South Korea forces retail investors to complete week-long training before trading leveraged ETFs

South Korea Requires Week-Long Training Before Retail Investors Can Trade Leveraged ETFs

South Korea's financial regulator is moving to cool one of the world's most volatile equity markets by forcing retail investors to complete five days of simulated leverage trading before accessing single-stock leveraged ETFs. Each day requires at least one hour of simulated trading, after which investors can access the real market.

The move follows a spectacular boom-and-bust cycle driven largely by retail money chasing semiconductor plays. The KOSPI rose 76% in 2025 and doubled again this year, peaking above 9,300 points in June. Retail investors poured a net $70 billion into the market—a staggering sum for an economy South Korea's size. Government cheerleading accelerated the frenzy: President Lee Jae Myung declared the market "somewhat undervalued" at 8,000 points in early June, signaling room to run.

The government itself had turbocharged the leverage trade by introducing single-stock leveraged ETFs on Samsung Electronics and SK Hynix in late May. Investors who bought into those products and held through mid-July lost roughly half their money when the KOSPI collapsed 22% in July—its worst month since the 2008 financial crisis.

The intervention's effectiveness is already visible but limited. Daily trading volume in single-stock leveraged ETFs fell 90% after regulatory tightening, dropping from $12 billion to $70 million by July 30. But the damage to retail confidence runs deeper. A South Korean investor who lost money in the frenzy described the training requirement as "closing the barn door after the horse has bolted." More pointedly, he expressed anger that the government had not intervened earlier to stop him from overextending: "He was counting on the government to stop him from going too crazy in the financial markets and they did not." Trust in policymakers, he says, has been "severely shattered."

The simulation mechanism itself raises questions about whether the training will prevent future losses or simply reshape risk-taking behavior. Investors may treat play money differently than real capital—either taking more aggressive bets in simulation or learning caution that fails to transfer when actual stakes return.