DailyFinance on Derivative ETFs

AOL Daily Finance has a good story about the ongoing regulatory drama involving leveraged, inverse and other derivative-based ETFs.  Writer Sheryl Nance-Nash goes into more depth about this complex subject than any other mainstream media report I’ve seen.

As we reported last month, the Securities & Exchange Commission is conducting a “review” of new filings for exchange-traded funds that use futures, options, swaps or other derivative instruments to implement their portfolio strategy.  This includes most of the ETFs offered by ProShares and Direxion, along with some smaller players.  Existing funds are not affected.  Nor, apparently, are new ETFs from sponsors that previously obtained exemptive relief from the SEC; subsequent to the March 25 SEC announcement, ProShares launched four new products covering biotechnology and regional banks.

The regulators say they want to make sure investors in these ETFs understand the risks they are taking.   This is a worthy goal but I’m not sure what else anyone can do.  The sponsors already provide abundant disclosures and educational materials.  Anyone who invests without bothering to inform themselves about what they are buying is unlikely to be stopped.

Read the article at Daily Finance for more detail.

Disclosure covering writer, editor, publisher, and affiliates: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.