South Korea toughens regulations on single-stock leveraged ETFs

SEOUL, July 16 : South Korea's financial regulator on Thursday unveiled a series of regulatory measures aimed at easing market volatility triggered by exchange-traded funds (ETFs) that are tied to certain major technology firms.

So-called single-stock, leveraged ETFs linked to chipmakers Samsung Electronics and SK Hynix were first introduced in South Korea in late May amid a chipmaker-driven rally in the country's KOSPI stock benchmark. But the derivative-based funds have increased market volatility.

"Recently, various worries and the needs of improvements have been raised about further increases in already heightened volatility in major memory chipmaker stocks globally and a high possibility of increasing investor losses," the Financial Services Commission (FSC) said in a statement.

The FSC said the minimum required deposits for retail investors to invest in such ETFs would be raised to 30 million won ($20,305.94) from 10 million won at present, while the minimum trading unit would be raised to 20 shares from 1.

Retail investors will also be required to take additional courses on risk education, while brokerage firms will be advised against launching new leveraged ETFs and promotional events, the FSC said, after a meeting between top economic policymakers including the finance minister and central bank governor.

Thursday's measures seek to protect investors while taking market stability and efficiency into consideration, the FSC said, adding that authorities would consider additional measures if needed to stabilise the market.

($1 = 1,477.4000 won)