Financial Supervisory Service Chief Admits Limited Options for Single-Stock Leverage Products Amid Market Volatility

As the domestic stock market continues to experience extreme fluctuations, Financial Supervisory Service (FSS) Governor Lee Chan-jin has reportedly expressed frustration, admitting that there are no clear alternatives for single-stock leverage products, which have been identified as a primary driver of market volatility.

According to the financial investment industry, Governor Lee stated during a private meeting with CEOs of asset management firms yesterday that regarding measures for single-stock leverage products, "There are structural issues, so it does not seem like a clear answer will emerge."

This is interpreted as an acknowledgment of the practical dilemma, as it is virtually impossible to forcibly liquidate or delist these products when individual investors have already net-purchased nearly 10 trillion won worth of them.

Governor Lee also reportedly said, "The government's position will be finalized and announced soon, but this is not an issue that will be resolved at once," adding, "It seems to be an area that will require continuous monitoring, revision, and supplementation."

He also mentioned that the Financial Services Commission is deeply concerned about single-stock leverage products, stating, "The FSS will actively listen to the voices of the market and will not shy away from being the target of criticism."

These products, which track twice the daily fluctuation rate of specific stocks such as Samsung Electronics and SK Hynix, have been criticized for becoming a "monster" that has explosively increased market volatility since their launch in May.

In fact, the frequency of KOSPI fluctuations of 3% or more, which stood at around 27% during the 96 days prior to the product launch, has nearly doubled to 52% over the 33 days since their introduction.

So far this year, sidecars, which temporarily suspend program trading due to stock market overheating or crashes, have been triggered 35 times, already breaking the all-time record set during the 2008 global financial crisis. Circuit breakers, which halt the market entirely, have also been triggered 7 times this year alone.

Foreign media outlets have also pointed out that the unusual volatility in the Korean stock market is being further amplified by leverage products tied to these two semiconductor stocks.

As the situation has become serious, the Financial Services Commission is convening experts from securities firms and asset management companies today to discuss supplementary measures behind closed doors.

While technical alternatives such as raising the minimum deposit requirement and adjusting leverage ratios are currently being discussed, market distrust and concern remain high over whether the authorities, caught in a dilemma, will be able to produce effective measures.

Reported by Lee Hyeon-yeong | Video by Seo Byeong-uk | Graphics by Lee Jeong-ju | Produced by SBS Digital News
※ Please note: This article was translated by AI and may contain errors.