South Korea advances early implementation of higher deposit rule for leveraged stock trading

South Korea is accelerating its efforts to curb speculative trading by increasing the minimum deposit required for leveraged investments in single stocks. The Financial Services Commission announced on July 24 that the basic investor deposit for leveraged products tied to individual stocks, such as Samsung Electronics and SK Hynix, will be raised from 10 million won to 30 million won.

This enhanced requirement, originally slated to take effect on August 5, will now be implemented earlier, starting July 31. Under the new rules, individual retail investors wishing to newly purchase or add to existing positions in single-stock leveraged products, both domestic and international, must maintain at least 30 million won in cash in their accounts. Previously, investors could trade if they met a 10 million won threshold, which included 70% of the market value of other securities held, such as stocks and bonds. However, under the revised regulations, the value of these other securities will no longer count towards the deposit requirement.

Furthermore, the Financial Services Commission is working to expedite the implementation of another measure: expanding the trading unit size for these leveraged products. Currently set at one unit, the plan is to increase it to 20 units, thereby raising the transaction volume per trade from the current 10,000-20,000 won to 200,000-400,000 won. This adjustment is also being pushed forward from its original November target.

The early implementation of the higher deposit requirement signals the authorities' heightened concern over excessive speculation in the market, particularly in leveraged products that magnify both gains and losses. By raising the barrier to entry, regulators aim to reduce the participation of less experienced investors and mitigate potential systemic risks associated with highly volatile trading strategies.