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ETF, leverage trading draws in market move bets, catalyzes volatility

Published: 10 Mar. 2026, 18:18

A screen in Hana Bank's trading room in central Seoul shows the Kospi in the morning hours of March 10. [NEWS1]

The Kospi’s recent roller-coaster ride is drawing a flood of money into products that let investors bet on the market’s next move, prompting regulatory advice aimed at preventing market investors from incurring heavy losses by betting on stock market volatility.

Exchange-traded funds (ETFs) tied to gains or losses in the Kospi and Kosdaq posted a combined 80 trillion won ($54.4 billion) in trading value over the five trading days from March 3 to Monday, according to the Korea Exchange. That comes to an average of 16 trillion won a day.

The overheating looks striking even compared to last year. So far this month, the average daily trading value of Kodex 200, a flagship Kospi-tracking product, stood at 3.49 trillion won, more than seven times its 2025 daily average of 462.7 billion won.

With the Kospi swinging between sharp gains and steep losses almost every other day, investors appear to be chasing short-term profits by trading the index itself.

“Even if it surges today, it could correct tomorrow and then jump again the next day,” said Han Ji-young, a researcher at Kiwoom Securities. “This is a historically unprecedented period of volatility, one in which leverage is effectively being applied to the stock market as a whole.”

In fact, the five most traded ETFs so far this month were all products tied to the direction of the indexes.

Kodex 200 led with 17 trillion won in trading value, followed by Kodex Leverage at 13 trillion won, Kodex Kosdaq 150 Leverage at 12 trillion won and Kodex 200 Futures Inverse 2X at 11 trillion won, showing how money has also rushed into geared products that magnify returns and losses.

A screen in Hana Bank's trading room in central Seoul shows the Kospi in the morning hours of March 10. [NEWS1]

There is nothing inherently wrong with investing in the long-term direction of an index. The problem is that trading is being driven less by long-term investments than by short-term bets, adding to market volatility. The Kodex 200 posted an average turnover rate of 20.18 percent this month, nearly triple its average of 7.02 percent over the past year.

The turnover rate is calculated by dividing trading volume by the number of listed units, meaning that a higher figure indicates more frequent changes in ownership.

Betting on declines was even more intense. Kodex Inverse posted an average turnover rate of 98.63 percent this month, close to 100 percent and about five times its average of 22.13 percent over the past year.

With the market already whipsawing and short-term trading reaching extremes, price distortions are also worsening. According to the exchange, 252 excessive-disparity disclosures, notices issued when market prices significantly exceed underlying value, had been filed as of March 9. In just five trading days, that had already reached 68 percent of February's monthly total of 372.

“ETFs have become a vehicle for short-term trading in Korea, pushing Kospi volatility to the highest level in history,” said Kim Sung-no, a researcher at BNK Securities.

3월 5일 서울 중구 하나은행 본점 딜링룸 전광판에 코스피 지수 종가가 표시되어 있다. 이날 코스피지수는 전일대비 9.63% 오른 5583.90에 코스닥은 전일 대비 14.10% 오른 1116.41에 장을 마감했다. [뉴스1]

Lee Chan-jin, the governor of the Financial Supervisory Service, held a video meeting with senior officials on Tuesday during a business trip to Switzerland to discuss developments in the Middle East and raised concerns about leverage ETF investing amid broader financial-market volatility.

“We need to monitor retail investors’ investment in leveraged ETFs,” Lee said. “Please issue investor advisories to help prevent large-scale losses caused by heightened volatility.”

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.
BY JANG SEO-YUN [[email protected]]