Rapid Growth of the Domestic ETF Market and the Strengthening of Synthetic ETF Regulations
The domestic ETF market has rapidly expanded, reaching approximately 270 trillion won, yet the number of new synthetic ETFs has significantly decreased. This decline is attributed to the heightened scrutiny by financial authorities, which became more conservative following the Russia-Ukraine war, thereby raising the approval threshold for synthetic ETFs. The industry expresses dissatisfaction, seeing this as a hindrance to the launch of innovative financial products.
Synthetic ETFs, structured to replicate index returns through derivatives rather than traditional physical assets, have increased market diversity, but currently, there are almost no new listings. The market has seen a surge of capital into thematic ETFs, with a notable increase in so-called 'copycat' phenomena.
Some experts argue that regulations intended to protect investments and investors may inadvertently restrict innovation and consumer choice. While the exchange plans to improve synthetic ETF-related systems, there is a strong call from the market for regulatory relaxation.
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