[Edaily Reporter Kim Kyung-eun ] Mr. Kim (28), an office worker and “Seohak Gaemi” (a retail investor who invests in foreign stocks), recently found himself in a sweat-inducing situation while trying to trade a Tesla 2x leveraged exchange-traded fund (ETF). As Tesla’s stock price plummeted, he attempted to lower his average cost basis by buying at the low—a strategy known as “averaging down”—but the trade was blocked due to recently implemented regulations on leverage for single-stock ETFs.

“The value of my existing holdings had fallen by more than 50%, so I desperately wanted to average down, but I didn’t have 30 million won in my account and failed to make the additional trade,” Kim lamented, adding, “I’ve been trading this product for a while, but it’s as if the barriers to entry have suddenly become much higher.” He continued, “It’s unfair that while 3x leveraged semiconductor funds—which are more volatile—are tradable, 2x leveraged Tesla funds are not.”

The fallout from regulations introduced to curb speculation in domestic single-stock leveraged ETFs is now affecting investors in foreign stocks. Trading in related products has plummeted as the 30 million won minimum cash deposit requirement is applied equally to single-stock leveraged products listed in the U.S. and elsewhere. While financial authorities maintain that this is a measure to resolve asymmetrical regulations between domestic and international markets, dissatisfaction among existing investors is growing.

According to SaveRo, the securities information portal of the Korea Securities Depository, from the 31st of last month—when the domestic single-stock leveraged ETF regulations took effect—through the previous day (the 19th), the settlement amount for “Direxion Daily TSLA Bull 2X Shares (TSLL),” an ETF that tracks Tesla’s stock price at twice its value, totaled $87.04 million (approximately 121.4 billion won).

This represents a sharp 68.3% decline compared to the settlement volume of $274.97 million (approximately 383.5 billion won) recorded during the same trading days (July 13–30) immediately prior to the regulation’s implementation. Settlement volume—the sum of purchase and sale amounts—indicates how active investor trading was during that period. This product, which had ranked among the top 15 in settlement volume for overseas stocks by domestic investors, dropped to 50th place following the implementation of the regulations.

During the same period, settlement volumes for leveraged ETFs that track SanDisk and Micron stock prices at double the rate—namely, “Trader 2X Long SNDK Daily” (SNXX) and “Direxion Daily MU Bull 2X” (MUU)—also fell by 68.8% and 62.8%, respectively. On the list of top-ranked products by trading volume, SanDisk fell from 10th to 44th place, while Micron dropped from 16th to 46th.

This is interpreted as a result of financial authorities raising the minimum margin requirement for single-stock leveraged ETFs to 30 million won in cash, which has also raised the barrier to entry for overseas products. This measure was implemented in response to growing concerns that excessive trading concentration in single-stock leveraged ETFs for Samsung Electronics and SK Hynix was increasing volatility in the domestic stock market. However, as the scope of the regulation has been expanded to include single-stock leveraged products listed on overseas stock markets, dissatisfaction among existing investors is growing.

Meanwhile, 3x leveraged index-based products are excluded from the regulations, raising questions of fairness. Products such as the “Direxion Daily Semiconductor Bull 3X” (SOXL), which tracks the daily return of a U.S. semiconductor index by a factor of three, and the “ProShares UltraPro QQQ” (TQQQ), which tracks the Nasdaq 100—a U.S. technology stock index—by a factor of three, have higher leverage ratios but are not subject to these regulations.

In fact, even after the regulations took effect, the trading volume of SOXL by domestic investors remained overwhelmingly high. From the 31st of last month to the 19th of this month, the settlement value for SOXL totaled $6.54357 billion (approximately 9.1178 trillion won), ranking first overall. This suggests that domestic investors’ preference for leveraged products remains strong.

However, compared to the same period the previous year ($7.24193 billion), settlement volume decreased by 9.6 percent. Analysts note that it is still too early to confirm the so-called “balloon effect,” in which investment demand shifts overseas due to domestic regulations.

Jeong Hyun-jong, an analyst at Korea Investment & Securities, stated, “It is still too early to assess the impact of the regulations, as they are in their initial stages.” He added, “Since it is not easy to curb the ‘balloon effect’ or global investment demand targeting the semiconductor cycle through domestic regulations alone, we need to monitor the long-term effects of these regulations.”