President Lee Jae-myung’s instruction to accelerate changes to South Korea’s single-stock leveraged exchange-traded fund (ETF) system does not represent a move toward additional regulations, the presidential office said on July 22, clarifying that the government is focused on speeding up previously announced reforms.
Kim Yong-beom, the presidential chief of policy, said President Lee was asking authorities to determine when existing measures would take effect and identify ways to implement them more quickly, rather than calling for a new policy package.
“My understanding is that the president was asking when the measures already announced would be implemented and urging officials to find ways to move the process forward,” Kim said during a briefing.
Kim said the previously announced reforms include substantial changes and that the government’s immediate priority is ensuring they are carried out effectively.
“The focus should be on rapid implementation and evaluating the results,” Kim said. “Since the effects have not yet become clear, discussing additional measures now would be premature.”
Kim added that regulators and industry participants could continue discussions over technical issues involving ETF pricing, including the gap between an ETF’s net asset value and its market price.
“There may be room for a more flexible interpretation of the pricing gap issue and further discussions between regulators and market participants,” he said.
The comments followed President Lee’s call for faster improvements to the rules governing single-stock leveraged ETFs, which have drawn attention over concerns that they could increase market volatility.
Kim also rejected the view that President Lee had expressed opposition to the so-called Yellow Envelope Act, a labor law expanding protections for workers involved in disputes with companies.
“I do not believe the president was expressing concerns about the Yellow Envelope Act itself,” Kim said.
He said Lee was instead calling for clearer implementation guidelines from the Ministry of Employment and Labor to prevent disputes over how the law should be applied.
“If clear guidelines are not established, disputes could develop into arguments that blame the Yellow Envelope Act itself,” Kim said. “That was not the president’s intention.”
Kim said it remains too early to determine the overall impact of the legislation, comparing the debate to whether a glass is viewed as half full or half empty.
“Whether the effects are considered positive or negative depends on individual assessments,” he said. “At least so far, there has not been a situation where bargaining units have fragmented excessively, leaving major contractors unable to manage negotiations.”
He added that the law should be reviewed after it has been in operation for a longer period.
“After one or two years, the benefits and areas for improvement will become clearer,” Kim said. “The government can then evaluate the results and make adjustments where necessary.”
