Daniel Sudzilouski Comment On Regulatory Notice 22-08
Daniel Sudzilouski
N/A
Leveraged ETFs currently provide some of the cheapest forms of leverage available to retail investors at a cost of less than 100 basis points above the daily fund rate. Furthermore, they provide inherent tax advantages in rebalancing when compared to alternative leverage methods such as opening box spreads, obtaining effective leverage through options chains, or managing futures contracts.
Not to mention, leveraged ETFs are safer to retail investors as they provide limited liability in preventing cost basis from going negative. In this regard, margin accounts can be more detrimental in risk management as an investor can loose, and be liable to, amounts higher than their principal balance.
It would be of more interest to impose regulation on margin rates provided by broker/dealers. For example, to accounts with low balances, Fidelity charged in excess of 8% in retail margin loans when the fund rate was almost zero. This is borderline scamming retail investors in comparison to brokers such as IBKR which provided competitive rates at ~2% to retail investors during the same time period.
Daniel Sudzilouski Comment On Regulatory Notice 22-08
Leveraged ETFs currently provide some of the cheapest forms of leverage available to retail investors at a cost of less than 100 basis points above the daily fund rate. Furthermore, they provide inherent tax advantages in rebalancing when compared to alternative leverage methods such as opening box spreads, obtaining effective leverage through options chains, or managing futures contracts.
Not to mention, leveraged ETFs are safer to retail investors as they provide limited liability in preventing cost basis from going negative. In this regard, margin accounts can be more detrimental in risk management as an investor can loose, and be liable to, amounts higher than their principal balance.
It would be of more interest to impose regulation on margin rates provided by broker/dealers. For example, to accounts with low balances, Fidelity charged in excess of 8% in retail margin loans when the fund rate was almost zero. This is borderline scamming retail investors in comparison to brokers such as IBKR which provided competitive rates at ~2% to retail investors during the same time period.