South Korea's Financial Services Commission (FSC), Financial Supervisory Service, Korea Exchange and Korea Financial Investment Association have accelerated stricter trading requirements for retail investors dealing in single-stock leveraged exchange-traded funds (ETFs). According to the latest announcement, retail investors will now be required to maintain a cash deposit of 30 million won ($20,437) to trade single-stock leveraged ETFs from July 31, earlier than its previous plan to introduce the measure sometime in August. The regulator announced this decision following discussions at a market monitoring meeting on July 16, stating that the measures aim to curb speculative trading by retail investors. Financial Supervisory Service Governor Lee Chan-jin acknowledged his responsibility as market manager, stating during a policy report to the president on July 15: "As a market manager, I have responsibility, and I am accepting that responsibility willingly."
The enhanced requirements come as 16 single-stock leveraged ETF products have recorded rapid growth in both market capitalization and trading value since their listing on May 27. As reported by authorities, combined market capitalization increased from 4.4 trillion won on the first day of trading to 11.09 trillion won as of July 15, while aggregate trading value rose from 10.4 trillion won to 13 trillion won over the same period. The move addresses growing concerns over heightened share-price volatility among major global memory chipmakers, with domestic single-stock leveraged ETFs linked to Samsung Electronics and SK Hynix having drawn criticism for contributing to increased market swings. According to The Economist, the artificial intelligence (AI) boom has been the backdrop for the market's surge since last year, with the combined market capitalization of Samsung Electronics and SK Hynix reaching 2 trillion dollars (about 2,953 trillion won). The outlet noted that retail investors have poured 10 billion dollars into leveraged ETFs this year, with the daily rebalancing structure of these products further increasing market volatility.
Under the updated system, authorities will tighten cash deposit rules significantly. Proceeds from the sale of eligible securities will now be recognized as cash only when they are actually settled and credited to the investor's account two business days after the trade date, rather than immediately treating them as cash deposits on the trade date. The change is specifically intended to curb excessive rapid-turnover trading in which investors sell and immediately repurchase the products on the same day. Additionally, funds borrowed against stock sale proceeds will no longer count toward the minimum margin requirement, with only cash deposits qualifying toward the new 30 million won requirement. As the product market has already grown to more than 10 trillion won, it is difficult to consider delisting; instead, the commission intends to raise the barrier by strengthening minimum investment requirements.
Separately, measures to strengthen securities firms' and asset managers' responsibility for managing tracking error rates and to shorten the process for designating products as investment caution issues will take effect on August 19 following revisions to Korea Exchange regulations and implementation rules. Authorities also said they will discuss accelerating the implementation of a plan to raise the minimum trading unit for single-stock leveraged ETFs from one unit to 20 units, which had originally been scheduled to take effect in November. Currently, retail investors seeking to purchase domestic or overseas-listed single-stock leveraged ETFs for the first time are required to maintain a minimum margin deposit of 10 million won, equivalent to about $6,820. The Economist warned that "no matter how much the financial regulators now regret it, it will not be easy to drive investors out of the casino," noting that Korean investors have already fallen deeply for these attractive financial products.
Despite recent stock-market corrections, South Korea's financial markets still face several key policy events in the second half of the year. Financial authorities plan to roll out a series of measures including subordinate rules for security tokens (STO), expanded incentives for foreign investment, follow-up changes to the cornerstone investor system and an overhaul of venture-investment rules. The most closely watched item is the formal rollout of the STO framework, with the Financial Services Commission planning to release subordinate regulations and guidelines this month following revisions to the Electronic Securities Act and Capital Markets Act. The package will include standards for assets eligible for fractional investment, disclosure requirements, and licensing structure for over-the-counter security-token exchanges, with the related law scheduled to take effect in February 2027.
