South Korea moves up leveraged ETF deposit rules to July 31

South Korea's Financial Services Commission is moving to implement stricter deposit requirements for single-stock leveraged exchange-traded funds ahead of schedule, with the tripled minimum cash deposit of 30 million won now expected to take effect on July 31 rather than the originally announced August 5 date, according to Korean media reports published Wednesday.newdaily.co.kr

The accelerated timeline follows a direct order from President Lee Jae-myung, who instructed officials at a Cabinet meeting on July 21 to prepare safeguards "swiftly and thoroughly" for the leveraged products tied to Samsung Electronics and SK Hynix.CHOSUNBIZ+1

A Rapid Reversal

The FSC initially announced the curbs on July 16 after a meeting between top economic policymakers including the finance minister and central bank governor. That package included raising the minimum deposit from 10 million won to 30 million won effective August 5, banning substitute securities toward the deposit starting August 19, and increasing the minimum trading unit from one share to 20 shares by November.Reuters+3

Now, according to the Seoul Economic Daily, the FSC has begun consulting with the securities and asset management industries to pull forward as many measures as possible. The cash-only deposit requirement, originally slated for August 19, is also being considered for earlier implementation.Seoul Economic Daily+1

From Launch to Crisis in Seven Weeks

South Korea launched 16 single-stock leveraged ETFs on May 27, offering two-times daily exposure to Samsung Electronics and SK Hynix. Within weeks, assets ballooned from roughly $3 billion to approximately $9.1 billion, with about 92 percent held by retail investors. The products drew liquidity away from the Kosdaq, with margin trading on the smaller-cap exchange declining sharply.First-Class Business Newspaper Financial News+1

The turmoil peaked in June when a leveraged ETF tied to SK Hynix swung 40 percent in the wrong direction due to liquidity-provider failures, triggering a circuit breaker on the Kospi. Financial Supervisory Service Governor Lee Chan-jin publicly said he regretted greenlighting the products.kucoin.com+1

Industry Pushback

Despite presidential urgency, some in the financial industry have questioned the approach. Critics note that moving the deposit deadline forward by just a few days does little to address structural issues, and that foreign and institutional investors remain exempt from the higher requirements. The Chosun Ilbo's business desk reported that so-called "super ants" — wealthy retail traders — would also be largely unaffected, raising questions about the measures' effectiveness at curbing speculation.newdaily.co.kr

The FSC has said it will consider further action if market stability is not restored.Channel NewsAsia