South Korea's Financial Regulator Apologizes for Market Volatility Amid ETF Controversy

SEOUL, July 29 (Yonhap) -- The chief financial regulator on Wednesday expressed regret over recent extreme market volatility, saying the authorities take responsibility for the turmoil amid criticism that single-stock leveraged ETFs had amplified the market swings.

"I regret failing to fully meet the public's expectations," Lee Eog-weon, chairman of the Financial Services Commission (FSC), said during a session at the National Assembly. "I take the sharp rise in market volatility very seriously."

It marked the first time the FSC chairman apologized in public over the controversy surrounding single-stock leveraged ETFs. "As the agency is ultimately responsible for the financial market, we recognize our heavy responsibility," Lee said. "We plan to promptly implement supplementary measures and introduce additional steps if necessary."

Seoul shares plunged by nearly 6 percent Wednesday following a nearly 11 percent crash the previous session as investors dumped semiconductor stocks amid growing skepticism over whether massive spending on artificial intelligence (AI) will generate sufficient returns.

In a report to parliament, Lee said the commission will consider additional measures to dampen demand for recently introduced single-stock ETFs. Earlier, the FSC unveiled a set of measures, such as a hike in the minimum cash deposit for single-stock leveraged ETF investment, effective Friday. The government moved up the implementation of the deposit requirement by several weeks to help stabilize the market and protect investors amid heightened market volatility.

"The measures will be swiftly implemented to stabilize the market, and additional measures will be reviewed depending on the market situation," Lee stressed. As one possible option, Lee has proposed a total volume management measure that would cap investment in such ETFs at 20 percent or less of an individual's total financial investment portfolio. Lee said his agency will look at other additional measures, including a further hike in the minimum deposit for leveraged ETF investment, adding that adjusting single-stock leveraged ETF regulations is one of the ways to stabilize market volatility.