The Korean regulatory authorities are considering more targeted restrictions on the ETF, with a focus on such hot spots as Tristar Electronics and SK Hercules. According to regulators, the demand for high-risk products in the diaspora has not cooled and the volatility and risk spillovers associated with the products are increasing.
The regulatory department says the side effects are increasing.
On Monday, Lee Chan-jin, President of the Korea Financial Supervisory Authority, indicated that the side effects of an ETF were becoming increasingly apparent. Such products are more vulnerable to single-company stock price volatility and to short-line risk when trading is active than the leverage products of the tracking index.
He indicated that regulators were studying the need for separate stabilization measures for such products to reduce the impact of market volatility on investors. The information disclosed at this stage does not indicate the content of the specific measures, but the statement indicates that the Korean regulatory hierarchy has identified the ETF as a risk point that needs to be focused on.
The demand is still warming.
The participation of the Korean market in high-risk, volatilely traded products has continued to be high in recent years, particularly with regard to leverage instruments associated with large technology units. Samsung Electronics and SK Hercules are the most concerned weights of the Korean stock market, and their related products are more likely to attract short-term, centralized transactions.
In the view of regulators, there is no significant cooling of demand, which means that general risk tips alone may not be sufficient to control risk. If individual measures are subsequently introduced, the focus may fall on the pace of product transactions, investor protection or volatility buffer arrangements.
Synchronization of SpaceX IPO allocation events
Lee also indicated that the Financial Supervisory Authority was investigating a previous stock distribution failure in SpaceX IPO in future assets. The objective of the investigation was to identify the history of the problem and to prevent the recurrence of similar situations.
This survey and the Leverage ETF topic, although distinct, point to the same regulatory focus, namely, how to reduce implementation failures and risk exposure in the face of high-heat investment products and hot-door trading opportunities and better protect investor interests.