South Korea’s top economic and financial officials convened an emergency market review meeting (F4 meeting) on the afternoon of the 16th to announce supplementary measures for single-stock leveraged exchange-traded funds (ETFs) tied to Samsung Electronics and SK Hynix, products that have faced mounting criticism for amplifying volatility in the domestic stock market. The core focus is expected to be raising entry barriers and strengthening investor protection mechanisms for these so-called “Samsung-SK Hynix leveraged” products.
The government held the F4 meeting in Seoul at 3 p.m. to finalize the measures, with results scheduled for official announcement around 4 p.m. Attendees included Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol, Bank of Korea Governor Shin Hyun-song, Financial Services Commission Chairman Lee Eok-won, and Financial Supervisory Service Governor Lee Chan-jin. The swift follow-up comes after President Lee Jae-myung directly ordered officials during a briefing the previous day to “expeditiously prepare supplementary measures for single-stock leveraged ETFs.”
Higher Deposit Requirements and Mandatory Education to Raise Entry Barriers
The cornerstone of the interagency package is tightening investor entry requirements. Raising the base deposit requirement from the current 10 million won (approximately $6,758) and mandating pre-investment education before purchasing these products are under serious consideration. With daily trading volumes across 16 single-stock leveraged ETFs consistently surpassing 10 trillion won (approximately $6.8 billion), the aim is to curb new capital inflows and cool market overheating.
Appearing on the YouTube program Kim Eo-jun’s Humility Is Hard News Factory earlier that morning, FSC Chairman Lee Eok-won stated, “The Ministry of Economy and Finance, Bank of Korea, Financial Supervisory Service, and Financial Services Commission are all meeting together in close consultation,” adding that they are “comprehensively reviewing investor protection and market stability measures.” While effectively acknowledging criticism that single-stock leveraged ETFs have amplified stock market volatility, he maintained a cautious stance on the possibility of delisting—a step demanded by some in the financial investment industry—noting that it “could create even greater side effects in the market.”
Chairman Lee assessed that “the market capitalization weight of Samsung Electronics and SK Hynix within the KOSPI has grown enormously,” and that “as these large-cap stocks have expanded, the surface area absorbing shocks whenever global markets fluctuate has also widened.” He further indicated a commitment to institutionally managing the short-term leveraged investment frenzy, saying, “We need to create conditions for long-term investment without market turbulence, including ensuring dividends are paid reliably as they are in the United States.”
Industry Self-Regulation and Government Measures on Dual Track
The financial investment industry had already unveiled self-regulatory measures on the 14th, pledging to raise base deposit requirements and diversify rebalancing trades. The government is reportedly reviewing additional market stabilization measures on top of this, such as strengthening the role of liquidity providers (LPs). When asked about the possibility of temporary trading halts raised by some quarters, Chairman Lee avoided a direct answer, stating, “There could be various methods, but we need to examine them comprehensively as there could be greater side effects for the market.”
This emergency meeting gained momentum following the president’s public directive. While scheduling conflicts among attendees had initially raised the possibility of a delay until the weekend, the government’s immediate convening of the meeting that afternoon signaled its determination to preemptively address market anxiety. Chairman Lee emphasized, “We plan to swiftly prepare supplementary measures and announce them shortly,” adding, “We will explain in detail what needs to be done for investor protection and what needs to be done for market stability.”
Leveraged Investment Surges Amid Semiconductor Supercycle
Behind this regulatory push lies the explosive growth in influence of single-stock leveraged ETFs amid a semiconductor supercycle. As shares of Samsung Electronics and SK Hynix have repeatedly experienced sharp swings over short periods, leveraged products tracking twice the daily returns of these two stocks have been identified as factors amplifying intraday volatility.
Regarding the original intent behind introducing leveraged ETFs, Chairman Lee explained, “There was regulatory asymmetry where these products were available overseas but not domestically. Rather than having domestic investors purchase them abroad, the goal was to manage them more transparently within the domestic regulatory framework and strengthen investor protection.” However, given the short-term investment nature of leveraged products, he added that “since this reflects a lack of confidence in companies, it is important to create conditions where investors can bet on shareholder value protection and long-term corporate growth.”
The government’s package is interpreted as a willingness to accommodate the rapid growth of the leveraged ETF market while keeping it at a “manageable level.” The choice of indirect entry restrictions—higher deposit requirements and enhanced education—rather than the extreme option of delisting underscores this approach. Depending on the final measures announced at 4 p.m., significant shifts are expected in the landscape of South Korea’s leveraged ETF market and investor sentiment.