South Korean Regulatory New Rule Curbs Speculative Frenzy, Leveraged ETF Trading Volume Plunges

August 4th: In South Korea, after regulatory measures were taken to suppress the recent surge in market volatility driven by leveraged ETF demand, the trading volume of leveraged ETFs related to two major chip giants in South Korea has significantly shrunk.

The KODEX Single Stock ETF tracking SK Hynix is one of South Korea's largest single stock leveraged ETFs. The product's trading volume dropped to 59 million shares on Monday, the lowest level since June 4th. Another similar ETF linked to Samsung Electronics also hit its lowest trading volume since it was launched at the end of May.

Peter Park, Assistant Manager of Stock Sales at NH Investment & Securities in South Korea, said, "The speculative leverage bubble in major tech stocks has been curbed from both the upside and downside. Retail speculative leveraged trading has effectively ended as investors can sell existing positions without restrictions but face high cash thresholds for new purchases."

Prior to this, the South Korean regulatory authority raised the minimum cash collateral requirement for single stock leveraged ETF investors from 10 million Korean won to 30 million Korean won. Compared to the trading volume of 12.4485 trillion Korean won on the last trading day before the measure was implemented (July 30th), the current trading scale of related products has decreased to about one-tenth.