Starting on the 19th, individual investors investing for the first time in single-stock leveraged exchange-traded funds (ETF) and exchange-traded notes (ETN) must complete five trading days of paper trading before actual trades. Following last month's hike in the minimum margin to 30 million won, the entry threshold for investing is rising once again.
According to the Korea Exchange (KRX) on the 11th, from the 19th, the paper-trading completion requirement will apply to general individual investors who trade single-stock leveraged and inverse ETFs and ETNs listed on domestic and overseas stock markets for the first time. Professional investors, corporations, and foreigners are excluded from the Daesang.
New investors must experience trading for at least five trading days on the Korea Exchange (KRX) paper-trading system, for a minimum of one hour per day and a total of at least five hours. They must register completion information with a securities firm and receive approval to buy new products for the first time. Some securities firms are also providing guidance on who is subject to the Daesang and how to complete the requirement through their websites.
However, investors who have previously traded single-stock leveraged products do not need to repeat paper trading. Individual investors who have experience trading domestic or overseas single-stock leveraged products from May 27 to the 18th of this month are exempt from the completion requirement.
This measure is part of the government's plan to strengthen regulations on single-stock leveraged products, released at last month's market situation review meeting. At the time, financial authorities proposed setting account-by-account investment limits, increasing transaction cost burdens, mandating advance paper trading, and emergency market stabilization measures. Among these, the paper-trading mandate will take effect first on the 19th.
The Financial Services Commission said at the time, "We will mandate paper trading so that investors trading single-stock leveraged products can clearly recognize the risks of the products before investing."
Earlier, starting on the 31st of last month, the minimum margin standard was raised from 10 million won to 30 million won in cash. With substitute securities no longer recognized as margin, entry conditions for individual investors in single-stock leveraged products are being tightened one after another.