Quadruple leveraged ETFs to hit US shores

May 5th, 2017 | By | Category: ETF and Index News

The Securities and Exchange Commission has approved a request to list quadruple-leveraged exchange-traded funds in the US.

Quadruple leveraged ETFs to hit US shores

Leveraged ETFs provide geared exposure to markets.

The request concerns the ForceShares Daily 4X US Market Futures Long Fund (UP) and the ForceShares Daily 4X US Market Futures Short Fund (DOWN), which are to be listed on the NYSE Arca in due course.

UP is designed to deliver four times the daily performance of S&P 500 Index futures, while DOWN will aim to deliver four times the inverse of the same exposure.

While there are currently several ETFs available in the US offering double- or triple- and inverse-leveraged exposure, the proposed funds would be the first to offer quadruple-leveraged exposure.

The approval is a notable shift in the approach of the regulator, which had previously sought to clamp down on mutual fund and ETF derivatives use. In 2015, the SEC proposed a rule that would limit the use of derivatives by registered investment companies, including ETFs. Had it come into force, the rule would likely have had a significant impact on US-listed leveraged and inverse ETFs, potentially forcing providers such as Direxion and ProShares to change the legal structure or leverage factor of affected products, or even close them down.

The change in tone comes as Jay Clayton was confirmed by the US Senate as the new chairman of the SEC under the Trump administration.

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