South Korea will tighten trading rules for single-stock leveraged products starting August 19, requiring new investors to complete at least five hours of simulated trading.

According to Yonhap News Agency, South Korea’s Financial Services Commission (FSC) approved relevant rule amendments on August 12, which will take effect on August 19 to further strengthen price deviation rate management for ETFs and ETNs, and expand simulation trading requirements to single-stock leveraged products (including inverse products) listed domestically and overseas. The new rules tighten the price deviation rate standards for securities firms on all ETFs and ETNs: from 3% for domestic products and 6% for overseas products to 2% and 5% respectively. For liquidity providers that intentionally, due to gross negligence, or repeatedly violate management obligations, the Korea Exchange plans to restrict their new liquidity provision business. Starting August 19, individual retail investors making their first investment in single-stock leveraged products listed in South Korea or overseas must complete free simulation trading first. Investors need to finish at least 5 trading days of simulation sessions, each lasting over 1 hour, totaling no less than 5 hours, to experience the negative compound interest effect of leveraged products and the actual trading environment. The FSC noted that it had already raised the basic margin for single-stock leveraged products to 30 million won in cash on July 31, and trading volume of these products dropped to less than one-fifteenth of the previous day’s level that same day. The regulatory authorities added that while recent stock market volatility has eased, unstable factors remain, and they will continue monitoring the market and rolling out follow-up measures.