South Korea Implements Strict Rules to Cool Leveraged ETF Market
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South Korea Implements Strict Rules to Cool Leveraged ETF Market
- South Korean regulators introduced new measures in August 2026, including a mandatory five-day mock trading course and a tripled minimum cash deposit of 30 million won (approximately $21,000), to curb speculative trading in leveraged exchange-traded funds (ETFs).
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These new regulations, which also include a temporary ban on new listings of single-stock leveraged ETFs, were prompted by significant market volatility and substantial losses for retail investors in products linked to major chipmakers like Samsung Electronics and SK Hynix.
South Korean financial authorities have implemented stringent new rules in an effort to cool down a highly speculative market for leveraged exchange-traded funds (ETFs), particularly those tracking domestic chipmakers. The measures, which came into effect in August 2026, include a mandatory mock trading course, an increased minimum cash deposit, and a temporary halt on new product listings.
New retail investors wishing to trade single-stock leveraged ETFs must now complete a five-day simulated trading program on the Korea Exchange platform, spending at least an hour per session. Additionally, they are required to complete three hours of educational training on the mechanics and risks of leveraged products. The minimum cash deposit for new investments in these products has also been tripled to 30 million won, equivalent to approximately $21,000.
These regulatory actions follow a period of intense volatility in the South Korean stock market, which saw significant retail investor interest in leveraged ETFs offering twice the daily returns of companies like Samsung Electronics and SK Hynix. The funds, launched in late May 2026, quickly attracted around $9.7 billion in inflows from retail investors, with combined assets under management peaking at approximately $28 billion. However, a sharp market correction in July 2026 led to substantial losses, with some leveraged ETFs dropping over 75% to 80% from their June peaks.
The trading value of these leveraged chip ETFs has since collapsed, falling over 90% from its peak in June, and the products recorded their first monthly outflow of nearly $1 billion in August 2026. South Korea’s finance minister publicly apologized in late July for insufficient safeguards surrounding these products. Regulators also temporarily suspended new listings of single-stock leveraged ETFs and banned their advertising and marketing. While the trading frenzy has subsided, some analysts suggest it is still early to fully assess the long-term impact of these measures on market volatility.