As debate mounts over whether single-stock leveraged exchange-traded funds (ETFs) are amplifying volatility in the domestic stock market, unverified posts — short pieces of information from unclear sources — claiming the government is preparing a regulation to cap the products' daily price movement at 20% have spread. Financial authorities say the circulating content is groundless and that they are preparing comprehensive supplementary measures.
According to the financial investment industry on the 9th, information of unclear origin titled "Government Leverage ETF Regulation Plan" spread indiscriminately that day, mainly around the securities district of Yeouido. The content claimed the government would take steps such as raising the basic deposit requirement from 10 million won to 50 million won, mandating one hour of weekly viewing of lectures on leveraged products, and capping products' daily price movement at 20%. Such information spread rapidly through social networking services (SNS) and online communities.
Financial authorities say this is entirely groundless. The Financial Services Commission (FSC) said that day, "The content being spread online is not true," adding, "Relevant agencies are closely monitoring the operating situation since the launch of single-stock leveraged products, their impact on the market, and the need for additional investor protection, and are also examining whether there are any matters that require supplementation."
"Because single-stock leveraged products have been so heavily pointed to as a cause of volatility, it seems someone attached plausible numbers to response measures being discussed in some corners of the market and circulated it," an official in the financial investment industry said.
The government plans to comprehensively analyze the market impact since the launch of single-stock leveraged products and the causes of current market volatility, and to review measures that can minimize investor damage.
Earlier, Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol also said at a full meeting of the National Assembly's Finance and Economy Committee on the 7th, "We are well aware of concerns that leverage ETFs are bringing significant volatility to our stock market," adding, "Relevant agencies are closely watching, monitoring, and reviewing various situations."
