Delisting criteria will be established for single-stock exchange-traded products (ETPs). The move comes just two weeks after the ETP market opened, putting in place post-listing management measures. Market participants point out that separate safeguards are also needed for price distortions that have surfaced in volatile markets.
According to the financial investment industry Tuesday, the Korea Exchange (KRX) has previewed an amendment to the "Detailed Enforcement Rules of the Securities Market Listing Regulations" containing these provisions. The delisting criteria apply when the stock serving as the underlying asset of a single-stock exchange-traded fund (ETF) or exchange-traded note (ETN) has, on a three-month average basis, a market capitalization weighting of less than 5% within the securities market and a trading value weighting of less than 2.5%. Samsung Electronics and SK hynix, which are currently listed, account for 28% and 23% of the KOSPI respectively, so there is no immediate possibility of them being affected.
When an exchange-traded derivative serves as the underlying asset, the criterion is an average trading value weighting of less than 0.5% within the relevant derivatives market. A new obligation has also been established requiring immediate reporting when the underlying asset meets the criteria. Products that have not yet passed one year from their listing date are excluded.
This amendment is a follow-up to the investor protection measures announced last month by the Financial Services Commission (FSC) ahead of the launch of single-stock leveraged ETPs. At the time, the FSC said it would restrict new listings of stocks falling below the target requirements under the detailed enforcement rules of the Financial Investment Services Regulations. The exchange plans to set the delisting criteria at half the level of these standards, aiming to prevent both forced maintenance of listings and premature delisting due to temporary trading slumps.
However, as listing requirements such as a 10% market capitalization weighting remain in place, expanding new products is expected to be difficult. SK Square, the third-largest stock by KOSPI market capitalization as of Tuesday, stands at only about 2.5%.
Meanwhile, overseas, Hong Kong-based CSOP Asset Management is known to be in talks with local financial authorities to launch a leveraged ETF tracking Hyundai Motor's stock at twice the daily rate within the year, following its 2x leveraged ETFs on Samsung Electronics and SK hynix.
