South Korea’s financial authorities have significantly curbed speculative trading in single-stock leverage exchange-traded funds by raising baseline deposit requirements, though broader market volatility persists according to data from the financial investment industry. The regulatory shift, implemented by the government on July 31, 2024, abruptly suppressed retail demand and drove down daily trading turnover across major semiconductor-linked products tied to Samsung Electronics and SK Hynix.
The average daily trading volume for single-stock leverage ETFs tracking Samsung Electronics and SK Hynix reached 11조9000억원 in July, according to industry figures cited by Yonhap News. Trading activity in these vehicles had expanded rapidly earlier in the year, growing from 9조3000억원 in May to 11조4000억원 in June. In response to heightened volatility driven by these derivative products, financial regulators raised the baseline investor deposit requirement from 1000만원 to 3000만원, applying the stricter threshold even to existing investors adding to their positions. Regulators also altered settlement rules so that securities sales proceeds count as cash deposits only after the T+2 settlement cycle.
Trading Volume and Turnover Plunge After Deposit Hike
The higher financial barrier instantly compressed market liquidity and retail participation. On August 3, 2024, the combined trading volume across 16 single-stock leverage and inverse ETFs fell to approximately 1조2000억원대로, representing a tenfold drop from the 12조4000억원 recorded on July 30, the final trading day before the rule change took effect.
Turnover rates experienced a matching contraction as high-frequency day trading receded. According to financial data, the daily turnover rate for single-stock leverage products dropped to 52.5% on July 31, down to roughly one-third of the previous average of 160%. “Market supply and demand are moving in a direction that reduces stock market volatility,” Kim stated, adding that measures such as the higher deposit requirement are dampening market overheating and that fewer derivatives will limit spot market fluctuations and prevent sharp price swings.
Persistent Market Instability Despite Curbed Demand
Despite the steep decline in leverage trading turnover, broader market instability has not immediately disappeared. Data compiled by Koscom Check shows that on July 31—the day the deposit hike took effect—the Kospi intraday volatility rate spiked to 16.33%, spanning 1,686 points and nearly doubling the 7.45% volatility rate recorded the previous session. Intraday volatility measures the gap between daily high and low index points relative to the average.
While the Kospi daily intraday volatility eased to 2.69% by August 3, the monthly average for July reached 7.20%, driven by concentrated retail activity and heavy exposure to cyclical semiconductor equities. That monthly figure outpaced regional peers during the same period, running three to four times higher than Japan’s Nikkei index at 2.19%, China’s Shanghai Composite at 1.76%, and the tech-heavy Nasdaq at 1.51%. Industry analysts emphasize that while derivatives regulations address excess speculation, resolving underlying vulnerability requires deeper structural strengthening of domestic equities beyond simple demand suppression.
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