FSC chief regrets leveraged ETF-driven volatility, vows further measures
Key Takeaways
- •FSC Chairman Lee Eog-weon publicly apologized for the market turmoil and said the agency accepts responsibility for the volatility.
- •The remarks were the first public apology from the FSC chairman over the controversy involving single-stock leveraged ETFs.
- •Seoul stocks fell nearly 6% Wednesday after a nearly 11% drop in the previous session, with semiconductor shares leading the decline.
- •The FSC will raise the minimum cash deposit for single-stock leveraged ETF investment starting Friday, after bringing the rule forward by several weeks.
- •Lee said regulators may consider further steps, including tighter volume limits or a higher deposit requirement, if market conditions warrant it.
The chief financial regulator on Wednesday expressed regret over recent extreme market volatility, saying the authorities take responsibility for the turmoil amid criticism that single-stock leveraged ETFs had amplified the market swings.
"I regret failing to fully meet the public's expectations," Lee Eog-weon, chairman of the Financial Services Commission, said during a session at the National Assembly. "I take the sharp rise in market volatility very seriously."
It marked the first time the FSC chairman apologized in public over the controversy surrounding single-stock leveraged ETFs.
"As the agency is ultimately responsible for the financial market, we recognize our heavy responsibility," Lee said. "We plan to promptly implement supplementary measures and introduce additional steps if necessary."
The remarks come as policymakers face pressure to show that recent safeguards are sufficient to curb excess trading without disrupting broader market activity, especially after sharp moves in heavyweight technology shares helped drive the selloff. Seoul shares plunged by nearly 6 percent Wednesday following a nearly 11 percent crash the previous session, as investors dumped semiconductor stocks amid growing skepticism over whether massive spending on artificial intelligence will generate sufficient returns.
In a report to parliament, Lee said the commission will consider additional measures to dampen demand for recently introduced single-stock ETFs.
Earlier, the FSC unveiled a set of measures, including a hike in the minimum cash deposit for single-stock leveraged ETF investment, effective Friday.
The government brought forward the implementation of the deposit requirement by several weeks to help stabilize the market and protect investors amid heightened market volatility.
"The measures will be swiftly implemented to stabilize the market, and additional measures will be reviewed depending on the market situation," Lee stressed.
As one possible option, Lee has proposed a total volume management measure that would cap investment in such ETFs at 20 percent or less of an individual's total financial investment portfolio.
Lee said his agency will also examine other possible steps, including a further hike in the minimum deposit for leveraged ETF investment, adding that adjusting single-stock leveraged ETF regulations is one way to stabilize market volatility. (Yonhap)