Mar. 19, 2020
Comment on SEC Proposed Rule #S7-24-15: In regards to the SEC’s consideration of limiting my ability to use leveraged and inverse funds: I actively monitor my three brokerage accounts. I visit them several times a day, especially when I am in a high risk asset. Be assured that I don’t believe that these funds are a long term asset allocation. Some of the reasons why these are bad choices for a long term investor are as follows - Over time the assets value will decrease significantly. A sort of decay effect. These funds should only be used for short term active traders, of which I am one. I do of course have some long term investments but leveraged and inverse funds aren’t part of that strategy. - The funds performance should not be expected for follow its underlying index fund value exactly. It could be more or less, depending on other traders forward looking price expectation. These funds are also subject to discrepancy of value due to the execution of contracts that these funds are derivatives of. I understand and accept that. - The longer these funds are held, the larger this discrepancy will get - Even single leveraged inverse funds are subject to these problems. I would also add that whenever I trade into one of these, my brokerage house send me its perspective within minutes. My brokers have also asked me to acknowledge that I have read and understand the risks of trading these funds. If I am to be limited on these funds I think my broker would be a better judge than the SEC, as they know my trading habits and can monitor my bad decisions quite well and inform me when I am at risk. I can call my broker if I have questions, and they are excellent at calling me when they see a problem. In the past I have been denied trades and immediately called whey they see what might be a fat finger error, or something similar. My brokers are paying attention and protecting me. I appreciate the SEC’s concern about trading in these funds. They are not suitable for most traders. I am not one of those traders. I’m active in my account, I use stop losses, and I believe that I am informed. If the SEC decides to take this option away from me, it may do the same with other speculative trades like options, pink sheet, or Chinese stocks. This proposal sets a precedent that I am uncomfortable with. These options are even more dangerous in my opinion than leveraged funds. I do use them, but only when I understand what I am trading. How can the SEC judge my knowledge accurately on stocks that aren’t considered blue chip? I think my broker is better at deciding this. And I can speak to my brokers 24/7 To protect the general investor, some way might be discovered to ensure that the trader is knowledgeable and not at undue risk. But another way should be found. The Brokerage houses should act as the guardian, not the SEC Regards.