South Korean brokerages discuss raising minimum deposit requirements for leveraged chip stock ETFs

Glonghui July 15 — The Korea Financial Investment Association stated that the CEOs of the country's ten largest asset management companies have discussed implementing investor protection measures for single-stock leveraged ETFs, including raising minimum deposit requirements and diversifying the timing of rebalancing trades. According to a statement released by the association, participants unanimously agreed that it is necessary to raise the minimum deposit requirement for investing in such leveraged products from the current level of 10 million Korean won (US$6,714). To reduce the impact of daily rebalancing trades (currently concentrated before market close) on the market, asset management companies indicated that efforts should be made to spread rebalancing activities throughout the trading day. They also pointed out the need to strengthen the role of liquidity providers as market stabilizers. Citing data from the Korea Capital Market Institute, the Korea Financial Investment Association noted that since the launch of related leveraged ETFs, the estimated daily trading volume of stocks required for rebalancing has been around 700 billion to 2.1 trillion Korean won.