Cash Deposit Requirement for Single-Stock Leveraged ETFs Raised to 30 Million Won; Trading Units Set at 20 Shares

Investors will now be required to hold a basic cash deposit of 30 million won to trade single-stock leveraged exchange-traded funds (ETFs).

Additionally, single-stock leveraged products will no longer be tradable in single-share units; they must be bought and sold in blocks of 20 shares, a measure expected to reduce overall trading volume.

The Financial Services Commission, the Financial Supervisory Service, and the Korea Exchange announced these supplementary measures for single-stock leveraged products today (the 16th), following discussions at a market situation assessment meeting presided over by Deputy Prime Minister for Economy Koo Yoon-cheol.

First, the basic deposit requirement for investing in single-stock leveraged products will be increased from the current 10 million won to 30 million won.

Previously, 70% of the 10 million won requirement could be met with the value of existing stocks, meaning an investor could participate with 7 million won in stocks and 3 million won in cash.

Under the new rules, however, the entire 30 million won must be held in cash to invest in single-stock leveraged products.

This effectively increases the minimum required cash from 3 million won to 30 million won.

The trading unit will also be tentatively expanded to 20 shares.

Currently, single-stock leveraged products are issued and traded at prices similar to typical leveraged products, ranging from 10,000 to 20,000 won, allowing for investment at prices lower than the underlying assets such as Samsung Electronics or SK Hynix.

However, raising the trading unit to 20 shares is expected to have the effect of reducing trading volume.

The increase in the basic deposit requirement is scheduled to take effect in August, while the change in trading units is expected to be implemented in November, taking into account the time required for securities firms to update their computer systems.

Management of tracking error rates will also be strengthened.

The tracking error rate is an indicator that expresses the percentage difference between an ETF's actual value, known as the Net Asset Value (NAV), and its actual market trading price (closing price).

The threshold for securities firms' obligation to manage tracking error rates will be tightened from the current 3% to 2%, and asset management companies that violate the appropriate tracking error rate may face restrictions on listing new ETFs.

The designation process for investment-warning stocks will also be streamlined from the current three stages to two.

In addition, the mandatory education time required to invest in single-stock leveraged products will be increased from two hours to three hours, and the listing of new single-stock leveraged products will be temporarily suspended until the market stabilizes.

Advertising and marketing for products already being traded will also be prohibited.

(Photo: Provided by the Ministry of Economy and Finance, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.