Korea FSC Urges Spread of Single-Stock Leveraged ETF Rebalancing to Curb Volatility

Chairman Lee Eog-weon directs asset managers to distribute single-stock leveraged ETF rebalancing across the full trading day, aiming to mitigate end-of-day price swings caused by concentrated order flow.

Woofun AI reports that South Korea's Financial Services Commission Chairman Lee Eog-weon has instructed asset management firms to disperse rebalancing activities for single-stock leveraged ETFs throughout the entire trading session. This directive targets the reduction of severe price volatility resulting from the clustering of large orders near market close. Currently, fund managers typically execute the majority of these operations between 3:20 PM and 3:30 PM local time to align with the goal of doubling the underlying stock's daily return. Lee Eog-weon warned that concentrating trades just before the closing bell can amplify upward momentum and exacerbate downturns, stating that "the timing of trades needs to be diversified." He further highlighted that certain products engage over 20 liquidity providers, which contributes to excessive turnover, increased internal trading, and expanded arbitrage activities.