I am an active individual investor who uses leveraged and inverse ETFs as a component of a diversified portfolio, and I vehemently oppose restrictions or other qualification requirements for individual investors trading in publicly traded inverse and leveraged ETFs. I am fully capable of reading the prospectuses and evaluating the risks on my own as well as determining the strategy to implement to target the returns I seek. This is a misguided proposal that would unfairly disadvantage individual investors and could even create unintended consequences that may force this class of investors to take on even more risk than these ETFs may carry.
These ETFs provide investors excellent opportunities to invest in many useful and important asset classes such as commodities and derivatives that would typically be out of reach of individual investors. Many of these ETFs track published indices, and are far safer and more convenient instruments than trading in the underlying assets such as options or commodities with leverage. They work to mitigate tracking errors, do not require margin to invest in, and where applicable, the burden of monthly options rolls are managed by the fund manager. They also have good liquidity and affordable spreads. It would be much more difficult and risky for an individual investor to replicate those instruments (and associated returns) by themselves when trading in the underlying options or futures markets.
Restricting us individual retail investors puts us at an unfair disadvantage against high net worth investors. If we wanted to reconstruct similar returns that these ETFs deliver, we would need to create complex options or futures structures that are difficult to execute and typically would require margin, carry higher liquidity risk and would be prone to slippage. High net worth investors have privileged access to financial institutions who can provide returns in leveraged investments that lower net worth investors simply do not have access to. Stop this gross government overreach and do not make the financial playing field even more unfair. Allow us to continue investing in leveraged or inverse ETFs without minimum net worth requirements or other onerous qualifications. Instead, focus on education in the effective usage of leveraged and inverse ETFs for individual investors to reduce the risk of using these assets.
Lux Joshi Comment On Regulatory Notice 22-08
I am an active individual investor who uses leveraged and inverse ETFs as a component of a diversified portfolio, and I vehemently oppose restrictions or other qualification requirements for individual investors trading in publicly traded inverse and leveraged ETFs. I am fully capable of reading the prospectuses and evaluating the risks on my own as well as determining the strategy to implement to target the returns I seek. This is a misguided proposal that would unfairly disadvantage individual investors and could even create unintended consequences that may force this class of investors to take on even more risk than these ETFs may carry.
These ETFs provide investors excellent opportunities to invest in many useful and important asset classes such as commodities and derivatives that would typically be out of reach of individual investors. Many of these ETFs track published indices, and are far safer and more convenient instruments than trading in the underlying assets such as options or commodities with leverage. They work to mitigate tracking errors, do not require margin to invest in, and where applicable, the burden of monthly options rolls are managed by the fund manager. They also have good liquidity and affordable spreads. It would be much more difficult and risky for an individual investor to replicate those instruments (and associated returns) by themselves when trading in the underlying options or futures markets.
Restricting us individual retail investors puts us at an unfair disadvantage against high net worth investors. If we wanted to reconstruct similar returns that these ETFs deliver, we would need to create complex options or futures structures that are difficult to execute and typically would require margin, carry higher liquidity risk and would be prone to slippage. High net worth investors have privileged access to financial institutions who can provide returns in leveraged investments that lower net worth investors simply do not have access to. Stop this gross government overreach and do not make the financial playing field even more unfair. Allow us to continue investing in leveraged or inverse ETFs without minimum net worth requirements or other onerous qualifications. Instead, focus on education in the effective usage of leveraged and inverse ETFs for individual investors to reduce the risk of using these assets.