South Korea Requires Simulated Trading Before Leveraged Single-Stock ETFs

South Korea now requires new retail investors in single-stock leveraged ETFs to complete at least one hour of simulated leveraged trading per day for five days before they can trade the products. The finance ministry announced the access limits after a sharp reversal in Korean equities.

The KOSPI peaked above 9,300 points in June before falling 22% in July. Investors who bought leveraged ETFs tied to Samsung Electronics and SK Hynix in late May and held them until mid-July lost about half their money, according to the account cited.

Daily turnover in single-stock leveraged ETFs fell from $12 trillion to $70 billion on July 30. It remains uncertain whether simulated trading will teach risk control or encourage more active and riskier behavior; the measure has also done little to restore trust among at least some investors who lost money.