Timely Financial Products
Korea Exchange announced on Oct. 2 that the trading of 10 exchange traded notes (ETNs), which will be listed by six securities firms, marks the beginning of a new stock market segment in Korea that will begin on Nov. 17.
An ETN is a type of derivative linked security issued by a securities company, and its earning rate depends on the basic market index. It is very similar in structure to an exchange traded fund (ETF), but the two differ from each other in that an ETF is run by an asset management company and has no maturity. Also, listing examination takes 45 trading days for ETF, but 15 for ETN, and the minimum number of stock items constituting an ETN is five, while the number is 10 for an ETF.
An ETN can be issued by a securities company with an equity capital of at least one trillion won. A total of nine companies satisfied the requirement as of the end of last year: Daewoo Securities, Woori Investment & Securities, Samsung Securities, Korea Investment & Securities, Hyundai Securities, Shinhan Investment Corporation, Mirae Asset Securities, Daishin Securities, and Hana Daewoo Securities. ETN can be issued within 50 percent of the equity capital. The combined equity capital of the nine companies is approximately 24 trillion won (US$22.5 billion).
“ETN is the third exchange traded product following the ELW and ETF launched in 2002 and 2005, respectively,” said director Kim Won-dae at the Korea Exchange, adding, “It will be very valuable in the current situation in which the low interest rate and low growth are becoming permanent to hamper stable asset management and preparation for later years.”