Lee’s Call to Tighten Single-Stock Leveraged ETF Rules Wasn’t a Push for New Measures, Aide Says

Kim Yong-beom says swift implementation of leveraged ETF curbs is the priority

Kim Yong-beom, the presidential policy chief, said on July 22 that President Lee Jae-myung’s instruction to swiftly tighten rules for single-stock leveraged exchange-traded funds did not amount to a call for additional measures.

At a presidential office briefing, Kim said he understood Lee’s remarks as asking when the measures already announced would take effect and urging officials to find ways to implement them sooner. The package unveiled earlier includes major changes, he said, making swift implementation the top priority. Authorities should assess the impact first and then consider whether any parts need to be supplemented. Talking about further steps before the measures have shown results would be premature, he added.

Kim also addressed remarks from an earlier broadcast interview about easing the selling burden tied to aligning ETF market prices with net asset value. On that issue, he said there could be room for talks between regulators and the industry over a more flexible interpretation of the tracking-gap rules.

The Financial Services Commission announced measures on July 16 to tighten single-stock leveraged products. They included raising the minimum deposit to 30 million won from 10 million won, allowing only cash rather than substitute securities such as stocks and bonds when calculating deposits, increasing the ETF trading unit to 20 shares from one share, and strengthening accountability at asset managers and brokerages for tracking gaps.

Lee recently said single-stock leveraged ETFs, which have been cited as a main driver of sharp stock-price swings, require supplementary measures that are both swift and thorough.

At a cabinet meeting he chaired at the presidential office on July 21, Lee said there were conflicting views over 2x leveraged products linked to Samsung Electronics Co. and SK Hynix Inc. Some analyses found they helped reduce capital outflows, while others concluded they worsened stock-market instability.

When Financial Services Commission Chairman Lee Eok-won said overseas leveraged products had previously been created using Korean assets and that the domestic products were introduced for investor protection and as part of efforts to advance the capital market, the president replied that they had nonetheless become a source of complaints from local investors.

Lee added that while authorities may have been aiming for the policy effect of exchange-rate stability, ordinary people should not be expected to weigh such considerations. Referring to the recently announced leverage-related measures, he said some had already questioned whether they would be enough and instructed officials to move quickly and take any necessary response measures boldly.

Kang Kyung-ju, Hankyung.com reporter qurasoha@hankyung.com