The Zhitong Finance App learned that South Korea will require new investors in individual stock leveraged ETFs to complete simulated trading exercises to further tighten regulations on such high-risk products that amplify market fluctuations.
The Korea Financial Services Commission (FSC) said in a statement that new investors in single-stock leveraged ETFs must complete simulated transactions for at least 5 days with a cumulative total of at least 5 hours. The new regulations will apply to both domestic and overseas investments from August 19.
The previous round of sharp declines caused investors to lose their positions by billions of dollars. This move is the latest move by regulators to curb retail exposure to leveraged ETFs. Previously, regulators had raised the minimum cash deposit for such transactions to 30 million won (approximately $2.1 million) and extended the mandatory online training period for new investors in single-stock leveraged products to 3 hours.
Prior to the introduction of these regulatory restrictions, outsiders criticized leveraged products linked to chip giants Samsung Electronics and SK Hynix for amplifying fluctuations in the benchmark Korea Composite Stock Price Index (Kospi Index).
Since the increase in cash margin requirements came into effect on July 31, the trading volume of single-stock leveraged ETFs has declined. According to data from financial regulators, the sales volume of such products was only 700 billion won on August 11, while on July 30, this figure reached 12.4 trillion won.
The Korea Stock Exchange's website will offer a new simulated trading course for free. Individuals seeking to trade derivatives or short sell stocks face similar compliance requirements.