On a day when SK Hynix shares plummeted by 7.68%, a leveraged exchange-traded fund (ETF) based on the company’s stock experienced an unusual surge of nearly 50% during the closing auction.
According to the Korea Exchange, the ACE SK Hynix Single Stock Leverage ETF closed at 30,000 won, up 49.70% from the previous trading day.
This ETF is designed to track SK Hynix's daily returns at double the rate. On the same day, SK Hynix shares fell by 159,000 won (7.68%) to close at 1,911,000 won.
Typically, when the underlying asset declines by 7-8%, a leveraged ETF would see a drop of around 15%. In fact, other leveraged ETFs tracking SK Hynix also fell sharply that day, with KODEX SK Hynix Single Stock Leverage down 15.31%, TIGER SK Hynix Single Stock Leverage down 16.73%, and SOL SK Hynix Single Stock Leverage down 16.11%.
In contrast, the ACE SK Hynix Single Stock Leverage ETF, which had been declining during the day, surged during the closing auction, resulting in a price discrepancy of 85.59%.
Market analysts believe that specific high-priced buy orders executed during the closing auction distorted the price. Approximately 46,813 shares were traded at 30,000 won during this time.
ETFs generally rely on liquidity providers (LPs) to present buy and sell orders to minimize discrepancies between market prices and net asset values (NAV). However, during the closing auction, LPs are exempt from submitting quotes, which can lead to temporary price distortions.
Market participants do not view this occurrence as a result of a technical error or an issue with the product structure.
A securities industry official stated, "During the closing auction, the price is determined based on the aggregate buy and sell orders to facilitate the highest volume of trades. It appears that the anticipated execution price was influenced by specific buy orders."
He added, "Market orders prioritize execution over price, meaning investors may end up buying at higher prices. This is not an issue limited to ETFs but represents a general market risk that can occur during the closing auction period."
* This article has been translated by AI.
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