Investors face trading hurdles on first day of new leveraged ETF rules in South Korea

South Korean investors are experiencing market confusion on the first day of new regulations targeting leveraged Exchange Traded Funds (ETFs). The Financial Services Commission (FSC) implemented a rule raising the minimum deposit for single-stock leveraged ETFs to 30 million won (approximately $21,500 USD), with only cash now accepted as collateral.

Previously, up to 70% of the value of other securities like stocks and ETFs could be used to meet the deposit requirement. The new rule also specifies that the deposit is recognized only when cash is actually deposited, not on the day of selling other securities, and excludes amounts borrowed against stock sales.

Despite holding more than the required 30 million won in cash, numerous investors reported being unable to trade ETFs. Online forums buzzed with complaints, with one investor stating, "Leveraged or inverse, orders won't go through. My deposit is well over 30 million won. The guidance message is strange." Another expressed frustration, "I have 60 million won in my brokerage account, but I can't buy a single share." Some reported receiving messages indicating a required deposit of 130 million won.

The situation is exacerbated by a surge in the South Korean stock market, particularly in semiconductor stocks like Samsung Electronics and SK Hynix, which have seen gains of around 25%. This has driven up leveraged ETFs tracking these stocks by over 50%, intensifying investor frustration over trading restrictions. The core issue appears to be the FSC's calculation method for deposits, which doesn't count funds from recently sold stocks as immediately available for trading.