Boost ETP, a recent debutant in Europe’s competitive exchange-traded product (ETP) industry, has revealed plans to launch a suite of triple-leveraged long (3x) and short (-3x) ETPs on the London Stock Exchange. The company expects to list up to 100 different ETPs across all asset classes in the next two years, starting with a broad range of equities and commodities, expected within weeks.

Hector McNeil and Nik Bienkowski, co-founders of Boost ETP

Boost will be the first provider in Europe to focus entirely on this area of the market. Globally, leveraged and short (also known as inverse) ETP assets stand at approximately $43 billion, with over $8 billion in 3x leveraged ETPs.

Triple-leveraged ETPs have been extremely successful in the US market, with providers such as ProShares and Direxion accumulating billions in assets. Boost is hoping for a similar level of success in Europe over time.

Demand for leveraged and short products has increased over the past few years as many financial markets have trended sideways, resulting in volatile and poor long-term returns.  Leveraged long and short ETPs make it possible to accentuate and exploit opportunities in these markets, stretching out returns where they do not otherwise exist.

Aimed at sophisticated and experienced investors, Boost’s leveraged and short ETPs will provide investors with instant leverage to highly liquid underlying markets in one single trade.  Investors will be able to achieve simple exposure to leveraged returns without having to borrow the additional funds to gain the additional long exposure or the need to borrow underlying shares, and then sell those shares in order to short the market.

Triple-leveraged ETPs are designed to provide amplified exposure to the daily changes in financial indices.  For example, if the Nasdaq 100 Index rises by 1% on a day, then the Boost Nasdaq 100 3x Leverage Daily ETP will rise by 3% on that day. Conversely, if the benchmark falls by 1% on a day, then the Boost Nasdaq 100 3x Short Daily ETP (N.B. short ETP) will rise by 3% on that day.

As well as amplifying one-way directional trading opportunities, the new ETPs will allow investors to execute a wide variety of strategies, including hedging, and sector and asset class pair trading. Leveraged products are typically best-suited to intra-day trading and other short-term holding periods.

Investors will be able to buy and sell the new Boost ETPs on the London Stock Exchange, through regulated brokers or approved market makers and authorised participants. Getco Europe has been appointed the Designated Market Maker with the responsibility to ensure that investors can trade at efficient bid/offer spreads throughout the day.

Boost ETPs will be backed by a robust risk management system,  underpinned by at least 100% collateral, comprised of a liquid and diversified mix of sovereign bonds and equities. Collateral will be ring-fenced and held at leading custodians.

Hector McNeil, Boost’s Co-founder and CEO, said: “We believe that the leveraged and short ETPs are exciting additions to the European ETP market and introduce investment products which investors currently demand, but are not yet available. Given the persistence of low, long-term returns and sideways trending financial markets over the past five or more years, Boost’s 3x leveraged ETPs should now give sophisticated investors valuable new tools to potentially enhance their investment returns or hedge market risks.”

Nik Bienkowski, fellow Co-founder and CEO, added: “Boost intends to become a significant player in the European ETP market. Boost’s 3x leveraged and short ETP platform is our first foray into this market and indicates our ambition and ability to add value to the ETP industry. This can be seen with Boost’s platform of equity and commodity ETPs, and Boost’s unique collateral structure. We look forward to creating many more value-added products in the near future.”

While the European leveraged and short ETP market is considerably less developed than in the US, the company is not entirely without competition. Boost will come up against ETF Securities, which hosts a range of leveraged long and short commodity and currency ETCs, and Deutsche Bank’s db X-trackers, which offers some 25 exchange-traded funds (ETFs) in this space, including double-leveraged long (2x) and inverse products based on bonds, broad equity markets and European sectors. Other European providers active in this space include Amundi, ComStage, EasyETF, Lyxor, RBS and Xact.