I strongly appose proposed restrictions on inverse and leveraged Exchange Traded Funds. I have used both of these to very effectively hedge long fixed income and equity positions over short exposure periods. Removing access to these funds will force me into the listed options market to construct similar hedges that more complicated, expensive, entail more basis risk and require more frequent rebalancing. I know some speculators use these funds to take leveraged bets on market moves, many of which have turned out badly. Restricting access to these ETF products is not going to protect gamblers. They will move on to other products such as listed options that are significantly more risky. But eliminating them will remove effective hedging vehicles that are used by investors like me. I strongly oppose this proposed action.
David Baden Comment On Regulatory Notice 22-08
FINRA,
I strongly appose proposed restrictions on inverse and leveraged Exchange Traded Funds. I have used both of these to very effectively hedge long fixed income and equity positions over short exposure periods. Removing access to these funds will force me into the listed options market to construct similar hedges that more complicated, expensive, entail more basis risk and require more frequent rebalancing. I know some speculators use these funds to take leveraged bets on market moves, many of which have turned out badly. Restricting access to these ETF products is not going to protect gamblers. They will move on to other products such as listed options that are significantly more risky. But eliminating them will remove effective hedging vehicles that are used by investors like me. I strongly oppose this proposed action.