Korea Exchange and brokerages collected more than 100 billion won ($70.7 million) in fees from single-stock leverage exchange-traded funds between their launch and the introduction of corrective measures, according to data submitted to the National Assembly.
The Financial Supervisory Service and Korea Exchange submitted the figures to the office of People Power Party lawmaker Park Sung-hoon, a member of the Assembly's Political Affairs Committee. The data show that from May 27, when Samsung Electronics and SK Hynix single-stock leverage and inverse ETFs were launched, through the end of July, the exchange and brokerages collected a combined 117.26 billion won in related fees across 16 products.
Financial regulators tightened investment requirements effective July 31, raising the mandatory base deposit to 30 million won in cash only, after criticism mounted that the single-stock leverage products were amplifying stock market volatility.
During that period, Korea Exchange collected a total of 27.91 billion won in trading and clearing fees.
Over 45 trading days, the exchange averaged about 620 million won in daily fee income. Trading fees accounted for the larger share at 24.14 billion won, with clearing and settlement fees making up the remaining 3.77 billion won.
On days when trading was especially heavy, daily fee income exceeded 1 billion won.
On June 24, for instance, the exchange earned 1.05 billion won in fees. On July 14, it collected 1.01 billion won.
Brokerages earned a combined 89.35 billion won in brokerage commissions from Samsung Electronics and SK Hynix single-stock leverage and inverse ETFs.
The FSS noted that actual fee revenue was lower than the volume of trading would suggest, as some brokerages temporarily waived online brokerage commissions as a promotional event.
FSS Governor Lee Chan-jin raised concerns at a press briefing in June, saying the products' "extreme turnover rate is enriching only the brokerages" and that he was "personally deeply worried that the players gain nothing while only those who manage and operate the system profit."
Financial authorities announced a package of corrective measures last month. The measures include raising the base deposit requirement to lift the investment threshold, capping individual investment at 20 percent of total assets, mandating investor education in advance, and strengthening brokerages' obligations to manage price-deviation rates.
"While retail investors were exposed to the risks of single-stock leverage products, not only brokerages but also the exchange collected hundreds of billions of won in fees," Park said. "Collecting fees from transactions is not itself a problem, but there is a need to examine whether the exchange properly fulfilled its role as market manager while individuals were exposed to high risk."
gil@heraldcorp.com
