On the 8th, even though SK hynix shares fell by nearly 8%, the ‘ACE SK hynix Single-Stock Leverage’ ETF (exchange-traded fund) that uses SK hynix as its underlying asset surged by about 50%.

Korea Investment Management’s ‘ACE SK hynix Single-Stock Leverage’ closed at 30,000 KRW, up 49.70% from the previous session. The product’s price had been on a downtrend throughout the day before suddenly soaring by nearly 50% right before the close.

The SK hynix Single-Stock Leverage is a product that tracks twice the price return of SK hynix.

On the day, SK hynix closed at 1,911,000 KRW, down 7.68%. Accordingly, it is typical for the SK hynix Single-Stock Leverage to record a decline of around 15∼16%, roughly twice that move. In fact, excluding this product, all six other SK hynix single-stock leverage products fell by about 15∼18%.

The securities industry believes the price was distorted when a market buy order was executed right before the close, a period during which liquidity providers (LPs) have no obligation to submit quotes. For ETFs, LPs present bid and ask quotes to prevent the market price from diverging significantly from net asset value (NAV). However, during the 3:20∼3:30 p.m. call auction session, LPs are exempt from the quote submission obligation.

In issues with limited trading volume, if someone places an order at an unusual price, the overall price of the issue can deviate greatly from the typical trend.

Accordingly, the ETF’s price is expected to fall back to the 16,000 KRW range at the open of the next trading day. Investors who bought the ETF at the sharply inflated price late in the session could face losses of more than 40%. It is said that those who bought the issue at 30,000 KRW that day were largely institutions rather than individuals.

An official at Korea Investment Management said, “We will review the LP quote system and take care to prevent any additional problems.”