South Korea moves to tighten rules on leveraged ETFs after market turmoil

South Korea launched 16 single‑stock leveraged exchange‑traded funds (ETFs) on May 27, 2026, tracking Samsung Electronics and SK Hynix. Assets surged from about $3 billion to $9.1 billion within weeks, with roughly 92 % of holders being retail investors. The rapid growth amplified price swings, triggering a KOSPI circuit‑breaker, a sharp fall in the ETFs (some >25 %), and spill‑over effects on U.S. Nasdaq futures and global semiconductor stocks.

Financial Supervisory Service Governor Lee Chan‑jin publicly expressed regret for approving the products, and the government is now weighing tighter regulations. Proposed measures include stricter eligibility for retail investors, higher minimum deposits, extended training, reduced leverage limits, caps on fund size and tighter oversight of rebalancing practices. The KOSPI volatility index rose from 70.7 on launch to 93.8 by June 30, exceeding the 2008 crisis peak. Finance Minister Koo Yun‑cheol and Democratic Party policy chief Han Jeong‑ae have signaled intent to protect investors and market stability.