Key facts
- South Korean financial authorities are considering a cap on single-stock leveraged ETFs in individual portfolios.
- The measure aims to curb extreme stock market volatility attributed to these products.
- One proposed cap is 20 percent of retail investors' portfolios.
- Other measures include increased financial burdens on brokerages and enhanced pre-trading education.
- The minimum cash deposit for these ETFs will increase to 30 million won.
- Trading in batches of 20 shares will be required starting in November.
South Korea's financial authorities are exploring significant measures to temper volatility in the stock market, with a particular focus on single-stock leveraged exchange-traded funds (ETFs). During an emergency meeting on July 29, 2026, officials discussed imposing a cap on the proportion of these leveraged ETFs that individual investors can hold, with one proposal suggesting a limit of 20 percent of a retail investor's portfolio. This move comes as single-stock leveraged ETFs, which gained popularity after their launch in the U.S. in 2022, have recently surged in popularity in Asia, especially among South Korean chipmakers.
In addition to the potential portfolio cap, authorities are considering other actions to curb excessive trading and market swings. These include increasing the financial burden on brokerage firms, implementing a simulated trading requirement alongside existing pre-trading education, and establishing a legal framework for market stabilization measures during emergencies triggered by leveraged ETFs. The government has already introduced some measures earlier this month, such as restricting the launch of new leveraged products and advertisements.
Further tightening measures are set to take effect soon. Starting Friday, the minimum cash deposit required to invest in single-stock leveraged ETFs will be raised from 10 million won to 30 million won (approximately US$20,600). In August, the mandatory educational period for investors will be extended from two to three hours. Beginning in November, investors will be required to trade these ETFs in batches of at least 20 shares, a move intended to reduce turnover. The meeting participants also acknowledged that competition in the memory chip industry and concerns over U.S. tech company fundraising contributed to market volatility, but affirmed that South Korea's economic fundamentals remain strong.