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South Korea bans new single-stock leveraged ETF listings temporarily
Starting Aug. 5, the minimum cash deposit for retail investors will rise to 30 million won, up from 10 million won, as regulators target volatility tied to chipmaker-linked products.
South Korea will temporarily pause new listings of exchange-traded funds that track certain major technology firms, while it increases required deposits for retail investors, the Financial Services Commission said. The regulator plans to halt new listings until market conditions stabilize, according to Reuters.
The new minimum cash balance needed to trade single-stock leveraged ETFs will be raised to 30 million won, about $20,300, from 10 million won starting Aug. 5. The move follows the late-May approval of domestic single-stock leveraged ETFs linked to Samsung Electronics and SK Hynix, which have grown rapidly in popularity.
Regulators cited concerns that frequent and large rebalancing trades tied to the leveraged structure have contributed to volatility. Leveraged ETFs use derivatives to target multiples of an underlying stock’s daily returns, a design that can increase trading activity beyond real investor flows.
As part of investor-protection steps, the government said it will require asset managers to retain qualified liquidity providers and hold them accountable for major pricing gaps. Byun Je-ho of the FSC said broker-dealers and asset management companies will be mandated to keep high-quality liquidity providers effective this August, while investors will face higher minimum deposit requirements for both domestic- and foreign-listed single-stock leveraged products.