THE REPUBLIC OF KOREA PROPOSES TO GRANT THE FINANCIAL REGULATORY AUTHORITY “EMERGENCY INTERVENTION”: CONSIDER LIMITING SINGLE-STOCK LEVERAGE ETF MULTIPLIERS AND INVESTMENT LEVELS

THE KOREA FINANCIAL REGULATORY AUTHORITY IS MOVING FORWARD WITH THE REVISION OF THE CAPITAL MARKET ACT, WHICH PLANS TO GIVE REGULATORS “EMERGENCY INTERVENTION” TO TAKE MARKET STABILIZATION MEASURES DIRECTLY DURING PERIODS OF VOLATILE STOCK MARKETS. THE KOREA FINANCE COMMISSION (FSC) HAS NOW INITIATED RELEVANT LEGISLATIVE AMENDMENTS WITH THE FINANCIAL SUPERVISORY AUTHORITY (FSS), FOCUSING ON SINGLE STOCK LEVERAGE ETF PRODUCTS CONSIDERED TO BE MORE VOLATILE DURING THE RECENT STOCK MARKET CRASH, WITH THE PROPOSED INTRODUCTION OF REGULATORY MEASURES, INCLUDING THE ADJUSTMENT OF LEVERAGE MULTIPLIERS AND INVESTMENT CAPS. REDUCE THE RISK OF CAPITAL-INTENSIVE TRANSACTIONS IN THE FACE OF ABNORMAL MARKET FLUCTUATIONS. IN ADDITION, THE KOREA FINANCIAL REGULATORY AUTHORITY HAS CONSIDERED SETTING INDIVIDUAL INVESTMENT LEVELS FOR SINGLE-STOCK LEVERAGE ETF, KEEPING INVESTMENT LIMITS FLAT AT ABOUT 20 PER CENT TO PREVENT EXCESSIVE POOLING OF FUNDS, AND INTRODUCING A REAL-TRADE SIMULATION SYSTEM TO INCREASE INVESTORS ' UNDERSTANDING OF LEVERAGE PRODUCT RISKS. THE KOREAN REGULATOR INDICATED THAT THE INCREASE IN THE BASIC BOND WAS MAINLY DUE TO AN INCREASE IN THE INVESTMENT THRESHOLD, WHILE THE LEVEL OF INVESTMENT WAS EQUIVALENT TO A “CEILING” OF CAPITAL INFLOWS, WHICH WOULD FORM A COMPLEMENTARY RISK CONTROL SYSTEM. EARLIER, ON 31 JULY, KOREA HAD INCREASED THE SINGLE-STOCK LEVERAGE ETF INVESTOR MINIMUM GUARANTEE FROM 10 MILLION WON TO 30 MILLION WON. ACCORDING TO THE DATA, 16 RELEVANT LEVERAGE ETF TRANSACTIONS ON THE FIRST DAY OF IMPLEMENTATION WERE ABOUT 3 TRILLION WON, ONLY ABOUT A QUARTER OF 12.4 TRILLION WON ON THE PREVIOUS DAY OF TRADE, DOWN BY ABOUT 80 PER CENT FROM THE LEVEL OF 15 TRILLION WON ON 29 JULY。