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Stories of Interest
- SEC Adopts Statement and Interpretive Guidance on Public Company Cybersecurity Disclosures
- SEC Charges Former Bitcoin Exchange and Its Founder With Fraud
- JPMorgan Chase to Replace NYC Headquarters with 70-Story Skyscraper
- Citigroup Raises CEO Corbat's Pay 48% to $23Mn
- Should Congress Create a Crypto-Cop?
- JPMorgan Weighs Buying an Exchange-Traded Funds Firm
- Hey, Goldman Sachs: Wanna Buy BNY Mellon?
- SEC Order Rejecting Acquisition of Chicago Stock Exchange (CSX) by Chinese-Baesd Company
- Kyle Moffatt Named Chief Accountant in SEC CorpFinance
- SEC Suspends Trading in 3 Issuers Claiming Involvement in Cryptocurrency and Blockchain Technology
- Karen Garnett, Assoc. Director of SEC CorpFinance, to Leave After 23 Years of Service
- Louisiana Adviser Barred for Hiding Losses from Investors
- Connecticut HF Manager Illegally Diverted Investor Money - Now Owes Nearly $13Mn
- White House Cleaning House of Advisors Without Full Security Clearance
- Goldman Projects 30% Growth in Wealth Management Advisor Force
- Whistleblower Alleges Manipulation of CBOE Volatility Index
- FINRA Looking Into VIX (CBOE Volatility Index) Manipulation: WSJ
- Atlanta-Area Resident Charged with Misusing Investor Funds - SEC
- FINRA Announces 2018 West Region Networking Seminar
- Alberto Arevalo, Associate Director in Office of International Affairs, to Retire From SEC
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NEWSLETTERS & ALERTS
Wall Street News
Don’t See the SEC Approving These Volatile ETFs
by Howard Haykin
Traders and, to a lesser extent investors, presently can choose from among nearly 300 leveraged ETFs that offer significantly leveraged returns – as in 2-times or 3-times the returns of various indexes and asset classes. And the best performer from this group is the Direxion Daily Semiconductor Bull 3X Shares, which is up 328% over the past 12 months. It provides 3-times the gains of the semiconductor sector.
Currently, the ForceShares UP and DOWN funds are in the crosshairs of the SEC. Earlier this month, the Commission approved a application that would have created 2 ETF offerings – the ForceShares Daily 4X U.S. Market Futures Long Fund, and the ForceShares Daily 4X US Market Futures Short Fund. Using derivatives, the funds would generate 4-times the gains or losses of the S&P Futures contract.
However, in response to complaints that the funds’ volatility could lead to losses by unsophisticated or unsuspecting investors, the SEC Chair and his 2 Commissioners are reviewing the staff’s approval to decide whether to delay approval. The application may even be put out for comment.
FINANCIALISH TAKE-AWAY. Boy, we’ve come a long way since the inception of exchange traded products, about 24 years ago. According to Investopedia, the American Stock Exchange released the S&P 500 Depository Receipt – aka the SPDR or "spider" for short) in January of 1993. It was very popular, and it is still one of the most actively-traded ETFs today. Then, 15 years later, the first actively-managed ETF reached the market. Finally, these days, we have 273 highly leveraged ETFs.
Over the past several months, the SEC rejected the applications of two Bitcoin-based ETFs, expressing concern for the volatility of the underlying currency. Just like the Bitcoin funds, ForceShares’ UP and DOWN funds carry enormous risk and volatility. And in this day and age, all these volatile market vehicles are sure to wreak havoc among smaller and unsophisticated traders or investors.
Hopefully, the SEC will be prudent and place a moratorium on these volatile funds.