South Korea to raise deposit requirements for single-stock leveraged ETFs

South Korea's financial industry is moving to increase the hurdles for retail investors trading single-stock leveraged exchange-traded funds (ETFs). Major securities firms, in an emergency meeting with the Korea Financial Investment Association (KFIA), agreed to raise the minimum deposit required for these products.

Currently, investors need at least 10 million won (approximately $7,200 USD) in their stock accounts to invest in single-stock leveraged ETFs. The industry plans to increase this threshold, making it more difficult for individual investors to engage in highly leveraged trading. This measure is intended to prevent excessive speculation and mitigate market volatility.

The decision comes just a day after Lee Chan-jin, head of the Financial Supervisory Service (FSS), pointed out issues with single-stock leveraged ETFs. He specifically highlighted problems with managing the gap between market price and net asset value (known as the "gap rate") and misleading advertisements. The FSS has been concerned that these products, which amplify market movements, are contributing to increased volatility in the KOSPI index.

The KFIA's meeting, chaired by Chairman Hwang Sung-yeop, involved representatives from ten major securities firms. They discussed self-regulatory measures to address the concerns. The agreement to raise the deposit requirement is a key outcome, signaling a proactive approach by the industry to manage risks associated with these complex financial instruments.