Korea Probes Foreign High-Frequency Trading in Single-Stock Leveraged ETFs

South Korea's financial authorities have launched an investigation into foreign high-frequency trading (HFT) in domestic single-stock leveraged exchange-traded funds (ETFs).

The regulators suspect that HFT, which uses ultra-fast computers and algorithms to place large volumes of orders in microseconds, has abnormally amplified volatility in the products.

The authorities have obtained records from Korea Investment & Securities Co. and Yuanta Securities Korea Co., which provided direct market access (DMA) services to foreign ultra-short-term traders.

The investigation focuses on whether HFT heightened volatility in the underlying stocks of single-stock leveraged ETFs during trading in the cash, ETF, and futures markets.