South Korea to Grant Financial Regulators Emergency Intervention Powers for Stock Market Stability

According to ChainCatcher, citing South Korean media outlet NATE, South Korea’s financial regulators are advancing revisions to the Capital Markets Act, aiming to grant regulatory authorities “emergency intervention powers” to directly implement market-stabilizing measures during periods of severe market volatility. The Financial Services Commission (FSC) and the Financial Supervisory Service (FSS) have already initiated the legal revision process, with a focus on single-stock leveraged ETFs, which were deemed to have amplified volatility during recent market crashes. Proposed regulatory measures include adjusting leverage ratios and imposing investment caps to reduce risks associated with concentrated trading during abnormal market fluctuations. Additionally, regulators are considering setting individual investment limits for single-stock leveraged ETFs, uniformly capping allocations at approximately 20% to prevent excessive capital concentration, and introducing actual trading simulation systems to enhance investor understanding of leverage product risks. Regulators stated that raising the initial margin requirement primarily raises the investment threshold, while investment limits serve as a “cap” on capital inflow—both forming a complementary risk control framework. Previously, on July 31, South Korea raised the minimum margin requirement for single-stock leveraged ETF investors from KRW 10 million to KRW 30 million. Data shows that on the first day of the new rules’ implementation, trading volume for the 16 relevant leveraged ETFs totaled approximately KRW 3 trillion—about one-quarter of the KRW 12.4 trillion traded the previous day and roughly 80% lower than the KRW 15 trillion recorded on July 29.