South Korea Single-Stock Leveraged ETF Regulation Implemented for One Week: Trading Activity Cools Significantly, Daily Turnover Drops Below 1 Trillion Korean Won

TechFlow news, August 7, according to South Korean media Daum, one week after the implementation of regulatory measures on South Korean single-stock leveraged and inverse ETFs, trading enthusiasm for related products has cooled significantly, with trading volume below 1 trillion won for two consecutive trading days.

According to data from the Korea Exchange (KRX), on August 7, the total trading volume of 16 single-stock leveraged and inverse ETFs in the South Korean market was 941.2 billion won, falling below 1 trillion won for the second consecutive trading day following 919.8 billion won on the previous trading day. The day before regulatory implementation (July 30), the trading volume of the 16 related ETFs reached as high as 12.45 trillion won; it plummeted to 3.15 trillion won on the first day of regulation (July 31), continued to decline thereafter, falling to 1.39 trillion won and 1.26 trillion won on August 3 and 4, respectively, and recently fell below 1 trillion won. Meanwhile, the trading share of single-stock leveraged and inverse ETFs in the South Korean ETF market also dropped significantly, dropping to 5.6% on August 7, while previously accounting for 30% to 40% before regulation.

The market believes that the decline in trading volume is mainly due to the new regulatory measures implemented since July 31. The new rules raised the capital threshold for individual ordinary investors participating in single-stock leveraged ETFs, increasing the base margin requirement from 10 million won to 30 million won in cash.