In order to be listed on the KRX’s ETN market, certain requirements on issuers, underlying indices and details of issuance must be met.


Requirements on the qualification of issuers

As ETNs are issued based on the credit of issuers, KRX imposes strict financial requirements on the issuers:

  • A financial investment corporation that has been licensed to conduct the business of trading of securities and over-the-counter derivatives products for at least 3 years
  • Equity capital of at least KRW 1 trillion
  • Credit rating of AA- or above
  • Net Operating Capital Ratio (NCR) of at least 200%
  • Unqualified opinions by auditors for the recent 3 years
Requirements on underlying indices
  • An index that represents the overall price movement of underlying assets that are traded in the KRX market (representative market indices such as KOSPI200 and KRX100, and sector indices are excluded)
  • An underlying index that represents the price movement of underlying assets that are traded in foreign securities exchange markets recognized by the KRX
  • In case where the underlying index includes domestic and foreign stocks or bonds, the underlying index must include at least 5 stocks and 5 bonds, respectively, and the proportion of a constituent must be at most 30% to ensure diversification (if an index consists of government bonds, monetary stabilization bonds and municipal bonds only, then the number of constituents must be 3 or more).
Requirements on issuance

As to a newly listed ETN, the issuing amount must be at least KRW 20 billion and the number of the notes issued must be at least 100,000. It is to avoid the excessive issuance of small-sized ETNs and secure high liquidity of traded ETNs. Also, the total amount of an ETN is limited to 50% of issur’s equity capital in order to prevent the excessive credit risk exposure.

Requirements on maturity, agreement on index utilization and liquidity provision

The maturity of ETNs may range from 1 to 20 years. ETNs must be issued through a deemed public offering where the issuer or liquidity providers hold the entire quantity of the issued ETNs without the public subscription process and the public sales occurs after the listing. In addition, the issuer must enter into an agreement on index utilization with an institution that has a legal authority regarding the indices to make the information related to indices available for investors’ utilization in real time. The issuer must make a liquidity provision contract in order to supply enough liquidity or the issuer should provide liquidity for itself.

Content Manager
  • ETN Market 02-3774-9372