South Korea has moved forward the implementation date for a new regulation requiring a minimum cash deposit for investors in leveraged exchange-traded funds (ETFs), now set for July 31st, in an effort to curb demand for products seen as amplifying stock market volatility.
The Financial Services Commission announced in a statement that the new rule will take effect next Friday. Under the regulation, South Korean traders using domestic brokerage accounts to purchase single-leveraged ETFs listed either in South Korea or overseas must maintain a minimum cash deposit or account balance of at least 30 million won (approximately $20,332). Earlier this month, regulators had stated the requirement would be implemented from August 5th.
On July 16th, South Korea enacted a series of measures targeting leveraged ETFs linked to Samsung Electronics and SK Hynix. These ETFs have experienced rapid growth in size, which has contributed to heightened market volatility. At that time, regulators also indicated that approvals for new single-stock leveraged ETFs would be suspended until market conditions stabilize.
Leveraged ETFs, which are heavily pursued by retail investors, along with the two chip stocks they track, now account for more than 70% of the trading volume on the South Korean stock market. Volatility has notably increased since ETFs tracking twice the daily price movement of Samsung Electronics and SK Hynix were listed in late May. These products are designed to attract more retail capital into the local equity market.
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