Amid a surge in similar ETFs, firms move to secure index rights and differentiate products

As competition in the domestic exchange-traded fund (ETF) market intensifies, securities firms are moving to secure "index rights" for a set period in order to block similar products. The move is seen as an attempt to gain an edge in product differentiation by using the Korea Exchange (KRX)'s ETF preferential use-rights system.
According to the financial investment industry on the 26th, Hana Asset Management Company Ltd.'s "Hana 1Q KOSPI 200 Bond-Mixed 50 Active ETF," which was listed on the 21st, received preferential use rights from KRX for three months.
The product is a bond-mixed ETF that invests 50% each in the KOSPI 200 Index and domestic short-term government bonds. It uses the "KOSPI 200 Short-Term Government Bond Mixed Index" as its benchmark, and the exchange has granted exclusive use rights for that index for a certain period.
When an asset manager develops a new benchmark index that did not previously exist and plans to launch an ETF based on it, it can apply to KRX for preferential use rights to the index. The exchange grants those rights after considering the index's originality and the scale of human and material resources invested in product development. In such cases, other asset managers cannot launch ETFs using the same index for up to six months. The system is intended to reduce copycat competition, protect the first developer, and encourage the launch of diverse products.
As the ETF market becomes increasingly competitive, the move is being interpreted as a strategy by asset managers to seek a breakthrough through differentiated product structures. The net asset value of ETFs listed on the domestic stock market stood at 420.1042 trillion won as of the 23rd, up 41.4% from 297.1401 trillion won at the end of last year. The number of products also rose to 1,095, up by more than 120 from 973 a year earlier.
The problem is that as the number of products has increased, similar products have also flooded the market. Whenever a particular theme or strategy gained attention, asset managers rushed to launch products with similar structures. For example, five firms rolled out U.S. aerospace-themed ETFs amid expectations that SpaceX would benefit from a listing. In the same vein, four asset managers launched "Samsung Electronics-SK hynix Bond-Mixed" products that combine momentum from major semiconductor stocks with the stability of bonds.
As concerns over the proliferation of similar products persisted, the exchange expanded and revised the index preferential use-rights system in 2023. Even so, only two asset managers have used the system since then. Before Hana Asset Management, KB Asset Management received six months of preferential use rights from the exchange for the "KOSPI 200 Weekly Covered Call ATM Index," the benchmark for its "RISE 200 Weekly Covered Call ETF," which was launched in 2024.
As competition in the ETF market intensifies, attention is turning to whether more firms will use index preferential rights. Still, some say the system remains limited in practice. In sector-themed products, in particular, the criteria for originality are seen as vague. For example, even if a semiconductor-based index includes major stocks along with differentiated mid- and small-cap names, it is difficult to judge whether the product is truly "original," they said.
One industry source said, "Index preferential use rights apply only to indices jointly developed by KRX and an asset manager. Because indices developed in cooperation with private index providers are excluded, actual use is limited." The source added, "Ultimately, each asset manager must first think about developing new products while observing industry norms."
nodelay@fnnews.com Park Ji-yeon Reporter