[DigitalToday reporter Sangyeop Oh] The brokerage industry is pushing voluntary investor protection measures for single-stock leveraged exchange-traded funds (ETFs), including raising basic margin deposits and strengthening investor education.

The Korea Financial Investment Association said on Monday it held an emergency meeting with securities firm chiefs at its headquarters in Yeouido, Seoul, and reviewed market conditions for single-stock leveraged ETFs and investor protection measures.

The meeting was attended by Korea Financial Investment Association Chairman Seongyeop Hwang (황성엽) and the heads of 10 comprehensive financial investment businesses, including Daishin Securities, Meritz Securities, Mirae Asset Securities, Samsung Securities, Shinhan Securities, Kiwoom Securities, Hana Securities, Korea Investment & Securities, KB Securities and NH Investment & Securities.

Participants agreed that single-stock leveraged ETFs can meet investors' varied strategies and risk preferences and help broaden the range of products in South Korea's capital markets.

They also said that as high-leverage products linked to South Korean shares are already traded overseas and domestic investors can access them, it is preferable to apply investor protection devices within the domestic regulated system rather than sending investment demand abroad.

They agreed, however, that single-stock leveraged ETFs can amplify losses over a short period due to leverage effects and can incur losses even in a sideways market due to negative compounding, and that investor protection should be strengthened.

Securities firms agreed to strengthen tailored risk warnings and guidance that take into account investors' age and investment portfolios. They are also pushing plans to supplement educational content and raise basic margin deposits so investors can trade after fully understanding product structures and risks.

They also discussed claims that single-stock leveraged ETFs increase market volatility. Participants said product rebalancing can affect the underlying asset market, but that judgments should be based on the trading volume needed for daily rebalancing rather than total trading value.

The Korea Capital Market Institute estimated the stock trading volume needed for daily rebalancing after the products' launch at 700 billion won to 2.1 trillion won.

The brokerage industry also agreed to review measures to reduce the impact on the underlying asset market, including dispersing trading times, considering that rebalancing trades tend to be concentrated at the close.

They also discussed strengthening the market-stabilising function of liquidity providers (LPs) and preventing trades from being concentrated in specific time slots during hedging transactions and the management process.

The association and the brokerage industry plan to continue monitoring trading trends and investment behaviour for single-stock leveraged ETFs and to cooperate if the government announces additional measures.

Chairman Hwang said, "Single-stock leveraged products also require the industry's role in protecting investors." He added, "I hope each company will strengthen investor protection efforts and supplement some systems to create a trustworthy environment."