South Korea’s ruling Democratic Party is reviewing a proposal to reduce leverage on single-stock leveraged and inverse ETFs from 2x to 1.5x, according to The Korea Herald. The discussion is being handled by the K-Capital Market Special Committee under the party and was confirmed on July 22 by committee chair Gu Chi-myung. The review was described as a response to President Lee Jae-myung’s instruction to prepare countermeasures.
The committee is also discussing changes to rules around beneficiary meetings. Under the current framework, investors representing more than 5% of total subscribed shares can convene such a meeting. Officials are considering a higher threshold, with the stated aim of preventing excessive speculation in leveraged products.
The products were originally introduced during the Moon Jae-in administration under a policy backdrop tied to a KOSPI 5000 target. Now that the index is nearing that level, the structure is facing possible adjustment. Some academics from Sejong University and Seoul National University support the move, saying it could improve investor safety and limit excessive volatility. South Korea’s Financial Services Commission said no specific proposal has yet been formally submitted for discussion. Meanwhile, Woo Moon-kyung and others argued that expanding the pool of liquidity providers should come first, adding that single-stock ETFs tied to names such as Samsung Electronics and SK Hynix have recently performed well.
South Korea’s ruling Democratic Party is studying a plan to cut the leverage cap on single-stock leveraged and inverse exchange-traded funds from 2x to 1.5x, according to The Korea Herald.
The review is being conducted by the K-Capital Market Special Committee under the party. Committee chair Gu Chi-myung confirmed on July 22 that discussions are underway, saying the move came in response to President Lee Jae-myung’s instruction to prepare countermeasures.
Committee reviews changes to leveraged single-stock ETF structure
The report said these products were introduced during the Moon Jae-in administration under a policy backdrop tied to a KOSPI target of 5000. With the index now nearing that level, the products are facing a possible adjustment.
Alongside the proposed leverage cut, the committee is also discussing changes to the threshold for convening a beneficiary meeting. Under the current rule, investors holding more than 5% of total subscribed shares can call such a meeting. The idea under review is to raise that bar in an effort to prevent excessive speculation in leveraged products.
Regulators say no formal proposal has been submitted yet
Some academics, including professors from Sejong University and Seoul National University, support the proposal. They said it could improve investor safety and curb excessive volatility.
South Korea’s Financial Services Commission said there is still no specific proposal that has been formally submitted for discussion.
At the same time, Woo Moon-kyung and others argued for alternative steps first, including expanding the scale of liquidity providers, or LPs. They also said single-stock ETFs linked to companies such as Samsung Electronics and SK Hynix have posted solid recent performance and should not face sharply tighter listing restrictions.
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