FSC Announces Early Implementation of Strengthened Deposit Requirement for Single-Stock Leveraged Products

The Financial Services Commission announced a plan to move up the implementation of the strengthened minimum deposit requirement for investing in single-stock leveraged products (exchange-traded funds and exchange-traded notes) on July 24. The earlier planned implementation schedule from August this year will move up to July 31 to quickly help to stabilize demand.

On July 16, the FSC and related authorities introduced a set of measures intended to strengthen the management of single-stock leveraged products to help to stabilize demand and protect investors.

After the announcement of the measures, the measures to prohibit new listings of single-stock leveraged products and ban financial investment businesses from engaging in advertising and marketing activities went into effect immediately from July 16. Since then, the financial authorities have worked closely with financial investment businesses to quickly implement the measures and have prepared a plan to move up the implementation schedule.

Early Implementation of Strengthened Deposit Requirements

(1) Moving up implementation schedule to July 31

The earlier planned implementation schedule for the strengthening of the minimum deposit requirement from August this year will move up to July 31 to quickly help to stabilize demand.

Currently, retail investors are required to deposit at least KRW10 million to make new investment in single-stock leveraged products (for both domestically listed and overseas listed). However, when calculating the minimum deposit amount, 70 percent of market values of substitute securities, such as stocks, ETFs (excluding leveraged ETFs), and bonds on the investor’s account was counted toward the deposit amount along with cash. Moreover, after three months of trading, securities firms would ordinarily have more leeway in lowering or strengthening the minimum deposit requirement for investors after taking into account the trading experience of investors.