Financial Supervisory Service Governor Lee Chan-jin said Monday that introducing the single-stock leveraged ETF was a policy failure.

The admission marks a rare public reversal by a top regulator regarding a product designed to attract domestic investors during a period of high exchange rates. By acknowledging the mistake, Lee highlights the tension between increasing market liquidity and maintaining systemic stability.

Speaking at the Financial Supervisory Service headquarters in Seoul on June 22 [1], Lee said he specifically cited the Samsung Electronics 2x leveraged ETF [2]. He said the product increased market volatility and led to an unhealthy concentration of trading within semiconductor stocks [1].

According to Lee, the introduction of the 2x leverage factor [2] caused a sharp rise in trading turnover. He said this shift primarily benefited securities firms rather than retail investors, who faced higher risks from the resulting instability [1].

The Governor said the policy was a failure that distorted market behavior. The concentration of trades in a single sector created a feedback loop that amplified price swings, a risk that outweighed the original goal of boosting domestic investment [1].

Lee did not specify immediate regulatory steps to reverse the policy during the press conference, but his comments signal a shift in how the FSS views high-leverage retail products [1].

“introducing the single-stock leveraged ETF was a policy failure”

This admission suggests that the South Korean government may move toward tighter restrictions on leveraged products to protect retail investors. By identifying the Samsung Electronics ETF as a source of volatility, the FSS is acknowledging that high-leverage tools can create systemic risks that outweigh the benefits of increased market participation.