Individual investors face higher barriers to entry for single-stock leveraged exchange-traded funds (ETFs) and exchange-traded notes (ETNs) in South Korea. This change comes as the minimum deposit requirement has been raised and new investors are now required to complete simulated trading before they can invest.
According to the Korea Exchange, starting August 19, individual investors trading single-stock leveraged and inverse ETFs and ETNs for the first time will be required to complete a mandatory simulated trading course. Securities firms are currently informing their clients about this new regulation.
New investors must complete at least five hours of simulated trading over a minimum of five trading days, spending one hour each day. After completing the course, they must register the relevant information with their brokerage and obtain approval before they can purchase actual products.
However, existing investors are exempt from this requirement. Anyone who has traded single-stock leveraged products at least once between May 27, when these products were listed, and August 18 is not required to complete the simulated trading. Professional investors, corporations, and foreign investors are also excluded from this mandate.
The simulated trading system will be operational starting August 19. Given the five-day completion requirement, the first confirmations of course completion will be available from August 24. Additional time of one to two business days may be needed for registration and approval by the brokerage.
This measure is a follow-up to investor protection initiatives announced by financial authorities amid concerns over excessive speculation in single-stock leveraged products. On July 29, during a market situation review meeting, the authorities introduced additional regulatory measures for these products.
Among the measures proposed were the mandatory simulated trading, setting investment limits per account, imposing excessive order fees, and implementing emergency market stabilization measures. The mandatory simulated trading requirement is the first of these measures to be implemented.
Previously, the minimum deposit requirement was significantly increased. As of July 31, the minimum deposit for single-stock leveraged ETFs and ETNs was raised from 10 million won to 30 million won in cash. With the increase in the minimum deposit and the addition of the simulated trading requirement, protective measures for individual investors in high-risk leveraged products are being strengthened.
* This article has been translated by AI.
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