South Korea to halt new listings of single-stock leveraged ETFs

[HONG KONG] South Korea will temporarily halt new listings of single-stock leveraged exchange traded products to curb market volatility after a surge in popularity of funds tied to Samsung Electronics and SK Hynix.

The ban will remain in place until market conditions stabilise, the Financial Services Commission said in a statement Thursday (Jul 16).

Authorities will also raise the minimum deposit requirement for leveraged ETFs to 30 million won (US$20,300) from 10 million won, with effect from Aug 5.

The decision comes after a meeting among regulators, the finance ministry and central bankers amid growing calls for policymakers to rein in volatility in the US$4.1 trillion equity market, which has become one of the world’s most turbulent.

More than a dozen leveraged ETFs were launched in May – which aim to deliver twice the daily return of Samsung Electronics and SK Hynix shares – have been blamed by market participants for exacerbating price swings through large rebalancing trades needed to maintain their target leverage. BLOOMBERG