▲ Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol presides over an emergency market situation inspection meeting at the Government Complex-Seoul on the 29th.
The Financial Services Commission (FSC) announced today (July 30) that it will implement additional supplementary measures for single-stock leverage exchange-traded funds (ETFs), which were announced on the 29th, "as early as possible."
In a briefing detailing the implementation tasks for the "additional measures on single-stock leverage products" decided during an emergency market inspection meeting of related agencies the previous night, the FSC stated, "We will promptly formulate detailed plans centered on the responsible agencies for each major task."
According to the plan, the FSC, along with the Financial Supervisory Service (FSS), intends to draft an amendment to the Capital Markets Act to establish a legal basis for financial authorities to take market stabilization measures in emergency situations.
The legal basis will be established to allow measures not only for single-stock leverage products, but also across various fields and market participants.
This references recent cases of variable leverage multipliers in Hong Kong.
The Hong Kong Securities and Futures Commission (SFC) issued guidelines on the 24th allowing the adjustment of multipliers for listed leverage and inverse products, subject to preliminary standards and disclosures based on asset management companies' operational capabilities.
The FSC stated, "This is to enable the FSC to timely prepare and implement measures without separate legislative revisions in the event of urgent situations that undermine market stability or investor protection."
The establishment of individual investment limits will be implemented in a manner where each brokerage sets a limit for each account.
This is intended to block the possibility of individuals taking on excessive risks by investing most of their assets into single-stock leverage, citing "20 percent of total investment amount" as an example of the investment limit ratio.
Along with the decision to raise the basic deposit requirement exclusively to 30 million won in cash, the imposition of investment limits is expected to have the effect of suppressing investment demand from both top and bottom.
The concept of excessive quote surcharges currently operating in the futures market will also be introduced to single-stock leverage products.
The FSC explained that this aims to resolve the issue where specific investors trade single-stock leverage products multiple times a day, excessively inflating market quotes and transactions.
However, detailed targets, methods, and rates for the surcharges, which would increase transaction cost burdens, will be finalized after discussions with the industry and related agencies.
In addition, mock trading will be made mandatory so that investors can clearly recognize the risks of single-stock leverage products before investing.
This is intended to supplement current theory-focused education with practical training.
Currently, retail investors are already required to complete mock trading in addition to preliminary education to participate in the exchange-traded derivatives market.
However, the FSC did not disclose the specific implementation date for the additional supplementary measures announced the previous night, stating that most detailed plans will be implemented after discussions with related agencies and the industry.
(Photo provided by the Ministry of Economy and Finance, Yonhap News)
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