First Quadruple Leveraged S&P 500 ETN Proposed

A small ETN issuer is seeking to launch the first quadruple leveraged S&P 500 ETN—with the ticker XXXX—as exchange-traded fund issuers push the envelope on high-risk, high-reward investment products.  

MAX ETNs, an exchange-traded note provider with four leveraged products, will offer investors daily compounded four times leveraged exposure to the S&P 500 Total Return Index. The fund’s inception date is listed as Dec. 5, according to Bloomberg, and its management fee is 0.95%. 

As the exchange traded product industry grows, providers constantly look for so-called “white space” in the sector to offer investors novel products. While the Securities and Exchange Commission allows only three times leveraged products, offering the investment as an ETN could circumvent regulatory scrutiny, according to Todd Sohn, ETF analyst at Strategas Securities.  

Sohn noted that retail traders represent a potential market for the product, because they often look for quick, high-reward short-term vehicles, even though these carry enormous risk. “I suspect the [demand for leveraged products] will continue to grow as retail continues to adopt these… now you have retail traders able to trade from their phone anywhere they want, and these products help to cater that,” he said.  

One consideration regarding ETNs is that unlike ETFs, they carry credit risk. “At its core, it’s a debt instrument,” Sohn said. “There is a risk for investors who play in this that it could close at a due time if the counterparty decides they don’t want the exposure anymore.”  

MAX ETNs other products include the Auto Industry 3X Leveraged ETNs and the Airlines 3X Leveraged ETNs.  

New ETFs on the Market

As leveraged ETFs grow in popularity, some wonder why these risky products can hit the market before spot bitcoin ETFs, which are now working through the SEC approval process. There are currently 169 leveraged ETFs with an average expense ratio of 1.02% and total assets under management of $73.32 billion. 

“Wild that grandma will be able to buy a 4x leveraged S&P 500 ETN before a spot bitcoin ETF,” Nate Geraci, head of The ETF Store, wrote on Twitter/X.  

Contact Lucy Brewster at [email protected].