In response to the recent volatility affecting the stock market due to developments in the Middle East, South Korea's Financial Supervisory Service (FSS) has called on securities companies to improve their risk management and investor education related to margin trading. The FSS held a meeting with executives from 11 securities firms in Yeouido, Seoul, where Deputy Commissioner Hwang Seon-oh emphasized the need for vigilance as leveraged investments, including margin trading, may pose risks to investors amid increasing market fluctuations.

As of the 6th of this month, the total amount of margin trading stood at approximately 32.8 trillion won, which accounts for 0.6% of the market capitalization, reflecting a decrease from the previous year's 0.7%. In the first week of March, the average daily amount of forced liquidation of leveraged trades was reported to be around 839 billion won, which is merely 0.13% of the total transaction volume of 64 trillion won. The FSS noted that while it can currently manage the scales of margin trading and forced liquidation, there is a heightened risk that these could emerge as significant financial hazards.

The FSS has ordered securities firms to ensure that investors understand the structure and risks associated with leveraged transactions, including the possibility of forced liquidation. Additionally, firms are advised to carefully oversee adjustments in margin loan rates and promotional events that could encourage recklessness among investors. The FSS's proactive stance underscores the need for a structured approach in the face of potential market instabilities, aimed at protecting investors from the risks associated with margin trading.