Daily trading value across 16 ETFs tracking leveraged or inverse moves in Samsung Electronics and SK hynix shares dropped to 990 billion won ($729 million) from 12.25 trillion won in the preceding period, according to data submitted to Rep. Kim Yong-man.
The comparison covered 22 trading days before the new requirement and 21 trading days beginning July 31, when the rule took effect.
The Financial Services Commission (FSC) raised the minimum deposit for retail investors trading single-stock leveraged products to 30 million won in cash from 10 million won.
Under the new rule, stocks, ETFs and bonds can no longer be counted toward the minimum deposit. Average daily trading in 14 leveraged ETFs fell to 800 billion won from 8.64 trillion won, leaving activity at about one-tenth of its previous level.
Trading in two inverse 2X ETFs dropped to 190 billion won from 3.6 trillion won, or about one-twentieth of the earlier level.
The average daily turnover rate for the 14 leveraged ETFs fell to 5.9 percent from 43.6 percent, while the rate for the two inverse 2X ETFs dropped to 125.0 percent from 1,110.4 percent.
Average daily trading in the 14 leveraged ETFs remained below 1 trillion won in each of the first four weeks after implementation, compared with 6.44 trillion won over July 27-30.
Daily trading value stood at 530 billion won on Aug. 31. Retail investors had been net buyers on an average daily basis in each of the five weeks before the rule change.
They turned to net selling of 1.07 trillion won on July 31 and remained net sellers in most subsequent weeks, except during Aug. 24-28.
The higher deposit requirement was part of measures announced by financial authorities in July to curb demand for single-stock leveraged products and strengthen investor protection.
The FSC also barred new listings and advertising and marketing of the products from July 16, before the higher cash-deposit threshold took effect.
"Reduced trading alone does not mean investor protection has been completed," Kim said.
He added that authorities should continue monitoring whether the decline persists and whether investment demand shifts to products outside the restrictions.
AJP Takeaways
- South Korea's single-stock leveraged and inverse ETFs saw average daily trading fall to less than one-tenth of pre-rule levels in the month after tighter cash-deposit requirements took effect.
- The 16 ETFs tracking Samsung Electronics and SK hynix recorded 990 billion won in average daily trading after the rule change, compared with 12.25 trillion won during the preceding period.
- The Financial Services Commission raised the minimum deposit for single-stock leveraged products to 30 million won in cash from 10 million won and stopped recognizing stocks, ETFs and bonds toward the requirement.
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