South Korea is intensifying oversight of leveraged exchange-traded funds (ETFs) that target individual stocks, aiming to curb retail speculation in these high-risk products by requiring new investors to complete a simulated trading exercise.

The Financial Services Commission (FSC) announced that new investors in single-stock leveraged ETFs must undergo a minimum of five days of simulation trading, totaling at least five hours. This mandate will take effect on August 19 and applies to both domestic and international investors. It represents the latest regulatory effort to limit retail access to leveraged ETFs, following a sharp market downturn that resulted in billions of dollars in losses for investors.

Previously, regulators had raised the minimum cash deposit requirement for such trades to 30 million won (approximately $21,000) and extended mandatory online training for new investors in single-stock leveraged products to three hours. These measures came after criticism that leveraged products linked to chip giants Samsung Electronics and SK Hynix amplified volatility in the benchmark Kospi Index.

Since the higher cash deposit requirement took effect on July 31, trading volumes in single-stock leveraged ETFs have declined. According to financial regulator data, turnover for these products stood at just 700 billion won on August 11, down sharply from 12.4 trillion won on July 30. The Korea Exchange will offer the new simulation trading course for free on its website. Similar compliance requirements already apply to individuals seeking to trade derivatives or short sell stocks.