South Korea advances leveraged ETF deposit hike to May 31

South Korea is accelerating its plan to raise the minimum deposit for leveraged exchange-traded funds (ETFs) focused on single stocks like Samsung Electronics and SK Hynix. The new requirement, set at 30 million won (approximately $21,700), will take effect on May 31, earlier than the originally scheduled June 5.

This move by the Financial Services Commission and other regulatory bodies aims to curb excessive speculation in the volatile leveraged ETF market. Under the revised rules, individual investors will need to have at least 30 million won in cash in their accounts to purchase new leveraged ETFs or increase their existing holdings. Previously, investors could meet the 10 million won requirement using a combination of cash and other securities, such as stocks and ETFs, valued at 70% of their worth.

The tightened regulations mean that these other securities will no longer count towards the deposit requirement. This significant shift is expected to deter retail investors from engaging in high-risk trading, particularly in products that track the performance of individual tech giants. The early implementation suggests a heightened concern among regulators about market stability and investor protection.