"Should Have Blocked It Even by Lying Down": Financial Supervisory Service Chief Criticizes Single-Stock Leverage Products

[Anchor]

Lee Chan-jin, Governor of the Financial Supervisory Service (FSS), has issued a sharp criticism regarding single-stock leverage products that allow investors to bet on double the daily price movement of Samsung Electronics and SK Hynix. He argued that these products increase market volatility, encourage day trading, and only benefit securities firms, even going so far as to say he should have blocked their introduction at any cost.

Reporter Lee Tae-gwon has the story.

[Reporter]

FSS Governor Lee Chan-jin has poured out criticism against single-stock leverage products tied to Samsung Electronics and SK Hynix.

The market capitalization of these leverage and inverse products, which were launched last month, has surpassed 15 trillion won, with cumulative trading volume surging to 173 trillion won since their debut.

Governor Lee expressed deep concern that this could lead to significant losses for retail investors.

[Lee Chan-jin/Governor of the Financial Supervisory Service: Most of these are held by retail investors. It seems to be around 92 percent. Even though these are highly risky investments, there is no cooling-down effect taking place.]

In fact, during periods of consecutive market declines, the maximum drawdown for these products reached an average of 36.9 percent.

He particularly criticized the situation, noting that the average daily turnover rate soared to as high as 200 percent, resulting in a scenario where only securities firms are profiting from trading commissions.

[Lee Chan-jin/Governor of the Financial Supervisory Service: It is estimated that (trading commissions) could exceed 10 trillion won. Those investors are paying anywhere from 40 percent to as much as 70 percent (of the total market cap) in commissions.]

He also stated that while these products were introduced to encourage "Seohak Ants" (individual investors who invest in overseas stocks) to bring their capital back to the domestic market due to the high exchange rate, the effect has been minimal. He went as far as to say he regrets not having blocked their introduction, even if it meant "lying down on the floor" to stop it.

He added that the side effects are too severe, as rapid stock price fluctuations could lead to significant shocks to households, and that the government is deeply concerned about the situation.

Governor Lee mentioned that he is currently discussing with the Financial Services Commission (FSC) to identify ways to mitigate these shocks.

Regarding the incident where Mirae Asset Securities received zero shares in the SpaceX listing, he called it an "absurd situation" and emphasized that the FSS is investigating whether the risk disclosures related to overseas investments were appropriate.

(Video reporting: Shin Jin-soo, Kim Hak-mo | Video editing: Choi Hye-ran | Design: Jang Chae-woo)
※ Please note: This article was translated by AI and may contain errors.