October 14, 2020
I am a retail investor who commonly utilizes inverse funds. I have also traded leveraged ETF products in the past. My concern is meeting the burden of proof required by the SEC/broker that I am qualified to trade them. Already, you have a range of due diligence by brokers when it comes to options (Robinhood = free entry, as an example). Some brokers may choose to become increasingly strict with allowing LI funds. I would be at a loss if my broker feels that the burden of due diligence with LI funds isn't worth it for the average retail investor, and could perhaps become incentivized not to offer them to me any more.
I think these products benefit the market.
If I feel like hedging against a leg down in the market, I would rather open a small position in an inverse ETF than liquidate my positions and sit on cash. I do not have options enabled on my account, so these products are my only access to such hedges. These products are more accessible and easier to trade than options for the type of risk I am accustomed to. If this rule was implemented and I could no longer access LI ETFs, I would certainly respond by beginning to trade options as a hedge... which I think defeats the purpose here.