SEC Approves Quadruple-Leveraged ETFs

New issuer ‘ForceShares’ may list geared long and short versions of the S&P 500.

Reviewed by: Trevor Hunnicutt
Edited by: Trevor Hunnicutt

New York (Reuters) – The Securities and Exchange Commission on Tuesday approved a request to trade quadruple-leveraged exchange-traded funds, marking a first for the growing market for such products in the United States.

The request was to list the ForceShares Daily 4X US Market Futures Long Fund, under the ticker 'UP,' and the ForceShares Daily 4X US Market Futures Short Fund, under the ticker 'DOWN' and they are planning to list on the NYSE Arca exchange.

'UP' is designed to deliver 400%of the daily performance of S&P 500 index futures, while 'DOWN' aims to deliver four times the inverse of that benchmark. That means 'DOWN' could go up 8% on a day the index it tracks falls by 2%.

ETFs offering three times leverage already trade in the U.S., but more reactive products have been limited to listing in Europe.

‘Not Going To Be For Everyone’

"We're excited about it," said Sam Masucci, chief executive officer at Exchange Traded Managers Group, which is distributing the product, though he said the product is "not going to be for everybody.

"But for those people looking for the leveraged exposure to the S&P and not looking to do it by way of a futures product, here you have a publicly listed security," Masucci said.

Regulators' move to approve the products comes after a difficult time for sponsors of more exotic ETFs.

Last year, the SEC presented draft rules that would restrict the use of derivatives, which was seen crimping some fund managers' ability to keep highly leveraged products on the market.

In March, the agency ruled against an application by investors Cameron and Tyler Winklevoss to bring the first bitcoin ETF to market, although the SEC recently said it would review that decision.

New SEC Chair

The U.S. Senate voted on Tuesday to confirm attorney Jay Clayton to head the SEC, a change in leadership that could prompt a change in tack by the agency through which investment products come to market.

Douglas Yones, a top NYSE ETF official, said in an emailed statement that he hopes the approval "paves the way for us to work with other leveraged product issuers over the rest of the year."

The product sponsor could not immediately be reached for comment.


Trevor Hunnicutt is a staff writer for Reuters.