South Korea Proposes Emergency Authority to Cap Single-Stock Leverage at 1.5x

Regulators seek legal power to slash single-stock leverage from 2x to 1.5x or 1x during crises, aiming to curb volatility linked to leveraged ETFs.

Woofun AI reports that South Korean financial regulators are advancing legislation to establish an "emergency action authority" for market stabilization. The proposed amendments to the Financial Investment Services and Capital Markets Act, drafted by the Financial Services Commission and Financial Supervisory Service, would empower regulators to temporarily reduce the leverage multiple of single-stock leveraged ETFs from the current 2x standard to 1.5x or 1x if deemed necessary for investor protection.

This measure targets single-stock leveraged products, which have been identified as primary drivers of severe market volatility.

In addition to the emergency leverage cap, regulators are evaluating further restrictive measures, including caps on leveraged investment amounts and increased base margin requirements, to mitigate systemic risks associated with high-leverage trading instruments.