FSC Chairman Lee Eok-won: "We Take Great Weight in Increased Volatility of Single-Stock Leverage Products"

Financial Services Commission Chairman Lee Eok-won said today (the 29th) regarding single-stock leverage exchange-traded funds (ETFs), "We are taking the significant expansion of market volatility very seriously." Chairman Lee made the remarks during a National Policy Committee work report held at the National Assembly in response to a question from People Power Party lawmaker Park Dae-chul, who asked, "Do you agree with the diagnosis that the plunge in single-stock leverage is a man-made disaster originating from the FSC and the Financial Supervisory Service?"

He added, "As the ultimate person in charge of the financial market, we naturally bear that responsibility heavily," and stated, "We will make all-out efforts to implement supplementary measures swiftly, and take bold additional measures if necessary."

He also expressed his stance that he would review supplementary measures proposed by members of the Policy Committee, such as raising additional deposit requirements, adjusting the multipliers of single-stock leverage products, and restricting new purchases to professional investors.

Chairman Lee stated, "It is said that setting the deposit requirement to 30 million won in cash would have the effect of reducing daily trading volume to 60 percent," adding, "We will monitor market conditions and consider various methods, such as raising the deposit requirement further if necessary."

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 like it would be effective in terms of mitigating volatility," while noting, "However, how to handle investor and beneficiary meetings will be examined during the legislative amendment process."

Chairman Lee also suggested total volume management restrictions, saying, "There is also a way to reduce the scale by setting limits on only a certain portion of the total investment amount for partial investment."

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

On the same day, Financial Supervisory Service Governor Lee Chan-jin also stated regarding the single-stock leverage issue, "We are taking this very seriously right now," and "We will make every effort to minimize volatility."

Regarding his remarks during a press conference last month where he said he "should have stopped it (the introduction) even by lying down," he explained, "It was intended to protect investors amid a situation where underlying asset volatility was appearing," adding, "There was no other context."

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