South Korean regulators crack down, strictly controlling retail investors’ frenzy for leveraged overseas ETFs.

South Korea's financial regulatory authorities are taking action to set up new barriers for retail investors who are enthusiastic about investing in high-risk overseas products, aiming to cool down an overheated market.

On November 16, the Financial Supervisory Service of Korea announced in a statement that starting December 15, overseas derivatives investment will be required to complete pre-education and simulated trading.

Investors who wish to purchase leveraged or inverse ETFs listed overseas must first complete a one-hour mandatory online training course. For those wanting to trade overseas derivatives, the threshold is even higher: in addition to the course mentioned above, they must also complete at least three hours of simulated trading.

The background of this tightened regulation is the unprecedented enthusiasm among South Korean retail investors for high-risk products like overseas leveraged ETFs.

According to reports, South Korean retail investors have shown a “voracious appetite” for such products, and this frenzy has sparked concerns from regulatory authorities about market stability and investor protection. Through mandatory pre-investment education and simulated trading, regulators hope to cool down the market and ensure that investors have the necessary awareness of risks when making investment decisions, thereby avoiding significant losses due to a lack of understanding of the complexity of these products.

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