South Korea's Financial Services Commission announced measures on the 16th to tighten access to single-stock leveraged ETFs for Samsung Electronics and SK Hynix, raising the minimum cash deposit from 10 million won to 30 million won starting next month 5th and increasing the trading unit from 1 share to 20 shares beginning in November. The policy response follows retail investor losses during a one-month period (last month 16th to this month 15th) when Samsung Electronics stocks fell 24.33% and SK Hynix stocks dropped 19.49%, while retail investors net purchased 5.849 trillion won of these leveraged products and institutions net sold 7.438 trillion won. The FSC aims to reduce the single-stock leveraged ETF market capitalization from approximately 12 trillion won to 4-5 trillion won through these measures.
FSC Raises Deposit Requirement to 30 Million Won Cash Starting Next Month 5th
The Financial Services Commission announced on the 16th that new investors in single-stock leveraged ETFs must deposit 30 million won in cash (increased from the previous 10 million won requirement) starting next month 5th. The trading unit will expand from 1 share to 20 shares beginning in November, requiring system upgrades at securities firms. The FSC cited the need to raise entry barriers as the rationale for both changes.
Retail Investors Net Bought 5.849 Trillion Won While Institutions Sold 7.438 Trillion Won
According to Korea Exchange and ETF CHECK data, retail investors net purchased 4.238 trillion won of SK Hynix leveraged ETFs (7 products) and 1.611 trillion won of Samsung Electronics leveraged ETFs (7 products) during the one-month period from last month 16th to this month 15th. Institutions net sold 5.171 trillion won and 2.267 trillion won of the same products respectively during this period. Total net inflows to the 16 single-stock leveraged and inverse ETFs for Samsung Electronics and SK Hynix reached 7.336 trillion won. The KODEX SK Hynix single-stock leveraged ETF alone attracted 3.447 trillion won, the largest inflow among all ETFs. KODEX SK Hynix single-stock leveraged ETF fell 45.60% and KODEX Samsung Electronics single-stock leveraged ETF declined 48.44% during the period.
Critics Highlight Contradictions in FSC Rationale and November Implementation Delay
The FSC stated in a background briefing that "theoretically, when ETF prices fall, investors buy more, creating a reverse-tracking trading effect that actually expands stock price stability." Critics noted this contradicts the premise that leveraged products increase market volatility, which formed the basis for the regulations. The FSC excluded measures to reduce leverage ratios to 1.5x or delist products, citing concerns about reverse discrimination against overseas products and procedural difficulties in holding beneficiary meetings. The November implementation date for the 20-share trading unit rule means investors holding fewer than 20 shares after that date cannot sell normally on the market and must apply separately to brokers to transfer their shares. The FSC originally approved these products citing capital market improvement and prevention of overseas investment outflows, but announced corrective measures just 50 days after product introduction.
FAQ
What deposit requirement did South Korea's FSC announce for single-stock leveraged ETFs?
The Financial Services Commission announced on the 16th that new investors must deposit 30 million won in cash (increased from 10 million won) starting next month 5th.
How much did retail investors buy of Samsung and SK Hynix leveraged ETFs during the one-month period?
Retail investors net purchased 4.238 trillion won of SK Hynix leveraged ETFs and 1.611 trillion won of Samsung Electronics leveraged ETFs from last month 16th to this month 15th, while institutions net sold 5.171 trillion won and 2.267 trillion won respectively during the same period.
When does the 20-share trading unit rule take effect?
The FSC announced the trading unit will expand from 1 share to 20 shares beginning in November, requiring system upgrades at securities firms before implementation.
