South Korea Suspends New Single-Stock Leveraged ETF Listings Amid High Market Volatility and Significantly Raises Investment Thresholds

To address increasing stock market volatility and strengthen investor protection, South Korea's Financial Services Commission (FSC) announced on Thursday (16th) the temporary suspension of new single-stock leveraged index ETFs and index-linked securities (ETNs).

This decision follows a joint market review meeting held by the Ministry of Economy and Finance, the Bank of Korea, and financial regulators, aiming to curb recent market instability triggered by the surge in leveraged products.

Under the new rules, minimum margin requirements for leveraged products will be significantly raised from the current 10 million KRW to 30 million KRW (approximately USD 20,300), with only cash accepted as collateral. This measure is scheduled to take effect officially on August 5.

In addition, regulators have raised trading thresholds, including extending mandatory investor training from 2 to 3 hours, increasing the minimum trading unit from 1 to 20 shares, and fully banning advertising for related products.

The intervention stems from the rapid expansion of the single-stock leveraged ETF market. Over the past two months, more than ten 2x leveraged products tracking major tech stocks such as Samsung Electronics and SK Hynix have entered the market. Since these funds must conduct large-scale rebalancing trades daily to maintain a fixed leverage ratio, the market widely believes this mechanism amplifies trading volume and price volatility before market close, creating a 'buy-high, sell-low' phenomenon that increases risks for retail investors.

Industry analysis suggests that while tighter regulations may limit retail investor participation to some extent, they have a positive effect in mitigating short-term market volatility. The South Korean government emphasized that if market conditions fail to stabilize, it will not rule out taking further supplementary measures.