South Korea FSC to ban new listings of single-stock leveraged ETFs from Aug 5

Published Jul 16, 02:00 AM UTC

South Korea's Financial Services Commission (FSC) announced a temporary ban on new listings of single-stock leveraged ETFs, particularly those tied to major tech firms like Samsung Electronics and SK Hynix, to curb market volatility. Starting August 5, the minimum cash balance required to trade such products will be raised from 10 million won to 30 million won ($20,300). The move follows a surge in popularity of leveraged ETFs linked to chipmakers, which politicians and investors blame for increasing volatility due to daily rebalancing trades. The FSC will also require asset managers to retain qualified liquidity providers (LPs) and hold them accountable for pricing disparities. Analysts say the intervention is overdue but warn that aggressive measures could trigger a rush to exit before implementation, amplifying volatility. The KOSPI fell over 6% on the announcement day. In June, the market watchdog admitted it had been too hasty in approving such products. Retail investors' borrowed investment in equities reached a record 60 trillion won ($40.39 billion) by end of May.