Leveraged ETFs Face SEC Squeeze in Plan to Rein in Derivatives
- Regulator's proposal would cap fund leverage at 150% of assets
- Chair White says she's concerned current rules now outdated
This article is for subscribers only.
U.S. regulators have declared war on the $32 billion leveraged ETF industry.
A proposal issued Friday by the Securities and Exchange Commission could handicap a product that has drawn warnings from BlackRock Inc.’s Laurence Fink and Wall Street’s brokerage regulator, the Financial Industry Regulatory Authority. Built like mutual funds, leveraged exchange traded funds managed by companies such as ProShare Advisors LLC and Direxion use derivatives that produce daily gains or losses that can be three times greater than an index they track, such as the Standard & Poor’s 500 Index.