South Korea will open the door to single-stock leveraged ETFs as early as May 22, in a regulatory shift aimed at expanding higher-risk investment products.
The Cabinet approved the rule revision Tuesday. It takes effect April 28, with the first products likely to launch in late May, subject to filings and exchange approval.
The Financial Services Commission said only large-cap, highly liquid domestic stocks will be eligible, citing investor protection and market stability. To qualify, a stock must account for at least 10 percent of benchmark market capitalization and 5 percent of trading volume over the past three months — a threshold currently met only by Samsung Electronics and SK hynix.
Both 2x leveraged and inverse ETFs will be permitted, allowing investors to amplify exposure to price gains or declines in individual stocks.
Separately, the FSC will broaden ETF-linked derivatives. Weekly options, currently limited to stock indices, will be extended to individual stocks and ETFs.
Weekly options on individual stocks — initially limited to Samsung Electronics, SK hynix, Hyundai Motor and LG Energy Solution — are set to launch on June 29, with ETF-based weekly options to follow later this year. The FSC also plans to introduce more frequent expiry cycles for index options and monthly options linked to ETFs.
The changes are expected to expand trading strategies, including income-focused products such as covered call ETFs tied to domestic assets.
Given the higher risk profile, the FSC will tighten safeguards. Investors must complete an additional one-hour advanced training course — in addition to the existing basic program — before trading these products. The training will be available from April 28.
A minimum deposit requirement of 10 million won ($7,200) will apply to both domestic and overseas-listed products.
To improve transparency, product names must clearly reflect their structure, using terms such as “single-stock,” “leveraged” or “inverse.”
“Given that single-stock leveraged ETFs have unique pricing structures and risk factors compared to conventional products, investors are advised to invest responsibly within their loss tolerance,” the FSC said.
ch0221@heraldcorp.com