According to ME News, on August 3 (UTC+8), South Korea’s financial regulators are pushing to introduce an “emergency action authority” that would enable regulators to swiftly reduce the leverage ratios of single-stock leveraged products during emergencies. Previously, these products were considered one of the primary factors contributing to extreme market volatility. Regulators are also examining additional restrictions, including setting upper limits on leveraged investment amounts and further increasing initial margin requirements. The Financial Services Commission (FSC) will collaborate with the Financial Supervisory Service (FSS) to draft amendments to the Financial Investment Services and Capital Markets Act, establishing a legal basis for implementing market-stabilizing measures in emergency situations. The core of this adjustment is to grant financial regulators the authority to temporarily adjust the leverage ratios of single-stock leveraged ETFs. Currently, single-stock leveraged products in South Korea are designed to track 2x returns. Under the emergency action authority, if deemed necessary to protect investors, the leverage ratio could be reduced to 1.5x or 1x. (Jinshi) (Source: ODAILY)
South Korea to Introduce Emergency Leverage Cap for Single-Stock Products
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Summary
South Korea is set to implement an emergency leverage cap on single-stock products to stabilize markets. Regulators aim to reduce leverage trading ratios from 2x to 1.5x or 1x during crises. The move targets products that distort the risk-to-reward ratio for retail investors. The FSC and FSS will draft legal amendments to enable rapid adjustments. Measures may also include stricter margin requirements and investment limits.
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