Financial Services Commission Chairman Apologizes Over Single-Stock Leverage Volatility

Financial Services Commission Chairman Lee Uk-won and Financial Supervisory Service Governor Lee Chan-jin issued their first official apologies today (the 29th) regarding single-stock leveraged exchange-traded funds (ETFs).

During a business report to the National Assembly's National Policy Committee, Financial Services Commission Chairman Lee stated, "I feel apologetic for failing to fully live up to the public's trust."

In response to a question from People Power Party lawmaker Park Dae-chul asking whether he agrees that the plunge in single-stock leverage should be diagnosed as a man-made disaster originating from the FSC and the FSS, Chairman Lee replied, "I take the significant expansion of market volatility very seriously."

He added, "As the ultimate person in charge of the financial market, we naturally bear a heavy responsibility," and stated, "We will pour all our efforts into swift supplementary measures and take bold additional actions if necessary."

Financial Supervisory Service Governor Lee Chan-jin also stated, "I am apologetic."

Regarding the single-stock leverage issue, he said, "We are taking this very seriously," and added, "We will make every possible effort to minimize volatility."

On this day, the KOSPI plummeted nearly 6%, closing at 5,663.24.

For two consecutive days, program trading sell order temporary halts (sell sidecars) and circuit breakers were triggered in both the KOSPI and KOSDAQ markets.

In response to a question asking whether the product was created following instructions from Kim Yong-beom, Chief of Staff for Policy at the Blue House, he only answered, "In the government's policy decision-making process, (the National Assembly and others) can raise issues or offer opinions, and related ministries can discuss them. Just because they are told to review it doesn't mean everything happens; we examine it thoroughly together with related ministries."

To a question asking if it was spearheaded by the Ministry of Finance and Economy and other bodies, he said, "The FSC reported it and created it in consultation with various ministries."

Chairman Lee also expressed his stance that he would review supplementary measures suggested by National Policy Committee members on this day, such as raising additional deposit requirements, adjusting multipliers for single-stock leverage products, and restricting new purchases by professional investors.

Chairman Lee stated, "Setting the deposit requirement to 30 million won in cash is said to have the effect of (reducing the daily trading volume to 60%)," adding, "While monitoring market conditions, if necessary, we will consider raising (the deposit) further or using various methods."

In response to a question from Democratic Party of Korea lawmaker Kim Hyun-jung on the necessity of 'introducing a variable leverage structure' that can adjust multipliers, he said, "Adjusting multipliers seems effective in terms of easing volatility," but added, "We will look into how to consider investor and beneficiary meetings during the bill amendment process."

Chairman Lee also proposed a total volume management restriction method, stating, "There is also a way to reduce the scale by setting limits on only a portion of the total investment amount so that partial investments can be made."

He added that other measures are also under review, such as dispersing rebalancing times and reducing trading scale.

Meanwhile, regarding his remarks during a press conference last month that 'we should have stopped (the introduction) even if it meant lying down,' Governor Lee explained, "It was intended to protect investors amid a situation where market volatility was appearing, and there was no other context."

When asked whether the FSS officially opposed the introduction of single-stock leverage, he said, "There is no record of us stating it officially," and added, "It was finalized through joint consultation."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.