Zombie ETFs in Korea: Thin Trading and Delisting Rules

Zombie ETF is an informal term for a rarely traded product. Delisting requirements in Korea should be distinguished from thin trading, and actual selling conditions should be checked using price quotes and net asset value.

Zombie ETFs are products that remain listed despite having very little trading activity. Low trading activity alone does not lead to immediate delisting. If you hold one, check both its net assets and actual ask prices.

The figures on low trading activity come from a tally as of October 2, published in Maekyung ECONOMY's October 8, 2026 report.

What Zombie ETFs Are and the Extent of Low Trading Activity

Zombie ETF is an informal term for an ETF that trades infrequently. It is not a separate product category defined by the exchange. Classification criteria may therefore differ between articles.

Maekyung ECONOMY reported the following figures, citing a Korea Exchange tally. Trading value was measured over the six months before the reference date. Products with an average daily trading value of less than KRW 100 million accounted for more than 20% of the total.

Category Reported figures as of October 2, 2026
All ETFs listed in Korea 1,171
Average daily trading value of less than KRW 100 million over the past six months 239
Meeting both the trading value condition above and an average daily trading volume of less than 5,000 units 186

The figures of 239 and 186 were counted using different conditions. Adding the two groups would count the same products twice. These figures alone also do not establish that every product is difficult to sell. Maekyung ECONOMY tally of low trading activity

Why Some Products Have Low Trading Activity

Launching similar thematic products at the same time can spread trading across them. Investor demand may then concentrate on a few leading products. If interest in the theme also declines, trading in the remaining products falls further.

Space industry and metaverse ETFs illustrate this competition. On October 13, 2021, four metaverse ETFs were listed together. Low trading activity in some products was later reported.

An increase in the number of products does not mean their investment strategies are distinct. Even products with different names may hold overlapping securities. When comparing them, check the following.

Fee cuts help reduce holding costs. However, wide bid-ask spreads can increase trading costs. It is difficult to choose a product based on its fee rate alone.

Delisting Criteria for ETFs in Korea

Low trading value alone does not lead to immediate delisting. Decisions follow separate criteria, including minimum size requirements and liquidity provision agreements. Even if a product's size exceeds the threshold, other grounds for delisting may arise.

The Korea Exchange applies its criteria for managing small ETFs in the following order.

  1. Check whether one year has passed since the listing date.
  2. Assess trust principal and total net assets at the end of the half-year.
  3. Designate the ETF as an issue under administration if both amounts are less than KRW 5 billion.
  4. Delist it if the same grounds persist at the end of the following half-year.

Trust principal is the principal amount reflecting fund creations and redemptions. Total net assets are the fund's assets minus its liabilities. The size requirement checks whether both amounts are less than KRW 5 billion.

The size criterion in the Korea Exchange's “ETF Delisting” guide is as follows.

Where an ETF has been designated as an issue under administration because its trust principal (capital) and total net assets are less than KRW 5 billion, and the same grounds persist at the end of the following half-year

Net assets alone therefore cannot determine whether a listing will be maintained. The absence of an LP agreement or termination of the investment trust are separate grounds. Check the latest disclosures for the grounds that apply to an individual product. Korea Exchange delisting guide

How Does Voluntary Termination Differ from Falling Below the Size Requirement?

An asset manager's voluntary termination of an investment trust is a different procedure from the exchange's size review. Small funds that meet certain requirements can already be voluntarily terminated. It is inaccurate to say that no voluntary closure mechanism exists.

Category What is assessed Points to note when interpreting it
Failure to meet minimum size requirements Principal and net assets at the end of the half-year, and whether the grounds persist A temporary decline in net assets alone does not establish the outcome
Voluntary termination of a small investment trust Statutory termination requirements and the asset manager's decision Separate from the procedure for designation as an issue under administration
Expiration of the fund's term Arrival of the end date set when the fund was established Includes scheduled closures unrelated to low trading activity
Failure to meet the correlation coefficient requirement How closely the daily movements of the ETF and its index resemble each other A different criterion from poor returns alone

The total number of delistings cannot be treated as the number of zombie ETFs. It also includes products that close as planned when their terms expire. The Korea Capital Market Institute explained this distinction in its October 2026 report. Changes in the Reasons for ETF Delistings in Korea and Points for Investors to Note

Conditions Compared: Trading Volume and the Ability to Sell

To assess actual selling conditions, look at both trading volume and current quotes. Trading volume is the quantity already traded. Quotes are the prices currently offered to buy or sell.

A liquidity provider (LP) is an institution that posts bid and ask quotes. LP quotes make trading possible even for ETFs that trade infrequently. They do not, however, guarantee execution at your desired price and quantity. Korea Exchange guide to the LP system

Product's current condition Interpretation What to check
Low trading volume but sufficient bid and ask quotes Past trading volume alone is not enough to conclude that selling will be difficult Outstanding buy orders that can absorb your order quantity
Low trading volume and a wide bid-ask spread Trading at your desired price may be difficult Difference between bid and ask prices
Large net assets but infrequent trading Asset size and trading activity are separate matters LP quotes and trading value trends
Active trading but a sharp drop in the theme's stock prices Ease of trading and investment loss risk are separate matters Holdings and price movements
Disclosures concerning designation as an issue under administration or delisting Assessment must follow the disclosed grounds and schedule Whether the grounds have been resolved and the trading suspension date

The difference between the ask price and the bid price is called the bid-ask spread. If this gap is wide, you may have to accept an unfavorable price when trading. If you hold a large quantity, also check outstanding buy orders at each price level.

Common Mistakes: Confusing Trading Value with Loss Risk

Low trading activity is a signal to check, but it does not indicate a loss rate. Trading volume and trading value are also indicators measured in different units. When reading figures in an article, make the following distinctions.

Common interpretation Correct distinction
Trading volume is KRW 100 million Trading volume is measured in units; trading value is measured in Korean won
A product is safe if its net assets exceed KRW 5 billion Size requirements and the risk of falling asset prices are separate matters
Low trading volume means you cannot sell Check current bid prices and outstanding buy orders separately
An LP lets you sell at your desired price An obligation to provide quotes is not a guarantee of execution
ETF delisting means losing all your principal Termination proceeds are paid after the holdings are liquidated
Waiting until liquidation means getting your original investment back Proceeds are calculated based on net asset value and other factors

Comparing Selling and Redemption upon Termination After a Delisting Announcement

When a delisting is announced, compare the terms for selling and redemption upon termination. The applicable price and the timing of access to your money differ. It is not possible to determine in advance which option will be more favorable.

Item Selling on the exchange before trading is suspended Continuing to hold for redemption upon termination
Basis for the amount Actual order execution price Net asset value and other factors under the disclosed termination terms
When cash becomes available After settlement of the sale proceeds Disclosed payment date for termination proceeds
Price-related details to check Bid prices and outstanding buy orders Termination valuation date and method for calculating proceeds
Main uncertainties Unfavorable execution price or failure to execute Prices, exchange rates, and costs during asset liquidation

Termination proceeds do not simply return the amount you originally invested. If asset prices have fallen, losses may be reflected. You should not assume that the trading suspension date and the payment date for proceeds are the same.

Korea Investment Management's delisting-related disclosure also explains these two options. You can sell on the exchange before trading is suspended. If you continue to hold, you receive termination proceeds based on net asset value. KIND investor notice concerning delisting

Criteria for Comparing Statistics on Low Trading Activity

Whether zombie ETFs have increased must be assessed using a time series based on consistent criteria. The proportion at a particular point shows the distribution at that point. Without earlier figures, the rate of increase cannot be calculated.

Recently listed ETFs, in particular, may have shorter observation periods. Results may vary depending on how average trading value is calculated. To compare the data, record the following together.

The Maekyung ECONOMY article does not provide the detailed formula for calculating the averages. It is therefore more accurate to cite “more than 20%” as a reported tally. To reproduce it yourself, specify the query conditions used for Korea Exchange trading data.

Steps for Checking ETFs You Hold

When assessing a product you hold, start with the latest disclosures and current quotes. Use the ticker code to avoid confusing products with similar names. If you are considering selling, also note when you need the money.

  1. Check disclosures on the Korea Exchange's KIND using the ticker code.
  2. Read the grounds for designation as an issue under administration or for the announced delisting.
  3. Check bid prices and outstanding buy orders on your brokerage platform.
  4. Compare the market price with iNAV, the intraday indicative net asset value.
  5. If you choose to sell, set your order price and quantity.
  6. If delisting is scheduled, record the final trading date and payment date.

A limit order lets you set the price you are willing to accept. However, it will not be executed if there is no counterparty at that price. A market order may execute at a less favorable price than expected, depending on the available quotes.

Improving Product Reviews and Ongoing Oversight

System improvements need to address both product differentiation and the process for recovering invested funds. The number of listed products alone is not enough to assess market quality. Closing every product simply because it trades infrequently also has limitations.

Invest Chosun reported on repeated launches of similar products and problems with the review system. These are concerns raised within the industry, not measures confirmed for implementation. When assessing discussions of improvements, distinguish the following areas. Invest Chosun report on the ETF review system

FAQ

Is "zombie ETF" an official designation?

It is not an official designation. It is an informal term for ETFs that trade infrequently. Check exchange rules and disclosures to determine whether an ETF is designated for administrative supervision or delisted.

Will an ETF be delisted if its average daily trading value is less than KRW 100 million?

That condition alone does not lead to immediate delisting. KRW 100 million is the threshold used in the cited report to classify low trading activity. Actual delisting is assessed separately based on grounds such as size maintenance requirements or termination of the investment trust.

What is the difference between the counts of 239 and 186 ETFs with low trading activity?

The figure of 239 counts ETFs whose average daily trading value over the past 6 months was less than KRW 100 million. The figure of 186 counts ETFs that also met the condition of average daily trading volume of less than 5,000 units. Both figures are from reporting as of October 2, 2026.

Is an ETF immediately designated for administrative supervision if its net assets are less than KRW 5 billion?

Net assets alone do not determine the designation. The assessment looks at an ETF's status at the end of a half-year after 1 year has passed since listing. If both the original trust principal and total net assets are less than KRW 5 billion, the ETF is subject to designation for administrative supervision based on its size.

Is low trading volume acceptable if an ETF has substantial net assets?

Net asset size and ease of trading are separate matters. When you actually sell, check the current bid prices and the quantities available at those prices. Assess the risk of falling asset prices separately as well.

If there is an LP, can I sell at my desired price at any time?

An LP does not guarantee execution at your desired price. Its role is to provide bid and ask quotes under certain conditions. Check the quotes and quantities immediately before placing an order.

Will I lose my entire investment if an ETF is delisted?

Delisting itself does not mean that your entire investment is lost. If you continue to hold the ETF, you will receive redemption proceeds through the termination process. However, your original investment is not guaranteed.

Should I sell before delisting?

Decide by comparing the current terms for selling with the terms for redemption upon termination. A sale uses the actual execution price. Redemption upon termination follows the disclosed calculation method and payment date.

Does an increase in delistings mean that the number of zombie ETFs has also increased?

You cannot tell from the number of delistings alone. That number also includes ETFs that terminate when their scheduled duration ends. Determining whether low trading activity has increased requires a time series compiled using the same criteria.

Where can I check delisting disclosures for an ETF I hold?

You can check Korea Exchange's KIND and disclosures from the asset manager. Searching by ticker code rather than product name can reduce confusion. Also check disclosures about changes to the reasons for delisting or the schedule.

Sources

Images

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