The FSC approved a revision to the KOSPI Market Listing Regulation submitted by the Korea Exchange (KRX) at its regular meeting on February 22, 2013 to lay a foundation for introducing synthetic Exchange Traded Funds (ETFs) to the KOSPI Market and strengthen criteria for listing and delisting ETFs.
With the revision, the FSC expects further diversification of ETF market and stronger investor protection.
KEY CONTENTS
1. Foundation for introduction of synthetic ETFs1
The revision sets a regulatory framework to manage the counterparty risk, with structural features of swap agreements included in synthetic ETFs taken into consideration
Counterparties for synthetic ETFs are mandated to meet certain eligibility requirements to enter, operate, exit, and disclosure their investment.2 The ETFs will be delisted if the counterparty risk significantly threatens continued trading of the products.
ETF management companies are required to establish systems to evaluate and manage the counterparty risk and collateral assets, and disclosure counterparty risk.
2. Strengthened criteria for listing and delisting ETFs
The minimum amount of trust principal for listing ETFs is increased from KRW 5 billion to KRW 7 billion.
Listing eligibility test is strengthened for qualitative elements such as whether an ETF product can be continuously traded, or whenter the applicant for listing has proper internal control system.
Small ETFs will be reviewed semiannually and delisted if they fail to meet certain criteria.3 In the first half of 2013, small ETFs likely to incur losses to investors4 will be encouraged to be delisted on a voluntary basis.
3. Upcoming schedule
Synthetic ETFs are expected to be listed to KRX in the first half of this year after amendments to detailed rules on KRX listing regulation and Listing Guideline.
With the revision, the FSC expects further diversification of ETF market and stronger investor protection.
KEY CONTENTS
1. Foundation for introduction of synthetic ETFs1
The revision sets a regulatory framework to manage the counterparty risk, with structural features of swap agreements included in synthetic ETFs taken into consideration
Counterparties for synthetic ETFs are mandated to meet certain eligibility requirements to enter, operate, exit, and disclosure their investment.2 The ETFs will be delisted if the counterparty risk significantly threatens continued trading of the products.
ETF management companies are required to establish systems to evaluate and manage the counterparty risk and collateral assets, and disclosure counterparty risk.
2. Strengthened criteria for listing and delisting ETFs
The minimum amount of trust principal for listing ETFs is increased from KRW 5 billion to KRW 7 billion.
Listing eligibility test is strengthened for qualitative elements such as whether an ETF product can be continuously traded, or whenter the applicant for listing has proper internal control system.
Small ETFs will be reviewed semiannually and delisted if they fail to meet certain criteria.3 In the first half of 2013, small ETFs likely to incur losses to investors4 will be encouraged to be delisted on a voluntary basis.
3. Upcoming schedule
Synthetic ETFs are expected to be listed to KRX in the first half of this year after amendments to detailed rules on KRX listing regulation and Listing Guideline.
*Please read the attached file for details.