South Korea's Financial Services Commission (FSC) approved rule revisions on Aug 12, with changes taking effect Aug 19, according to Yonhap. The new rules tighten price deviation management for ETFs and ETNs, and extend simulated trading requirements to single-stock leveraged products listed in South Korea and overseas, including inverse products.
Price deviation standards tightened
Under the new rules, securities firms must keep price deviation rates within 2% for domestic ETF and ETN products, down from 3%, and within 5% for overseas products, down from 6%. The Korea Exchange also plans to restrict liquidity providers from taking on new liquidity supply business if they deliberately, grossly negligently, or repeatedly violate management obligations.
New investors must complete simulated trading first
Starting Aug 19, individual ordinary investors buying single-stock leveraged products for the first time must complete free simulated trading beforehand. The requirement is at least five trading days, more than one hour per day, totaling no less than five hours, so investors can experience the negative compounding effect of leveraged products and get familiar with real trading conditions.
Regulatory context
The FSC noted it raised the basic margin requirement for single-stock leveraged products to 30 million won in cash on Jul 31. On that day, trading volume in related products dropped to less than one-fifteenth of the prior day's level. Regulators said that although recent stock market volatility has eased, unstable factors remain, and they will continue monitoring the market while pushing forward follow-up measures.