This month, the average daily trading volume of domestic exchange-traded funds (ETFs) has fallen to half of last month's levels. This decline is attributed to stricter regulations on single-stock leverage products that were implemented at the end of July.
According to the Korea Exchange, from August 3 to 19, the average daily trading volume of ETFs was recorded at 17.4371 trillion won. This represents a 47.6% decrease compared to last month's average of 33.2909 trillion won.
The average daily trading volume of ETFs surged from 16.5359 trillion won in April to 30.4181 trillion won in May. In June, it reached a record high of 38.079 trillion won. However, it dropped to 33.2909 trillion won in July and has now returned to April's levels.
The significant fluctuations in trading volume are largely attributed to single-stock leverage products. Sixteen types of these products, including two inverse funds, were launched on May 27. On their first day, trading reached 10.418 trillion won, and by late June, daily trading volume approached 20 trillion won.
However, following the tightening of regulations on July 31, trading volume sharply declined. At one point, it fell to around 500 billion won, and it has recently fluctuated around 1 trillion won.
Financial authorities increased the minimum deposit for single-stock leverage products from 10 million won to 30 million won as of July 31. Additionally, as of August 19, simulated trading has become mandatory for investments in these products.
Trading volume has also decreased. The average daily trading volume of all ETFs rose from 4.818 billion shares in April to 10.495 billion shares in May, and then to 14.315 billion shares in July. This month, it has dropped back to 10.38 billion shares.
The larger decline in trading volume compared to trading quantity is believed to be influenced by the price drop of single-stock leverage products.
The overall ETF market size has also contracted. This month, the total market capitalization of ETFs is 440.808 trillion won, a 14.1% decrease from June's 512.3112 trillion won. During the same period, the number of ETF products increased from 1,143 to 1,162, an increase of 19.
Market analysts view the recent decline in trading volume as a normalization process rather than a general downturn in the ETF market, particularly centered around single-stock leverage products.
Labor Gil, a researcher at Shinhan Investment Corp, stated, "After the regulations, trading turnover and new inflows for single-stock leverage products have sharply decreased, and price shocks are also easing. While leverage balances remain, the trading activity that conveyed these to market prices has weakened significantly. The first normalization is occurring in trading rather than in balances."
* This article has been translated by AI.
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