IndexUniverse: ProShares Files for as Many as 94 3x Leveraged ETFs

In a move that is raising eyebrows across the ETF industry, ETF specialists IndexUniverse have uncovered a recent ProShares SEC filing for approval of as many as 94 different 3x ETFs. The move follows competitor Rydex's filing of approval for its own line of 3x leveraged and inverse ETFs.

Though it's unclear when the funds will actually launch, ProShares hopes to ultimately bring to market bullish and bearish 3x ETFs breaking down as follows (as verified by IndexUniverse's Murray Coleman):

• 25 domestic U.S. equity ETFs
• 62 international equity ETFs
• Seven bond ETFs

According to ProShares' updated filing and verified by Coleman, potential indexes it seeks to tie its 3x ETFs to include:

1. DJ Wilshire Total Market Index
2. Russell 1000 Index
3. Russell 3000 Index
4. Russell 3000 Value Index
5. Russell 3000 Growth Index
6. MSCI EAFE Index
7. MSCI EAFE Value Index
8. MSCI EAFE Growth Index
9. MSCI Emerging Markets Index
10. MSCI Japan Index
11. MSCI Pacific Free ex-Japan Index
12. MSCI Australia Index
13. MSCI Malaysia Index
14. MSCI Singapore Index
15. MSCI Europe Index
16. S&P Europe 350 Index
17. Russell/Nomura Prime Japan Index
18. Nikkei 255 Stock Average
19. FTSE/Xinhua China 25 Index
20. BONY Emerging Markets 50 ADR Index
21. BONY Developed Markets 100 ADR Index
22. BONY Japan Index
23. BONY China Index
24. Lehman US Aggregate Index
25. Lehman 7 - 10 Year Treasury Index
26. Lehman 20+ Year Treasury Index
27. iBoxx Liquid $ Investment Grade Index
28. iBoxx Liquid $ High Yield Index
29. NASDAQ Biotechnology Equal-Weighted Index
30. NASDAQ Clean Edge U.S. Liquid Series Index
31. NASDAQ-100 Equal Weighted Index
32. MSCI Brazil Index
33. MSCI Taiwan Index
34. MSCI South Korea Index
35. MSCI BRIC Index
36. MSCI Latin America Index
37. Credit Suisse 130/30 Large Cap Index

Leveraged ETFs have come under fire recently as potentially adding volatility to already unstable equity markets. As Paul Kedrosky recently noted:

Leveraged ETFs, as assets increase, represent a new source of systemic risk in the market as their managers rebalance them at market close every day.

The WSJ first stirred the leveraged ETF debate last December with a somewhat controversial article claiming "Many traders are blaming high-octane exchange-traded funds for the market's wild moves in the last hour of trading."

However, it's clear why ETF issuers want to be in the leveraged ETF game and why they are now offering increasingly levered products. According to IndexUniverse's Coleman:

Since opening the space last November, Direxion has become one of the fastest-growing ETF companies. Entering Wednesday, it had roughly $3.4 billion in assets in 16 different 3x ETFs. In fact, through March, Direxion was running neck and neck with Vanguard Group for No. 2 among ETF providers this year in terms of net inflows.

[For more on Direxion's 3x ETFs, see here.]

With that kind of momentum in building assets under management, coupled with the ability to charge higher expense ratios than straightforward equity and bond ETFs, there is little doubt the number of leveraged and super-leveraged vehicles available to investors and traders will continue to multiply. All that's needed now is SEC approval.

Sources

ProShares' amended filing

IndexUniverse, Murray Coleman: ProShares Files For 3X Leverage On 94 New ETFs

Barclays Global Investors, Minder Cheng and Ananth Madhavan: The Dynamics of Leveraged and Inverse Exchange-Traded Funds (.pdf)

WSJ, Tom Lauricella, Susan Pulliam and Diya Gullapalli: Are ETFs Driving Late Day Turns?

• More on choosing the right ETF

Comments

[squark62:]

94? you goh-a-bee-k'in-me!

Apr 23 03:55 PM

[SA Editor J...:]

It's somewhat unlikely that all 94 will make it to market (certainly not anytime soon) but that is the plan they have on record with the SEC.

Apr 24 03:19 AM

[AndrewBaker:]

Who needs a bookie when you've got Proshares and Direxion. There will be a lot of very poor and unhappy "investors" around if even a few of these get to market and people jump in to buy them!

(I trade 2x and 3x ETF on a day trading basis, maybe two or three days if markets move against me and I am very positive I am right. If there's no return in the first few hours, I'll generally sell and take a loss.)

Apr 24 09:41 AM