Single-Stock Leverage Rules to Be Brought Forward... Initial Deposit Raised to 30 Million Won Starting on the 31st

[Financial News] Stricter initial deposit requirements for single-stock leverage products will take effect early, starting on the 31st of this month. The measures had originally been scheduled for mid-next month, but the rollout was moved up to better protect investors.
According to related agencies, including the Financial Services Commission (FSC), the Financial Supervisory Service, Korea Exchange and the Korea Financial Investment Association, they agreed with the industry to move up the implementation of key measures, such as raising the initial deposit and no longer recognizing substitute securities, from next month to the 31st of this month in order to stabilize the market.
The agencies had previously announced a supplementary plan for single-stock leverage products after a market situation review meeting on the 16th. They said the move was intended to address asymmetries between domestic and overseas markets and to reflect concerns over rising price volatility in major memory semiconductor companies, whose trading has expanded globally.
Starting on the 31st of next month, the agencies will raise the initial deposit for buying single-stock leverage products to 30 million won. Substitute securities such as stocks, ETFs and bonds held by investors will be excluded from deposit calculations, leaving only cash to be recognized.
The original plan was to raise the deposit to 30 million won on the 5th of next month and abolish recognition of substitute securities on the 19th. However, the schedule was moved up with the industry's support for system development. Securities firms that fail to complete system upgrades by the deadline will be recommended to suspend new transactions.
The standards for recognizing cash deposits will also be revised. At present, cash from the sale of substitute securities is recognized immediately on the same day of sale (T day) as equivalent to the initial deposit. Going forward, for single-stock leverage products only, it will be recognized as cash deposit only when the proceeds are actually received after settlement (T+2). This is intended to curb excessive round-trip trading, in which investors sell and immediately buy back on the same day. In addition, amounts borrowed using sale proceeds as collateral will also be excluded from the initial deposit.
According to the agencies, the 16 single-stock leverage products have seen their market capitalization and trading value rise rapidly since their listing on May 27. Market capitalization jumped from 440 billion won on the first day of trading to 11.09 trillion won on the 15th of this month, while trading value increased from 1.04 trillion won to 1.3 trillion won over the same period.
Other measures, including strengthening the responsibility of securities firms and asset managers to manage tracking errors and shortening the process for designating products as investment caution items, will take effect on August 19 after revisions to exchange rules and enforcement regulations.
The agencies also plan to discuss moving up the implementation of a measure to expand the trading unit for single-stock leverage products from one unit to 20 units, which had originally been scheduled for November.
[email protected] Park Ji-yeon Reporter