It takes 29 days to go public and controversy over “half of the average 62 days”
Exchange “The figures including the management company preparation period”
Preliminary screening 13 days, longer than the average of 11 days for the representative index ETF

Yeouido KRX Korea Exchange. [Photo = Yonhap News] ė‚Žė§„ 확대 Yeouido KRX Korea Exchange. [Photo = Yonhap News]

The Korea Exchange has countered the controversy that it has unusually shortened the listing screening of single-stock leveraged exchange-traded funds (ETFs) based on Samsung Electronics and SK Hynix as underlying assets. The misunderstanding stems from the fact that the entire 29 days from the receipt of the listing preliminary review to the listing were regarded as the exchange’s “review period,” and the preliminary and main listing screening periods involving the actual exchange were rather longer or the same as ordinary ETFs.

The Korea Exchange said on the 8th, “It is not true that the exchange has more than doubled the listing review period for single-stock leverage than usual.” The move comes after critics pointed out that the ETF began trading 29 days after applying for a preliminary listing review, which was more than half faster than the average listing time (62 days) of ETFs such as overseas index type and mixed asset type.

The core of the refutation is that the “total listing period” and the “exchange review period” are different concepts. ETFs must be effective in securities reports submitted to the Financial Supervisory Service after passing the preliminary screening of the exchange’s listing, and after that, when the management company applies for the main listing, the trading begins after the exchange checks the formal requirements. Among them, the only sections that the exchange directly reviews are preliminary and main listing examinations. The period from the approval of the preliminary review to the application for the main listing includes time for the management company to secure liquidity providers (LPs) and prepare for the operation method and fundraising. As it varies greatly depending on market conditions and the speed of preparation of the management company, it is not appropriate to tie them all into the exchange review period.

In fact, it is difficult to say that single-stock leverage ETFs have been processed faster if only preliminary screening is taken aside. It took an average of 13 days, which was two days longer than Korea’s leading index ETF (11th) over the past five years. Although it is shorter than other ETFs (19th) such as overseas index type and mixed asset type, it is explained that differences in product structure should be considered. The exchange emphasized that the review period took longer than the representative index type, even though it is a relatively simple structure with domestic listed stocks such as Samsung Electronics and SK Hynix as underlying assets.

It is a position that there was no separate rapid screening even at the main listing stage. Single-stock leveraged ETFs applied for the main listing on May 19 and began trading on the 27th. Considering the holiday on the 25th, it took seven days from the application to the start of the transaction. ETFs usually go through the same procedures and periods as they start trading within about a week after checking the format requirements after applying for the main listing.

The exchange explains that the entire listing period of 29 days is not an unprecedented speed. In the past five years, it took an average of 43 days for domestic representative indices from preliminary screening to listing, and 62 days for overseas indices and mixed assets, but the shortest case of both types was 27 days. It is shorter than the average, but it means that it is not at the level that did not appear in the existing procedure.

In the end, the issue of this controversy is narrowed down to “Who controlled the period reduced?” rather than whether the listing was fast. It is true that it applied for a preliminary review on April 28 and started trading on May 27 and the entire process ended in 29 days. However, the exchange refutes that it is difficult to define it as the exchange’s “shortening of screening” as the preliminary screening in charge of the exchange was longer than the representative index average and the main listing screening also went through a normal period.