Owen

February ETF Deathwatch Expands to 153 Names

Complex and arbitrary rules result in complex and arbitrary products. The rules requiring margin levels which are several times higher than the expected value at risk resulted in the 2X and 3X ETFs. The rules preventing naked short sales resulted in the inverse ETFs. Rules preventing securities accounts from trading futures resulted in commodity ETFs--again, with ridiculously high margin requirements.

In fact, the whole invention of Single Stock Futures is an awkward workaround for the arbitrary limitations on shorting and margin levels for stocks. Other than SSFs, the futures market, which have traditionally enjoyed a more rational regulatory environment, don't offer arbitrary products designed to outsmart the regulators.

Rather than dedicate our time and effort to designing ever smarter ETFs and ETNs to get around a heavy-handed regulator, we should push to get an SEC that actually understands capital markets. The current rules hurt everyone and protect no one.