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Korea Exchange adds mock-trading rule for chip leveraged ETFs
The change, effective Aug. 19, requires investors to complete five days of Windows PC simulated trading and has coincided with trading value falling to about 4% of the products' June peak.
Korea Exchange is tightening access to leveraged exchange-traded funds tied to chipmakers Samsung Electronics and SK Hynix, as South Korea looks to cool investor enthusiasm for products that have added to volatility in the country’s $4.3 trillion stock market, according to LiveMint Markets.
The rule requires investors to complete five days of simulated trading under a new process, including downloading a Windows-only program on a personal computer and spending at least an hour per day using virtual cash. LiveMint Markets reported that several Korean retail investors said the requirement is too cumbersome, including concerns that some work computers cannot install the needed software, and others citing minimum time and new membership account steps.
Leveraged ETFs targeting twice the daily moves of the two single-stock chip stocks have seen their trading value collapse to 4% of its June peak and are set for their first monthly outflow, the outlet said. The ETFs were introduced in May to attract retail money but became a political flashpoint after they helped drive heavy turnover and wild price swings.
The mock-trading system uses a virtual cash deposit of 100 million won to show investors potential “volatility decay,” or how leveraged returns can erode over time. LiveMint Markets added that the Korea Exchange declined to share how many people have downloaded the program or attempted the simulation.