South Korea's financial authorities announced a package of measures Tuesday aimed at enhancing the global competitiveness of the local derivative market.
Since introducing derivative products two decades ago, South Korea has been a leading player in the field among Asian economies.
A computer-generated imagery of a exchange-traded note (ETN). (Yonhap)
But its market remains heavily dependent on stock index-linked instruments.
The volume of such products traded here last year accounted for 68.9 percent of the total derivative transactions, far higher than 30.8 percent in the United States and 35.7 percent in Europe, according to the Financial Services Commission (FSC).
The state financial regulator hopes to diversify derivative-related investment vehicles.
For that, it plans to allow the country's sole stock market operator Korea Exchange to decide on the listing of new derivative products. Currently, it requires the FSC's approval.
The commission added it will step up efforts to prevent the derivative market from overheating.
The government will "focus on raising the competitiveness through the improvement of quality, not just the quantity expansion," it said.
The FSC took note of worries about potential systemic risks from the constant increase of such products as equity-linked securities (ELS) and derivative-linked securities (DLS).
The government will endeavor to effectively manage the risks through a regular stress test on the financial soundness of securities firms, while promoting alternative derivative instruments including exchange-traded notes (ETNs), it said. (Yonhap)
