South Korea hikes deposit for single-stock leveraged trades to curb volatility

South Korea's Financial Services Commission (FSC) is implementing stricter measures to curb extreme stock market volatility, particularly concerning leveraged investment products linked to single stocks. Effective soon, the required deposit for trading products tied to Samsung Electronics and SK Hynix will increase from 10 million won to 30 million won.

Crucially, these deposits must now be made entirely in cash. Previously, investors could use up to 70% of the market value of their existing stocks or bonds as collateral. This change aims to prevent investors from easily entering leveraged trades with small amounts of cash, thereby reducing the potential for amplified losses during market swings.

In addition to the increased cash requirement, the FSC is prohibiting the listing of new single-stock leveraged products. Advertising and promotional marketing for already listed products are also banned, effective immediately. These measures come just over a month after the launch of such products in late May, signaling regulators' concern over their impact on market stability.

The FSC is also strengthening investor education, adding an hour of in-depth training focused on market conditions and loss cases, bringing the total training time to three hours. Minimum trading lot sizes for these products will also increase from one unit to 20 units starting in November, raising the minimum order value to 200,000-400,000 won.