South Korea's Financial Services Commission said on Monday the cabinet approved an amended enforcement decree of the Capital Markets and Financial Investment Business Act that allows the introduction of single-stock exchange-traded funds (ETFs) based on domestic blue-chip shares.

The amendment was prepared to resolve asymmetric regulation between domestically listed ETFs and overseas-listed ETFs. It will be promulgated and take effect on April 28. After securities filings and listing reviews, single-stock leveraged products are expected to be listed as early as May 22.

Until now in South Korea, single-stock ETFs and exchange-traded notes (ETNs) could not be launched due to diversification requirements, including a 30 percent cap on management per stock.

The FSC will raise the limit on holding securities of the same stock as a share of total assets to 100 percent from 30 percent. It will also exempt the existing diversification requirement to include at least 10 stocks. It will allow the risk assessment amount from price fluctuations in the same stock up to 200 percent of total assets.

Underlying assets will be limited to blue-chip shares that meet requirements such as at least 10 percent of market capitalisation and at least 5 percent of trading volume. As of the first quarter of 2026, two stocks qualify: Samsung Electronics and SK Hynix.

Product types include single-stock plus-or-minus 2 times leverage and inverse products. Single-stock covered-call products will also be allowed, which buy the underlying spot and sell related call options.

Revisions to the Korea Exchange's business rules for the derivatives market will also create a basis for developing various products. Individual stock weekly options are set to be first listed on June 29, and ETF weekly options are set to be first listed in the second half of the year.

The FSC strengthened investor protection measures, considering the higher potential for losses compared with general products. It will ban the use of 'ETF' in product names to avoid confusion with general products, and require clear labelling of product characteristics such as 'single-stock' and 'leverage·inverse'.

Investors seeking to invest in single-stock leverage and inverse products must complete an additional one hour of advanced pre-education on top of the existing one hour of general pre-education.

A 10,000,000 won minimum deposit rule will also be introduced and will apply equally to investments in domestically and overseas-listed single-stock leveraged products.

An FSC official said leveraged products can generate large losses in a short period due to leverage effects and can show negative compounding effects, making them unsuitable for long-term investment purposes. The official urged that only experienced investors who fully understand the product structure and risks invest responsibly at their own risk.