Jorge Gustavson Comment On Regulatory Notice 22-08
Jorge Gustavson
N/A
Regarding L&I funds and potentially restricting access to them... I would oppose any such move.
Firstly, my current brokers (TDAmeritrade, E*Trade Financial, and Charles Schwab & Co, Inc) all provide me with ample educational materials online at no charge which informs me of the risks and limitations involved in trading L&I products, namely, they are intended only for short-term active trading by knowledgeable investors. I understand the problems with trading a derivative of a derivative, and especially a leveraged one, where the day to day tracking of the index change is geometrically compounded over time in a power series, and does not end up tracking the performance of the "underlying" security or index. These L&I products are meant for hedging, or actively pursuing a short-term directional move opportunity in the market, and especially with leverage, can expose the purchaser to exaggerated losses very quickly.
See, I already understand all of that, because of the excellence of the educational materials my broker has provided to me.
Additionally, I am required every year to review and sign an L&I products trading agreement, wherein my broker makes certain I am put on notice as to the limitations and risks of such products.
Finally, every single time I make a "buy" trade of one of these L&I products, my trade order messages prior to order execution remind me that the symbol I am trading is an L&I product and that I should be certain I understand the limitations and risks trading that product.
In short, everything that should be done is already being done. There is no need, in my considered opinion, to go any further, and take any steps to restrict access to these products. I've got thirty years of self-directed investing experience, including 12 years of trading options and other "complex" products, so I believe I can speak with confidence and opine there's no need for further tightening in this area.
Jorge Gustavson Comment On Regulatory Notice 22-08
Regarding L&I funds and potentially restricting access to them... I would oppose any such move.
Firstly, my current brokers (TDAmeritrade, E*Trade Financial, and Charles Schwab & Co, Inc) all provide me with ample educational materials online at no charge which informs me of the risks and limitations involved in trading L&I products, namely, they are intended only for short-term active trading by knowledgeable investors. I understand the problems with trading a derivative of a derivative, and especially a leveraged one, where the day to day tracking of the index change is geometrically compounded over time in a power series, and does not end up tracking the performance of the "underlying" security or index. These L&I products are meant for hedging, or actively pursuing a short-term directional move opportunity in the market, and especially with leverage, can expose the purchaser to exaggerated losses very quickly.
See, I already understand all of that, because of the excellence of the educational materials my broker has provided to me.
Additionally, I am required every year to review and sign an L&I products trading agreement, wherein my broker makes certain I am put on notice as to the limitations and risks of such products.
Finally, every single time I make a "buy" trade of one of these L&I products, my trade order messages prior to order execution remind me that the symbol I am trading is an L&I product and that I should be certain I understand the limitations and risks trading that product.
In short, everything that should be done is already being done. There is no need, in my considered opinion, to go any further, and take any steps to restrict access to these products. I've got thirty years of self-directed investing experience, including 12 years of trading options and other "complex" products, so I believe I can speak with confidence and opine there's no need for further tightening in this area.
Thank you for kindly considering my remarks.