South Korea's financial regulator announced on Friday that the minimum margin requirement for investors in single-stock leveraged exchange-traded funds (ETFs) will increase starting July 31.
This margin hike is part of a series of measures targeting leveraged ETFs unveiled earlier this month. The moves are designed to maintain market stability and protect investors amid significant volatility in South Korea's stock market.
The Financial Services Commission (FSC) had previously stated the measures would take effect early next month, but President Lee Jae-myung called for the steps to be accelerated.
Under the new rules, the listing of new ETFs tracking companies such as Samsung Electronics and SK Hynix will be suspended. Additionally, the minimum margin requirement for investors trading single-stock leveraged ETFs will be raised to 30 million Korean won (approximately $20,000) in cash only, up from the previous requirement of 10 million won, which could be a mix of stocks and cash.
Furthermore, when investors trade leveraged ETFs, the trading unit will be set at 20 contracts per lot, a move the regulator says will help reduce market turnover rates.
These leveraged ETFs, launched in May, are designed to amplify the daily price movements of their underlying stocks by two times, which has contributed to increased market volatility.
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