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- Sarah ten Siethoff is New Associate Director of SEC Investment Management Rulemaking Office
- Catherine Keating Appointed CEO of BNY Mellon Wealth Management
- Credit Suisse to Pay $47Mn to Resolve DOJ Asia Probe
- SEC Chair Clayton Goes 'Hat in Hand' Before Congress on 2019 Budget Request
- SEC's Opening Remarks to the Elder Justice Coordinating Council
- Massachusetts Jury Convicts CA Attorney of Securities Fraud
- Deutsche Bank Says 3 Senior Investment Bankers to Leave Firm
- World’s Biggest Hedge Fund Reportedly ‘Bearish On Financial Assets’
- SEC Fines Constant Contact, Popular Email Marketer, for Overstating Subscriber Numbers
- SocGen Agrees to Pay $1.3 Billion to End Libya, Libor Probes
- Cryptocurrency Exchange Bitfinex Briefly Halts Trading After Cyber Attack
- SEC Names Valerie Szczepanik Senior Advisor for Digital Assets and Innovation
- SEC Modernizes Delivery of Fund Reports, Seeks Public Feedback on Improving Fund Disclosure
- NYSE Says SEC Plan to Limit Exchange Rebates Would Hurt Investors
- Deutsche Bank faces another challenge with Fed stress test
- Former JPMorgan Broker Files racial discrimination suit against company
- $3.3Mn Winning Bid for Lunch with Warren Buffett
- Julie Erhardt is SEC's New Acting Chief Risk Officer
- Chyhe Becker is SEC's New Acting Chief Economist, Acting Director of Economic and Risk Analysis Division
- Getting a Handle on Virtual Currencies - FINRA
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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.