Korean regulator Kofia has granted Korea Investment Securities an exclusive three-month licence to issue a new payoff, called a 'KO Early Redemption', offering potential early maturities. The equity-linked security (ELS) uses a combination of a shark fin and a step-down payoff.
In an example provided in documents submitted to the regulator, a three-year product linked to two shares is described. Every six months the product can mature early, paying 16% pa (simple rate), if the levels of the underlyings are at or above specified levels, which are lowered as time goes on. Additionally, if on any day both shares reach above 107% of their initial levels, the security matures and three days later a coupon based on the number of months elapsed is paid in addition to 8% for each full six-month period elapsed.
Kofia noted that it was pleased that KIS will pay investors the return three days after the relevant final calculation date, and that this contributed to the acceptance of the new product type.
The licence will be effective from 29 June and retail products are expected to emerge from that time.
This product will appear in Recent Additions (Korea) in due course.