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DLS sales drop in 3rd quarter

Dec 26,2019
Sales of derivatives-linked securities in Korea fell 32.7 percent in the third quarter from a quarter earlier due in part to lower demand following recent missellings of derivative-linked funds, data showed Wednesday.

The combined value of equity-linked securities (ELS) and derivatives-linked securities (DLS) issued in the July-September period came to 24.5 trillion won ($21 billion), compared with 36.4 trillion won in the April-June period, according to the data from the Financial Supervisory Service.

The products are structured to track the performance of underlying assets, not guarantee the principle, as investors prefer instruments that promise higher yields.

The FSS said the recent misselling of derivatives linked to overseas interest rates is to blame for declines in sales of derivatives-tied securities.

Earlier this month, the FSS recommended the compensation rate of 40-80 percent to Woori Bank and KEB Hana Bank over six cases where derivative products were missold.

The issuance of ELS products fell 35.3 percent on-quarter to 18 trillion won in the third quarter.

ELS refers to hybrid debt securities whose returns are determined by the performance of underlying equities. ELS products track benchmark stock indexes, including the Korea Composite Stock Price Index 200.

Sales of DLS instruments, which track interest rates, currency values and other underlying assets, dropped 24.4 percent on-quarter to 6.5 trillion won in the third quarter.

The outstanding value of ELS products reached 72.1 trillion won as of the end of September, down from 76.1 trillion won as of the end of June, with the amount for DLS vehicles falling 3.2 percent to 39.1 trillion won.

Yonhap