South Korea raises deposit requirement for leveraged ETFs to curb market volatility

South Korean financial authorities have announced new measures to stabilize the stock market, primarily targeting single-stock leveraged Exchange Traded Funds (ETFs). Effective immediately, the minimum investor deposit for these products will be raised from 10 million won to 30 million won.

This decision, made during a market situation review meeting chaired by Deputy Prime Minister for Economy Koo Yun-cheol, aims to increase the hurdle for individual investors engaging with leveraged products. The authorities will only recognize cash as eligible for the minimum deposit, excluding other securities.

Furthermore, new listings of single-stock leveraged ETFs will be temporarily halted, and their advertising will be prohibited. These actions are intended to mitigate the volatility in the stock market, which has been partly fueled by the speculative nature of these leveraged instruments. The Ministry of Economy and Finance, the Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange are collaborating on these measures.