Average daily trading volume for 16 single-stock leveraged exchange-traded funds (ETFs) in South Korea fell below 1 trillion won (US$701 million) on Wednesday, marking a notable contraction in activity for the high-risk instruments.
The decline follows recent steps by financial authorities to curb speculative trading in these products, which have previously seen surging volumes driven by retail investors seeking amplified returns on individual equities.
The drop in turnover suggests that the regulatory measures are beginning to take effect, dampening the frenetic trading patterns that characterized the sector in recent months.
Single-stock leveraged ETFs, which use derivatives to multiply the daily performance of underlying stocks, have been a focal point of concern for regulators due to their potential to amplify losses and contribute to market volatility.
South Korean financial authorities have been considering stricter limits on the proportion of these leveraged ETFs that can be held in individual investment portfolios.
The proposed measures aim to reduce concentration risk and protect retail investors from the inherent dangers of leveraged products, particularly in a volatile market environment.