Korean Retail Frenzy Triggers Harsh New Rules on US Leveraged ETFs

Regulatory Changes - South Korea is implementing mandatory training for retail investors wishing to trade foreign leveraged ETFs, requiring a one-hour online course and a three-hour mock-trading exam [2][4] - The new policy will take effect on December 15, 2025, aligning foreign-market rules with domestic standards [2] Market Trends - Korean retail traders invested $7 billion in US leveraged ETFs in October 2023 alone, with a total of $30 billion year-to-date, marking the highest monthly foreign ETF purchase on record [3][5] - The trend of Korean retail investors, referred to as "Seohak Ants," has led to a record purchase of US stocks worth 43 trillion won (approximately $29.3 billion) this year [5] Financial Implications - The surge in retail investment has significantly impacted Korea's dollar funding markets, with securities firms' dollar repo balances increasing 15-fold since 2019 to 28.6 trillion won ($19.5 billion) [6] - The demand for dollars has influenced the won-dollar exchange rate, pushing it into the mid-to-high 1,400 range, raising concerns about potential currency losses [7] Trading Behavior - There is a notable increase in Korean trading of US single-stock ETFs, with some stocks like IONQ trading more daily volume in Korea than major companies like Amazon, Microsoft, or Google [8]