South Korean Brokerages Profit $73 Million from Volatility-Driving Leveraged Products

South Korean securities firms have generated substantial profits from single-stock leveraged products, raking in 90 billion won (approximately $73 million) in commission fees over a two-month period. These financial instruments, which magnify market movements, have been pinpointed as a key contributor to the increased volatility observed in the KOSPI, South Korea's main stock market index.

The Korea Exchange and the Korea Financial Investment Association have also benefited significantly, earning over 30 billion won (approximately $24 million) through listing fees and other associated charges. This revenue stream highlights the financial incentives involved in the proliferation of these complex products.

Data obtained by Rep. Park Seong-hoon of the People Power Party from the Financial Supervisory Service reveals that 36 brokerages collectively earned 89.35 billion won in commission fees. This figure was calculated over 46 trading days, from the launch of the first single-stock leveraged product on May 27 to the end of last month. On average, each brokerage firm earned approximately 2.48 billion won.

Despite the substantial reported earnings, the actual commission fees collected by brokerages were lower than they could have been. This is due to temporary fee waivers or discounts offered by some firms. If these promotional offers had not been in place, the total commission revenue for the brokerages would have been even higher, underscoring the lucrative nature of these leveraged products.