South Korean regulators have moved to allow 2x leveraged single stock exchange-traded funds linked to individual domestic blue-chip stocks. The initiative targets shifting individual investor assets from foreign to local markets while maintaining caps on leverage to reinforce investor protection.
Regulatory officials confirmed that, unlike international markets that offer a wider array of high-leverage ETF products, South Korea has until now held stricter limits, which led investors to seek more aggressive options abroad. The new policy will lift restrictions preventing leveraged ETFs from tracking single top-tier domestic equities, amending previous rules that only permitted indices of at least ten constituents and restricted individual stock weightings within ETFs.
While these changes will facilitate new 2x leveraged ETF offerings at the stock level, regulators reiterated that leverage will not exceed ±2x out of concern for both investor safety and consistency with international norms. They clarified that although 3x leveraged ETFs exist in overseas jurisdictions like the U.S., new products at this leverage have not been introduced since 2020.
Authorities plan to publish updated regulations for public review soon. Along with this market access expansion, new investor safeguards will be implemented. These include mandatory pre-investment education and broader deposit requirements for participation in leveraged ETF trading, particularly those referencing global securities.
