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- Banca IMI Securities to Pay $35Mn for Improper Handling of ADRs in Continuing SEC Crackdown
- Members of White House ‘Arts Panel’ Resign En Masse in Protest of Trump
- FINRA Whiffs on Disciplinary Sanction: Bill Singer's 'Negligent Market Manipulation in OTC Stock Promotion'
- Heather Heyer’s Mother Says, ‘I’m Not Talking to the President’
- Goldman Sachs May Have Lost $100Mn on Energy Bet Gone Wrong
- SEC Drops Case Against Ex-JPMorgan Traders Over 'London Whale'
- Financial Advisers That Invest in Technology Need to Accomplish These Two Things
- FINRA Amends Codes Regarding Expedited Arbitrator List Selection
- FINRA July 2017 Quarterly Disciplinary Review (Podcast)
- Senior Exec in Citigroup's Equities Unit Has Left
- Prudential Plotting its Escape From Fed's Tough Oversight
- Why CEOs Spurned Trump's Business Councils, in Their Own Words
- A Stockbroker, Her LLC, and Her Customers' Loans (Or Investment?) - Bill Singer
- Brian Quintenz Sworn In as CFTC Commissioner
- A Gary Cohn Resignation Would 'Crash the Markets' – Mgmt Guru Jeffrey Sonnenfeld
- Trading Firm DRW to Buy RGM Advisors - As Low Volatility Forces Out Weak HFT Players (subsc reqd)
- Reputational Damage - Rajat Gupta on Hard Road to Recovery
- 7th Circuit Affirms Spoofing Conviction - Bill Singer
- Wells Fargo Announces Board Changes
- Judge Rules Against Ex-Goldman Employee in Fed Leak Case
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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.