Citi, Morgan Stanley, Goldman Sachs and Other Major Banks Tighten Swap Leverage on SK Hynix and Samsung, Financing Rates Surge to Nearly 15%
Miles Bennett
Six top global brokers have raised the cost of betting on SK Hynix and Samsung Electronics via swaps, pushing funding rates toward 15%; Morgan Stanley is flat-out refusing new orders — Wall Street is pulling the leverage brake on the AI-chip rally.
What exactly are the banks doing?
Citi, JPMorgan, Goldman Sachs, Bank of America, BNP Paribas and UBS have all raised the funding cost for hedge funds using equity swaps — contracts that let investors bet on a stock's moves without owning it directly — to wager on SK Hynix and Samsung Electronics. They have also capped new deal sizes and narrowed the list of eligible counterparties.
Morgan Stanley went further: it is outright rejecting new swap requests on these two Korean stocks. Several second-tier banks stopped taking new orders in the past two weeks.
This means → This is not one bank's call. It is an industry-wide risk pullback — when six or seven top brokers tighten the tap simultaneously, the leverage pipeline shrinks system-wide.
How much has the cost jumped?
Funding rates on SK Hynix and Samsung swaps have risen from roughly SOFR + 100–200 basis points in early May to SOFR + 300 bps to 11% now.
In plain terms = SOFR — the overnight bank-lending benchmark — sits at about 3.6% today. Add the top-end spread and the all-in rate nears 15%.
This means → The cost of the same bet has multiplied in weeks. The new rates apply to fresh contracts and to rollovers — existing positions pay the new price when they renew.
Why are banks tightening now?
The trigger: SK Hynix has more than tripled this year; Samsung Electronics is up over 175%. Together they have driven the Kospi index up roughly 100% year-to-date, making it the world's best-performing major market.
The fear: a sharp pullback → client positions lose value → margin calls go out → clients default → the bank absorbs the loss.
This reflects a structural feature of the Korean market — most hedge funds lack their own exchange-trading accounts in Korea, so swaps are the default tool for betting on Korean stocks. Banks must use their own balance sheets to warehouse the exposure, keeping the risk on their books.
What do SpaceX's IPO and TSMC have to do with this?
Some banks now require clients to hold swap positions on a fully funded basis, stripping out the traditional built-in leverage.
SpaceX's roughly $75 billion mega-IPO landed this week and is expected to consume a large slice of bank balance-sheet capacity — giving banks an extra reason to trim capital deployed on Korean chip-stock swaps.
This means → A bank's balance sheet is finite shelf space. The SpaceX IPO grabbed a big chunk; less room is left for Korean swaps. Banks have imposed similar restrictions on TSMC as well.
What role is ETF money playing?
Roundhill Investments' actively managed Memory ETF has swelled to $16.7 billion in assets since its early-April launch; SK Hynix and Samsung together account for over 40% of its holdings.
CSOP Asset Management's Hong Kong-listed leveraged ETF — tracking 2× daily returns on SK Hynix — has topped $10.9 billion in about eight months.
In plain terms = ETFs are funneling retail and institutional money into the same two stocks at high concentration, amplifying both demand and concentration risk.
What is the market testing next?
SK Hynix and Samsung now make up roughly 53% of the Kospi index by weight, more than double their share five years ago. The AI boom is the core driver of that concentration spike.
Both stocks have already pulled back noticeably; sources say some restrictions were put in place before the recent sell-off.
This means → The tightening is not a reactive response to falling prices — it is pre-emptive risk management. Once leveraged money recedes, whether fundamentals can support current valuations becomes the market's next test.
Content is for reference only, not financial advice.