An investor looks at a notice on a brokerage app warning about the risks of single-stock leveraged exchange-traded funds and exchange-traded notes.NEWS1
Average daily trading value in exchange-traded funds (ETF) listed in Korea has nearly halved this month after tighter rules sharply cooled activity in single-stock leveraged products.
Average daily ETF trading value stood at 17.4 trillion won ($12.5 billion) from Aug. 3 through Wednesday, down 47.6 percent from 33.3 trillion won in July, Korea Exchange data showed Thursday.
ETF trading had surged in earlier months. Average daily trading value jumped from 16.5 trillion won in April to 30.4 trillion won in May and reached a record 38.1 trillion won in June.
Single-stock leveraged products were a major driver of the jump. Sixteen single-stock leveraged ETFs, including two inverse products, debuted on May 27 alongside two single-stock leveraged exchange-traded notes. The ETFs' trading value reached 10.4 trillion won on the first day and approached 20 trillion won a day in late June.
Trading cooled rapidly after regulators tightened requirements on July 31. Daily trading value in the products fell as low as roughly 500 billion won and has recently hovered around 1 trillion won.
The Financial Services Commission raised the minimum cash balance that retail investors must hold before buying single-stock leveraged products from 10 million won to 30 million won on July 31. Stocks, ETFs and bonds no longer count toward that minimum.
New retail investors have also had to complete simulated trading before buying single-stock leveraged products since Wednesday. The Korea Exchange program requires at least five trading days of practice and at least five hours in total.
A stock trading app displays the price chart of a Samsung Electronics' single-stock leveraged exchange-traded fund on July 15.NEWS1
The rules apply to both domestically and overseas-listed single-stock leveraged products. Regulators have described them as high-risk instruments because they track twice the daily movements of an individual stock and can suffer losses even when the underlying share price finishes a period near where it started.
Average daily ETF trading volume also declined, though less sharply than trading value. Volume rose from 4.82 billion shares in April to 10.5 billion in May and 14.32 billion in July before falling to 10.38 billion this month.
The steeper decline in trading value than in volume appears to reflect lower prices for leveraged products.
The market capitalization of listed ETFs stood at about 440.1 trillion won, down 14.1 percent from 512.3 trillion won in June. The number of listed products rose by 19 over the same period, to 1,162.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
