South Korea Cracks Down: Regulators Slap New Rules on High-Risk Leveraged ETFs Amid Trading Frenzy

Seoul tightens the screws on speculative ETF trading—because what could go wrong with 3x leveraged bets on volatile assets?

The Financial Services Commission (FSA) just dropped a regulatory hammer on leveraged ETFs, aiming to cool a market that’s been running hotter than a overclocked mining rig. New leverage caps, stricter disclosures—the works.

Why now? Because retail traders treating these products like lottery tickets tend to end badly. And when margin calls hit, guess who gets blamed? (Spoiler: not the traders.)

One cynical take? This is less about protecting investors and more about preventing another political firestorm when—not if—the next crypto-linked ETF blows up. Welcome to financial regulation: always one step behind the next disaster.

Kim says new policy teaches compounding effects

Bora Kim, the head of APAC strategy at Leverage Shares Plc, stated that the new policy will enable South Korean retail investors to recognize the compounding effects and strategies of investing in leveraged overseas ETFs. She added that the programs will address what South Korean investors have been ignoring and could impact risk-neutral retail investors. Meanwhile, the overall appetite is expected to remain the same. 

Data compiled by Bloomberg shows that the direct investment made by South Korean retail investors in U.S. ETFs and Stocks has hit a new ATH this year. Currently at $28.3 billion so far in 2025, South Korea’s retail investors added $6.9 billion in October alone, an all-time monthly high since 2011.

Kim observed that leveraged ETFs also amplify the returns and losses investors can get by directly buying U.S. stocks. She noted that inverse ETFs rise when the key index or security plummets, and vice versa.

September sees moderate decline in overseas ETF activity

Data retrieved from ETFGI, an independent research and consultancy company specializing in global ETF industry trends, indicates that September saw a modest decline in overseas ETF activity among South Korean retail investors.

In September, 21 out of the top 50 overseas securities bought by South Korean investors were listed in the U.S., representing a slight decline from August’s 23 ETFs. September’s ETF activity was also lower than July’s (22) and June’s (26), indicating a slight cooling in ETF concentration among top overseas investment picks.

Meanwhile, in terms of trading volume, South Korean retail investors bought $9.8 billion in overseas ETFs in September. The peak month so far this year was April, which recorded a record $12.08 billion in ETF purchases. The largest single buy was $2.31 billion of the SPDR S&P 500 ETF Trust (SPY).

Specifically, they purchased $1.27 billion in ETFs from the Direxion Daily Semiconductor Bull 3X SHS ETF and another $1.01 billion from the Direxion Daily TSLA Bull 2X Shares. South Korean retail investors also purchased over $920 million in ETFs from the Invesco QQQ Trust SRS 1 ETF and another $766 million from the Vanguard S&P 500 ETF SPLR. 

ETFGI also noted that 14 of the top 21 ETFs provided inverse or leveraged exposure, reflecting continued interest in calculated trading strategies. However, the ETF research firm pointed out that only 22.66% of the ETFs listed on the South Korean Stock Exchange offer inverse and leveraged exposure, which accounts for nearly 6.99% of the assets in South Korea’s ETF industry.

Want your project in front of crypto’s top minds? Feature it in our next industry report, where data meets impact.