Financial authorities to discuss single-stock leveraged ETF risks Thursday

From left, Financial Supervisory Service Gov. Lee Chan-jin, Bank of Korea Gov. Shin Hyun-song, Deputy Prime Minister and Finance Minister Koo Yun-cheol and Financial Services Commission Chairman Lee Eok-weon pose during a meeting at the Government Complex Seoul, June 18. Yonhap

Financial authorities will convene a high-level meeting Thursday to discuss possible measures for single-stock leveraged exchange-traded funds (ETFs), as policymakers move to address mounting concerns that the products are amplifying swings in Korea's stock market.

The meeting, expected to be held under the government's macroeconomic and financial issues consultative group known as the F4, will bring together officials from the Ministry of Finance and Economy, the Financial Services Commission, the Financial Supervisory Service and the Bank of Korea.

The discussions come after weeks of increasingly volatile trading, with single-stock leveraged ETFs drawing growing scrutiny from regulators and market participants who say the products have become a significant driver of sharp price movements.

The KOSPI plunged more than 8 percent during Monday's session, triggering the market's seventh circuit breaker of the year and intensifying calls for a policy response.

Deputy Prime Minister and Finance Minister Koo Yun-cheol said last week during a National Assembly session that authorities were closely monitoring concerns that leveraged ETFs were contributing to market volatility.

Financial Supervisory Service Gov. Lee Chan-jin said last month that regulators were seriously reviewing the unintended consequences that have emerged since the products were introduced.

Officials said regulators have been coordinating internally in recent days, although no final direction has been determined.

Possible measures discussed in the market have included raising margin requirements, limiting daily price movements and adjusting leverage ratios.

Officials, however, have said those proposals may amount to temporary fixes rather than addressing the structural causes of market volatility.

Separately, securities firms and asset management companies are scheduled to hold an industry meeting on Tuesday to discuss leveraged ETF issues and broader market conditions ahead of Thursday's government meeting.