South Korea Tightens Single-Stock Leveraged ETF Rules, Raises Margin Deposit to 3M Won

South Korea's government on July 20 announced new regulatory measures for single-stock leveraged exchange-traded funds (ETFs), raising the minimum cash deposit requirement to 3 million won, expanding trading units to 20 shares, and tightening net asset value management standards from 3% to 2%. Investment education duration was also extended from 2 to 3 hours.

However, industry observers expressed skepticism about the measures' effectiveness in reducing market volatility. Experts suggested alternative approaches, including dispersing liquidity providers' (LP) hedging trades throughout the trading day instead of concentrating them near market close, introducing volatility circuit breakers, reducing the leverage multiple from 2x to 1.5x, and broadening eligible stocks beyond Samsung Electronics and SK Hynix to include Hyundai Motor, Naver, and major financial companies.