The financial authorities are expected to increase regulations on single stock leverage products, which have been identified as a cause of market volatility. The Financial Services Commission (FSC) announced that it will first assess the impact of the enhanced basic deposit requirement set to take effect on July 31. If market overheating continues, the FSC will consider implementing individual investment limits and additional investment requirements.
During a meeting on July 28 at the Financial Investment Association in Yeouido, FSC Chairman Lee Ok-yeon stated, "The government will closely examine the policy effects of the enhanced basic deposit requirement and other supplementary measures that will be implemented on July 31. If demand does not sufficiently stabilize, we will also consider and prepare for additional measures such as raising investment requirements and setting individual investment limits."
Proposed additional measures include periodic re-education, the introduction of simulated investment if necessary, and the establishment of prior investment experience requirements. The FSC is also considering a total investment management plan that would allow investment in single stock leverage products only within a certain percentage (e.g., 20%) of the total investment amount in financial products.
Since the FSC announced supplementary measures on July 16 and proposed an early implementation of the enhanced basic deposit requirement on July 24, discussions around single stock leverage have continued, indicating the possibility of further regulations. Domestic market volatility has persisted, leading to the activation of the 14th circuit breaker in the KOSPI market on the same day.
This situation is also influenced by President Lee Jae-myung's public directive. During a Cabinet meeting on July 21, he remarked on the FSC's supplementary measures, saying, "There are concerns that this alone will not suffice. Ensure that necessary response measures are taken swiftly and decisively." He further noted that the measures would not be implemented immediately but would take time.
Political circles have also begun discussions on follow-up measures. The previous day, the Democratic Party's 'Korea Premium K-Capital Market Special Committee' held a meeting with representatives from securities firms and asset management companies to discuss the market impact of single stock leverage products and additional supplementary measures. After the meeting, committee member Oh Gi-hyung stated, "The current basic deposit requirement of 30 million won could be raised to 50 million won depending on the situation."
The FSC plans to proceed with the confirmed supplementary measures as scheduled. The listing of new products and advertising has been immediately halted since July 16, and the basic deposit requirement of 30 million won will be implemented earlier than planned on July 31. Discussions are ongoing to expedite the expansion of the minimum trading unit (from 1 share to 20 shares) and enhance investor education based on case studies, originally scheduled for November, to an earlier date in July or August. Additionally, stricter management of price discrepancies will be implemented starting August 19. Furthermore, in the future, even if securities are sold, the basic deposit will only be recognized at the time the settlement is completed and actual cash is deposited into the account (T+2 days). Loans secured by the proceeds from sales will also be excluded from the basic deposit to prevent circumvention through round-trip trading, according to the financial authorities.
Analysts in the securities industry suggest that the strengthened regulations could alleviate the concentration on large-cap stocks. Lee Jae-won, a researcher at Yuanta Securities, stated, "A significant decline in trading volume and turnover is expected, and if there is a corresponding decrease in net assets, the concentration on Samsung Electronics and SK Hynix may ease. This could normalize the KOSDAQ market, which has been a 'vacant house' in terms of supply and demand, with the influx of foreign capital and the return of individual investors."
* This article has been translated by AI.
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