Koo Yun-cheol says government reviewing ways to address leveraged ETF volatility concerns

Deputy Prime Minister and Minister of Finance and Economy Koo Yun-cheol said Tuesday the government is reviewing measures to address concerns that single-stock leveraged exchange-traded funds are amplifying stock market volatility.

"I am well aware of the concerns that leveraged ETFs are bringing significant volatility to the stock market," Koo said at the first plenary session of the National Assembly's Finance and Economy Planning Committee on Tuesday. "We are in discussions on ways to address this."

"When we introduced the policy, we looked at the impact on both the foreign exchange market and the capital market together, but some problems have since been raised," Koo said. "We are in discussions on how to address and minimize those problems."

Asked whether the Ministry of Finance and Economy had pushed for leveraged ETF products as a way to manage the exchange rate, Koo said that was not the only reason. "We introduced these products based on the judgment that they were necessary after comprehensively considering various markets," he said.

Koo said that before the regime was introduced, two- and three-times leveraged ETFs were already operating overseas and attracting significant investment from domestic investors. "There was also an aspect of introducing the products to prevent that outflow," he said.

He added that although investor education requirements and certain guidelines had been put in place, the government was now working to find ways to stabilize the situation given the range of concerns being raised.