Achieved 6th Place in ETN Market Share After Over 2 Years
Popular YouTube Lecture Explaining ETFN Easily
Meritz Securities (CEO Choi Hee-moon) is focusing on Exchange Traded Notes (ETNs) to strengthen its competitiveness in the retail business.
Meritz Securities, which has established a solid position centered on corporate finance (IB) and real estate project financing (PF), has a relatively small share of retail in its operating net profit, accounting for around 10% annually. Considering that the average retail share of comprehensive financial investment business operators (CIBs) is about 50%, Meritz Securities has primarily operated with an IB focus and has not stood out significantly in the securities industry's retail market.
Accordingly, Meritz Securities has launched a large number of ETN products, the first in the industry, to rapidly increase its retail market share and expand the ETN market.
Since June 2021, Meritz Securities has actively entered the ETN market, launching Korea's first ETN products such as European carbon emission allowances, natural gas, gold and silver, three representative agricultural products, and 30-year U.S. Treasury bonds.
Since entering the market, Meritz Securities has released a large number of various domestic first ETN products, achieving first place in ETN product issuance for two consecutive years with 62 types. In particular, it is focusing on market penetration through bond-type products. Among the 38 bond-type ETNs listed in the ETN market, 36 of the top products are ETNs listed by Meritz Securities. The ‘Meritz 3X Leverage Treasury Bond 30-Year ETN,’ which was the first 3x leveraged product listed domestically on December 21 last year, gained great popularity as its indicative value exceeded 30 billion KRW within one month. Meritz Securities currently holds an 8% share of the ETN market.
ETNs are derivative-linked securities that track the returns of an underlying index, similar to Exchange Traded Funds (ETFs). Unlike ETFs, ETNs are issued by securities companies and have a maturity date. Since they are issued based on the credit of the securities company, certain requirements must be met to issue them. The qualifications for securities companies to issue ETNs include having a capital of over 500 billion KRW, a net capital ratio of 150%, and a credit rating of AA- or higher. Recently, the ETN market has been rapidly expanding with the launch of various ETN products, including commodities such as crude oil and natural gas with volatile price fluctuations, as well as representative domestic and international market indices and bonds.
Nevertheless, the ETN market remains a relatively unfamiliar investment product for individual investors and is smaller in scale compared to the ETF market managed by asset management companies. As of January 31, ETFs had a total net asset value of 86 trillion KRW, growing at an average annual rate of over 30% since starting with 4 products worth 344.4 billion KRW in 2002. In contrast, the total indicative value of ETNs stands at 10.2995 trillion KRW, showing a gap of more than eight times compared to ETFs.
To revitalize the ETN market, Meritz Securities is conducting ‘ETFN Investment Class’ lectures through its official YouTube channel to help individual investors better understand and invest in ETNs. As of the end of February, ‘ETFN Investment Class’ has surpassed 200,000 cumulative views across episodes 1 to 9, gaining significant popularity. Episode 9, titled ‘Asset Management Using ETFs and ETNs,’ explains the necessity of asset management strategies using not only stocks but also ETFs and ETNs tailored to individual investors' investment tendencies.
A Meritz Securities representative stated, “As individual investors show increasing interest in diverse investments, ETN sales balances and daily trading volumes are significantly rising. Meritz Securities will continue to launch Korea's first ETN products and enhance investors' accessibility to ETNs through YouTube to expand the market.”
Meanwhile, Meritz Securities is also focusing on digital business and marketing to overcome its weakness of having a small retail branch network and workforce, which results in a low market position in the retail business. Jang Won-jae, president overseeing the Sales & Trading (S&T) division, concurrently serves as head of the newly established Digital Platform Headquarters, dedicating full efforts to expanding retail. Various events are held in line with new service or product launches, and the YouTube channel ‘Meritz On’ regularly uploads investment lectures featuring Meritz Securities employees, along with brand advertisements.
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