Single-Stock Leveraged ETF Deposit Requirement Raised to 30 Million Won, Early Implementation from the 31st

FSC Expedites Implementation for Rapid Demand Stabilization

Cash Deposit Requirement Recognized Only After Cash Is Credited from Substitute Securities Sales

Starting from July 31, the minimum cash deposit required for leverage Exchange Traded Funds (ETFs) based on a single stock, such as Samsung Electronics and SK hynix, will be increased to 30 million won. This measure, originally scheduled to take effect next month, has been expedited.

The Financial Services Commission (FSC) announced on July 24 that it will implement the strengthened cash deposit requirement for leverage products based on a single stock (ETFs and ETNs) ahead of schedule, moving up the effective date to July 31. Previously, on July 16, the FSC revealed its plan to raise the basic deposit from 10 million won to 30 million won and to exclude substitute securities from the deposit calculation.

The FSC explained that, although the increase in the deposit requirement was initially set to be implemented next month to allow time for securities companies to upgrade their IT systems, close cooperation among relevant agencies and the financial investment industry made the earlier implementation possible. The FSC added that if any securities firm fails to complete the system upgrade by the deadline, it will recommend restricting new trades of single-stock leverage products at those firms.

Consequently, starting July 31, investors will need to hold more than 30 million won in cash to newly invest in or purchase additional single-stock leverage products. Moreover, the basic deposit requirement will not be eased even after a certain period following a transaction. Currently, securities companies may ease the deposit requirement after three months of trading based on the investor’s trade history.

The FSC has also further improved the details around the cash deposit rules. Previously, proceeds from the sale of substitute securities were recognized the same as cash for the deposit immediately upon sale. Moving forward, only cash that has been deposited on the settlement date (T+2) will be recognized as meeting the deposit requirement. This aims to prevent excessive turnover trading—such as purchasing leverage single-stock products before the cash from a sale is actually credited to the account.

In addition, any loans secured by sales proceeds will be excluded from the minimum cash deposit. Measures to strengthen arbitrage rate management and penalties will take effect from August 19 following amendments to exchange regulations and enforcement rules. The FSC also plans to expedite the introduction of increasing the trading unit size from 1 share to 20 shares, moving up the timeframe from the originally scheduled date in November.

An FSC official stated, "We will continue to implement detailed policies quickly according to each issue to support market stability, while continuously monitoring the market impact of supplementary measures." The official added, "If market stability is not achieved, we will also consider additional supplementary actions."

This content was produced with the assistance of AI translation services.