido, Yeongdeungpo-gu, Seoul, to discuss the market conditions of single-stock leveraged ETFs and investor protection measures. The participants acknowledged that while single-stock leveraged ETFs expand investor choices and increase product diversity, their "leverage effect" amplifies losses with only a small investment, leading to potentially large losses within a short period and even causing losses during sideways markets.

To prevent excessive leveraged investment, the group agreed to push for an increase in the minimum deposit, currently set at KRW 10 million. They also discussed ways to mitigate the impact of daily rebalancing trades on underlying asset markets. According to the Korea Capital Market Institute, since the launch of single-stock leveraged ETFs, the daily stock trading volume required for rebalancing is estimated at approximately KRW 700 billion to KRW 2.1 trillion.

Participants noted that rebalancing trades tend to be concentrated at closing prices and agreed on the need to disperse trading times while reinforcing the market stabilization functions of liquidity providers (LPs). In addition, as investor demand has grown faster than anticipated since the product's launch, they plan to enhance tailored risk warnings and guidance based on investor age and asset holdings. They will also strengthen investor education to ensure that investors fully understand the structure and risks of these products before investing.

However, specific implementation details, such as the exact increase in the minimum deposit, were not discussed at the meeting. Since each securities firm has a different client base, each company will review an appropriate level and pursue discussions accordingly.

The Korea Financial Investment Association and the securities industry plan to continuously monitor trading trends and investor behavior related to single-stock leveraged ETFs, and will cooperate if the government introduces additional measures. Hwang Sungyeop, President of the Korea Financial Investment Association, said, "Single-stock leveraged products can expand investor choices, but this also requires a greater role from the industry in protecting investors."

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