Well-funded retail investors in South Korea are flocking to a leveraged instrument that has caused major losses in the past; outsiders worry that with severe stock market turbulence, related bets may be concentrated and liquidated. South Korea still allows investors whose account assets have reached a certain threshold to trade so-called CFDs, while the US prohibits ordinary retail traders from trading CFDs. According to data from the Korea Financial Investment Association, as of Monday, the number of open positions in such products surged by nearly two-thirds from a year ago, to about 3.3 trillion won. CFDs are popular because of their leverage effect. Investors only need to invest 40% of the total exposure insurance to obtain up to 2.5 times the exposure area. However, CFD was restricted by South Korea in 2023 due to market turmoil, and now it is making a comeback again, but the timing is quite sensitive. Leveraged ETFs linked to chip stocks have increased market fluctuations, and even prompted the competent authorities to suspend approval for the listing of new single-share leveraged ETFs.

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