As a short term tool, buying inverse ETFs can be very valuable, and can actually help traders achieve financial objectives that they can not either otherwise achieve, or would require the use of riskier derivatives. Obviously, assets do not always rise, so trading just the long side means forgoing potential profit when assets decline. Also, using inverse ETFs during declining markets acts as a hedging tool against losses when an investor is already holding long positions. Without this tool, investors would need to liquidate their long positions, which would add to volatility and sell-side imbalances in a declining market. I am in favor of allowing both inverse and leveraged ETFs remain as a staple available to traders and investors.
Dan Skotek Comment On Regulatory Notice 22-08
As a short term tool, buying inverse ETFs can be very valuable, and can actually help traders achieve financial objectives that they can not either otherwise achieve, or would require the use of riskier derivatives. Obviously, assets do not always rise, so trading just the long side means forgoing potential profit when assets decline. Also, using inverse ETFs during declining markets acts as a hedging tool against losses when an investor is already holding long positions. Without this tool, investors would need to liquidate their long positions, which would add to volatility and sell-side imbalances in a declining market. I am in favor of allowing both inverse and leveraged ETFs remain as a staple available to traders and investors.