Korea Financial Services Commission: If demand for single-stock leveraged ETFs does not cool off, it will consider setting individual investment limit caps

PANews July 29, according to South Korean media SUPPLY, the South Korean stock market plunged sharply during intraday trading today and triggered the primary circuit breaker mechanism. Lee Eiwon, chairman of the Financial Services Commission of Korea, said that if demand for single-stock leveraged ETFs does not cool down sufficiently, regulators will review additional regulatory measures, including limits on individual investors’ investment quotas.

It is understood that South Korea may cap the investment size of single-stock leveraged ETFs at no more than 20% of an individual’s total financial investment assets, and assess further raising investor access thresholds, including introducing periodic retraining, simulated trading, and minimum investment-experience requirements.

Meanwhile, the Financial Services Commission of Korea requires fund companies to diversify the timing of ETF rebalancing to avoid concentrated portfolio reshuffling near the close, which could magnify market volatility, and calls on liquidity providers (LPs) to reasonably control their quotes and trading frequency to reduce unnecessary trading. The Financial Services Commission of Korea previously announced that, effective July 31, the minimum initial margin for single-stock leveraged ETFs will be raised to 30 million won, and that it will strengthen investor education and manage the premium rate.