Starting on the 19th, individual investors making their first investment in single-stock leverage exchange-traded funds (ETFs) and other similar products will be required to complete mock trading before investing actual funds.
The same regulation applies not only to products listed on the domestic market but also to single-stock leverage products listed on overseas stock exchanges.
According to the Korea Exchange, the mandatory mock trading requirement will apply to general individual investors trading single-stock leverage and inverse ETFs and exchange-traded notes (ETNs) for the first time starting from the 19th.
Professional investors, corporations, and foreigners are exempt from this requirement.
New investors must engage in mock trading for at least five trading days on the Korea Exchange mock trading website.
They must complete a minimum of one hour per day, totaling at least five hours, before they can trade actual products.
However, investors who have previous trading experience with single-stock leverage products are not required to do mock trading.
Those who have invested in domestic or overseas single-stock leverage products between May 27th and the 18th of this month will be exempt from the completion requirement.
Because the mock trading system will be operational starting on the 19th, new investors will be able to confirm their actual completion starting from the 24th, after five trading days have passed.
An additional one to two business days may also be required to register the completion information with securities firms and receive approval.
This measure is one of the additional regulations introduced by the government to curb excessive investment in single-stock leverage products.
Last month, financial authorities proposed additional measures including setting investment limits per account, increasing the burden of trading costs, and making preliminary mock trading mandatory.
Among these, the mandatory mock trading will be implemented first starting on the 19th.
Previously, starting from the 31st of last month, the basic deposit that investors must keep in their accounts was also raised from 10 million KRW to 30 million KRW in cash.
Substitute securities such as stocks are no longer recognized, significantly raising the barrier to entry for investment.
Following the regulations, the scale of related products is rapidly decreasing.
As of the previous day, the market capitalization of 16 single-stock leverage and inverse ETFs listed on the domestic stock market stood at around 5.6 trillion KRW.
Financial authorities anticipated that through regulations such as the basic deposit requirement, the size of related products, which once swelled to 12 trillion KRW, could be lowered to the range of 4 trillion to 5 trillion KRW.
This is a similar level to the 4.4 trillion KRW listing size when single-stock leverage products were first launched domestically in May.
Reported by Kim Minjeong | Video by Seo Byeong-wook | Graphics by Yook Do-hyun | Produced by SBS Digital News
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