The Democratic Party's Special Committee on K-Capital Markets will visit the Korea Financial Investment Association (KOFIA) next week for an on-site meeting. The aim is to examine the responsibility of securities firms in connection with single-stock leveraged exchange-traded funds (ETFs) tied to Samsung Electronics and SK hynix, which have recently been cited as factors behind sharp stock price swings.
On the 22nd, the K-Capital Markets committee was coordinating a schedule to hold the on-site meeting at KOFIA in Yeouido on the 27th. Committee members are expected to meet with executives from securities firms and asset management companies to press for investor protection principles. "Rather than hearing about market conditions indirectly from the FSS and the Financial Services Commission, we plan to visit the site directly and conduct an inspection," a committee official said.
Under the current structure, the larger the trading volume of single-stock leveraged ETFs, the greater the commission income for securities firms. Critics have consistently pointed out that only asset managers and securities firms profit while investor losses mount. The management fees for these ETFs range from 0.6 to 1.0 percent annually, about three to five times higher than for ordinary ETFs.
Earlier this month, the K-Capital Markets committee held its first meeting of the second half of the year and received a report from the Financial Supervisory Service (FSS) on the status of single-stock leveraged ETFs. At the time, committee chairman Oh Ki-hyoung said, "It is raising volatility, so we are watching closely. If necessary measures are needed, we will communicate with the market and present a direction." Committee secretary Kim Nam-keun said, "Beyond the effects caused by leveraged ETFs, they can create an image of an unstable market due to volatility."
Voices calling for supplementary measures on single-stock leveraged ETFs have been raised daily within the government and ruling party. President Lee Jae-myung, at a Cabinet meeting the previous day, stressed, "Aren't stock market participants thinking they suffered damage because the decline widened due to this? In any case, it is our role to come up with supplementary measures."
Democratic Party lawmakers on the National Assembly's National Policy Committee, following a party-government meeting with the Financial Services Commission on the 20th, urged strong monitoring of market conditions and, if necessary, the pursuit of additional measures.
