Preying on Leveraged ETFs
创建于 更新于
摘要
This paper identifies a predatory trading mechanism in Korea where daily LETF rebalances create a self-reinforcing loop that elevates the close and then reverses, amplifying volatility and transferring wealth from retail holders. The loop is captured by the scalar ℓ = ΛcK, the product of price impact and rebalancing capital, which governs how much the closing print is distorted. In the Korean episode the loop added roughly 47 percentage points of annualized volatility to SK Hynix and transferred about KRW 3.96 trillion to holders of the affected products over eight weeks, with the effects concentrated at the reference print and unwinding overnight. Korea’s regulators proposed remedies that alter the reference mechanism (e.g., averaging across two prints) to damp the loop, a design shown to materially reduce both the price distortion and the toll in counterfactuals. The paper develops a formal model distinguishing anticipation from manipulation and demonstrates how the public-channel toll operates at any positive loop gain, while the private (manufacturing) channel depends on market depth and competition. [page::0][page::9][page::4][page::5][page::23]
