Korea's HFT Firms Resist Regulatory Clampdown on Leveraged ETF Trading
South Korea's financial authorities introduced a rule on July 31 requiring investors in single-stock leveraged exchange-traded funds and notes to post a minimum cash deposit of 30 million won ($21,700). This move effectively pushed out retail investors from the market.
The data shows that commission revenue from retail investors plunged 93% to 2.02 billion won ($1.5 million) in August from 30.47 billion won ($22.1 million) in July for eight brokerages: Korea Investment & Securities, Kiwoom Securities, Mirae Asset Securities, Samsung Securities, NH Investment & Securities, Daishin Securities, Hana Securities and Meritz Securities.
On the other hand, commissions collected from institutions and foreign high-frequency trading firms fell only 42.1% over the same period to 6.43 billion won ($4.7 million) from 11.11 billion won ($8.1 million). This suggests that professional HFT trading remained largely intact even as retail investors were forced out.
Park Dae-chul, a lawmaker from the ruling People Power Party, noted that commission revenue from retail investors dropped sharply after the introduction of the minimum deposit rule.