Key facts
- South Korea's financial regulator has introduced new measures for leveraged ETFs to ensure market stability.
- New listings for leveraged ETFs tracking Samsung Electronics and SK hynix will be temporarily suspended.
- The minimum deposit requirement for single-stock leveraged ETFs will increase to 30 million won ($20,000) in cash only.
- The minimum trading unit for leveraged ETFs will be set at 20 shares.
- Brokerage firms and asset managers face strengthened penalties for tracking errors.
- Enhanced risk disclosures and pre-investment education for investors will be implemented.
South Korea's financial regulator has introduced a series of measures aimed at stabilizing the market and protecting investors amid extreme volatility in leveraged exchange-traded funds (ETFs). The Financial Services Commission (FSC) announced that new listings for leveraged ETFs tracking Samsung Electronics and SK hynix will be temporarily suspended.
Effective August 5, the minimum deposit requirement for investors in single-stock leveraged ETFs will be raised to 30 million won (approximately $20,000) in cash only, a significant increase from the current 10 million won which allowed a mix of stocks and cash. Furthermore, starting in November, investors will be limited to trading leveraged ETFs in batches of 20 shares, a move intended to reduce turnover. These leveraged ETFs, which debuted in May, have seen a surge in retail investor interest due to their amplified daily returns, particularly those linked to the strong performance of chipmakers Samsung Electronics and SK hynix amid the AI boom.
The FSC also plans to strengthen penalties for brokerage firms and asset managers concerning tracking errors and enhance investor protection through improved risk disclosures and pre-investment education. The regulator estimates these stricter deposit requirements could reduce the combined market capitalization of single-stock leveraged products, currently around 12 trillion won, to approximately one-third of its current size. The measures follow a call from President Lee Jae Myung for regulatory action to stabilize the market.