Misha Rajcoomar Comment On Regulatory Notice 22-08
Misha Rajcoomar
N/A
My brokerage firm required me to listen to a statement detailing the potential risks for options before I could start trading them. Since options can similarly be used to achieve leverage or inverse returns, I think this is a reasonable requirement for trading in leveraged/inverse funds. At the end of the day, higher expected return comes hand in hand with greater risk. If a given investor isn't aware of this, the issue isn't that they're trading in these products but the fact that they're trading in the first place. Completely restricting access or having to pass a test are excessive actions.
That being said, perhaps the investor should be instructed by their broker to read certain information on these products to gain a certain minimum knowledge. But I emphasize instructed not required. Different investors have different levels of knowledge.
Finally, I question whether a restriction on these products actually protects investors. For example, one could still use options or trade on margin if they wanted to achieve leverage. In other words, the restriction doesn't protect the investor so much as make it more costly to achieve their goals. The notice cites the growing popularity of these products. Based on this, I think it's reasonable to assume that investors will choose alternative paths to achieve leverage regardless.
Misha Rajcoomar Comment On Regulatory Notice 22-08
My brokerage firm required me to listen to a statement detailing the potential risks for options before I could start trading them. Since options can similarly be used to achieve leverage or inverse returns, I think this is a reasonable requirement for trading in leveraged/inverse funds. At the end of the day, higher expected return comes hand in hand with greater risk. If a given investor isn't aware of this, the issue isn't that they're trading in these products but the fact that they're trading in the first place. Completely restricting access or having to pass a test are excessive actions.
That being said, perhaps the investor should be instructed by their broker to read certain information on these products to gain a certain minimum knowledge. But I emphasize instructed not required. Different investors have different levels of knowledge.
Finally, I question whether a restriction on these products actually protects investors. For example, one could still use options or trade on margin if they wanted to achieve leverage. In other words, the restriction doesn't protect the investor so much as make it more costly to achieve their goals. The notice cites the growing popularity of these products. Based on this, I think it's reasonable to assume that investors will choose alternative paths to achieve leverage regardless.