South Korea's Financial Services Commission Requires 5-Day Simulated Trading for New Leveraged ETF Investors
South Korea's Financial Services Commission issued new rules on Aug 12 requiring new investors to complete at least five days of free simulated trading (totaling five hours) on the Korea Exchange website before purchasing single leveraged ETFs, effective Aug 19. The rules apply to domestic and foreign products. Earlier, the regulator raised the minimum cash deposit for such ETFs to 30 million Korean won and extended online training to three hours. Following the Jul 31 cash-threshold increase, trading volume in single-stock leveraged ETFs plunged from 12.4 trillion won on Jul 30 to 700 billion won by Aug 11, a drop of over 90%. The new simulation mandate extends investor protection for high-risk leveraged products.
South Korea's Financial Services Commission announced new rules on Aug 12 requiring new investors to complete at least five days of free simulated trading – totaling five hours – on the Korea Exchange website before purchasing single leveraged ETFs. The rules take effect Aug 19 and apply to both domestic and overseas related investment products. Previously, the regulator had raised the minimum cash deposit requirement for single-stock leveraged ETFs to 30 million Korean won and extended mandatory online training for new investors to three hours.
The impact of regulatory tightening has become evident. Since the cash threshold was raised on Jul 31, trading volume in single-stock leveraged ETFs has cooled sharply, falling from 12.4 trillion won on Jul 30 to 700 billion won by Aug 11, a decline of over 90% within a few trading days. The extension of the simulated-trading mechanism to single leveraged ETFs indicates that South Korea is gradually establishing an investor access system for high-risk leveraged products.