South Korea Curbs Leveraged ETFs: Trading Volume Now Down to One-Tenth

The boom in single-stock leveraged ETFs in South Korea has now turned into a costly lesson for the market. Finance Minister Koo Yun-cheol said trading activity in these products had shrunk to around one-tenth of its previous level after the government tightened regulations and raised entry barriers for investors.

Single-stock leveraged products were only launched on May 27, but grew very rapidly. The market value of these products surged from around KRW4.4 trillion to KRW11.9 trillion in less than two months.
Problems emerged when the technology stock rally, particularly in Samsung Electronics and SK Hynix, sharply reversed. Leverage magnifies gains when the market rises, but also accelerates losses and selling pressure when prices reverse. The government even acknowledged that these products had contributed to increased market volatility.
Not Just a Decline in Volume
What is interesting is the shift in capital flows after regulations were tightened. Funds began moving from single-stock-based leveraged ETFs toward KOSDAQ index ETFs and index-based leveraged products. In early August, several KOSDAQ leveraged ETFs even recorded gains of around 59–63% in one week.
This means Korean investors have not completely abandoned high-risk strategies. They have only changed their investment vehicles.
The government is also considering limiting the proportion of single-stock leveraged ETFs in retail investors' portfolios, with 20% having been one of the options discussed.
Conclusion
The decline in volume to one-tenth is not merely a sign of fading interest. It shows that regulation can change market behavior in a very short time.
For investors, the biggest lesson is clear: leverage can accelerate gains, but when the trend reverses, it can also accelerate panic.
South Korea is now not only trying to control leveraged ETFs but also testing how far financial innovation can go without becoming a source of systemic volatility.
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