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- RBS to Cut 443 Jobs In UK, Move Many of Them to India
- Deutsche Bank Bullish on London Despite Brexit
- Supreme Court Nears Finish With Big Cases, Retirement Rumors
- The Richest Person in Every State
- LPL Tabs Scott Seese, Former eBay Exec, as Chief Information Officer
- Fired Biglaw Associate Arrested for Trying to Extort Partners
- Canada's CIBC Completes $5Bn PrivateBancorp Buy
- Word ‘Women’ Literally Never Appears in U.S. Senate’s 142-Page Health-Care Bill
- Stephen Pierce, Goldman Sachs Global Head of Equity Markets, To Retire
- Al Gore 'Not Very Smart,’ But Became Filthy Rich Using Simple Investing Formula - Charlie Munger
- U.S. Regulators, Lawmakers Support Volcker Rule Revamp at Hearing
- Morgan Stanley Opts for Frankfurt as New EU Hub
- A New Risk for Goldman, Morgan Stanley in Stress Tests (subsc reqd)
- A Trump Bump for Law Firm of President’s Lawyer - Kasowitz Benson Torres
- JPMorgan, BofA, Goldman, Citi, Wells Fargo Pass Fed's Stress Test
- Blackstone Stock Still Trading at $31 - Its IPO Price From 10 Years Ago
- NJ Resident and NY-Based Global FX Club Charged with Solicitation Fraud, Misappropriation - CFTC
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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.