"The spread between the bid and offer is typically the best indicator of liquidity. A tighter spread denotes a more liquid market... The levered notes, too, are more actively traded and more liquid."
The reason may not be due to their use as hedges, but rather due to the exploding popularity of levered ETFs and ETNs generally. For example, look at the trading volume of the relatively new TZA.
Oil ETN Liquidity - Long and Short [View article]
"The spread between the bid and offer is typically the best indicator of liquidity. A tighter spread denotes a more liquid market... The levered notes, too, are more actively traded and more liquid."
The reason may not be due to their use as hedges, but rather due to the exploding popularity of levered ETFs and ETNs generally. For example, look at the trading volume of the relatively new TZA.