South Korean Government: Will Explore How to Minimize Market Impact of Leveraged Products During Specific Time Windows, Reduce ETF NAV Divergence from Closing Price

BlockBeats News, July 19th - Kim Yong-bum, Chief of Presidential Policy at the Blue House, clearly stated today on a KBS program that the delisting of a single stock leveraged ETF, which has been identified as the main cause of the recent drastic stock price volatility, is "hard to imagine." Investors have been deeply involved, and the related product has exceeded a size of over 100 trillion Korean won. "If a forced delisting were to occur, it would itself cause a huge impact on the market, and we would also have to absorb selling pressure."

Kim Yong-bum also affirmed the supplementary measures recently introduced by South Korea's financial regulatory authorities, including raising the leverage ETF margin requirement to 30 million Korean won in cash, setting a 20-stock trading unit minimum, and stated that "we have substantially accepted the issues raised by the market and that the implementation will to a considerable extent mitigate the side effects."

Kim Yong-bum also pointed out that the influence of leveraged products on the market during a downtrend will be magnified, and further discussions are needed with regulatory authorities, asset management companies, and securities firms on how to minimize market impact during specific periods, especially by reducing the deviation rate between the ETF's net asset value and the actual closing price, and properly controlling the selling pressure generated to narrow the deviation rate.