[Anchor]

The extreme volatility of our stock market remained unchanged today, July 15. Various measures are being discussed to address leveraged ETFs, which have been pointed out as a primary cause. Proposals such as raising the minimum deposit requirement to prevent reckless entry by investors are currently under consideration.

Reporter Kim Hye-min has the story.

[Reporter]

During today's policy briefing at the Blue House, President Lee Jae-myung directly mentioned single-stock leveraged ETFs.

[President Lee Jae-myung: It seems many people are suffering losses from Samsung and Hynix ETFs...]

[Lee Chan-jin, Governor of the Financial Supervisory Service: As a market regulator, I feel responsible and am ready to accept the consequences.]

[President Lee Jae-myung: The Korea Exchange is also noisy because of these ETFs, right? Please prepare supplementary measures promptly.]

[Jeong Eun-bo, Chairman of the Korea Exchange: Yes, I will do so.]

Single-stock 2x leveraged ETFs are being blamed for the extreme volatility, as evidenced by the fact that circuit breakers have been triggered 5 times since their launch in May, compared to only 6 times over the past 27 years.

The issue is that to maintain a 2x volatility target, these funds must frequently buy or sell the underlying stocks, which in turn amplifies market fluctuations.

The negative compounding effect, where losses accumulate during price swings, making it increasingly difficult for the investment to return to its original value, is also becoming more pronounced.

We compared the volatility from the launch date of these single-stock leveraged ETFs to today's market close.

While the price of Samsung Electronics common stock fell by 6% and SK Hynix rose by 1.46%, most of the leveraged ETF products showed declines well exceeding 20%.

[Kwon Min-kyung, Senior Research Fellow at the Korea Capital Market Institute: In Korea, there is significant exposure to Samsung Electronics and Hynix, and they account for a large portion of the index. Because interest in leveraged and inverse products is also relatively high, these factors can influence index volatility.]

Financial authorities have begun to prepare countermeasures.

Related alternatives are expected to be discussed at the market situation inspection meeting scheduled for tomorrow, July 16, which will be attended by officials from the Ministry of Finance and Economy, the Bank of Korea, the Financial Services Commission, and the Financial Supervisory Service.

Yesterday, July 14, the Korea Financial Investment Association also met with CEOs of major domestic brokerage firms to discuss plans such as raising the minimum deposit requirement for single-stock leveraged ETFs, which is currently 10 million won, and staggering the rebalancing trade times used to maintain the 2x volatility ratio.

However, with over 13 trillion won in individual investor capital already tied up in leveraged products, some argue that blocking new inflows may have little impact. Furthermore, some reports suggest that the volatility-inducing effect of these ETFs is limited, leaving the effectiveness of these measures uncertain.

Reported by Jung Sang-bo | Video by Kim Jun-hee | Graphics by Kang Yoon-jung | Produced by SBS Digital News