Mar. 22, 2020
Comment on SEC Proposed Rule #S7-24-15: I oppose the proposed regulations contained in SEC release No. 34-87607. I have been using leveraged ETFs for over four years and clearly understand their risks. I do not use inverse ETFs. In particular I find leveraged ETFs work well when the market is driven by fundamentals rather than headlines, so do not invest in them in a volatile market. When I do invest in them it is always a day trade, which I monitor three to four times a day. I use a combination of slow stochastics, MACD, and RSI to establish my entry point, and always use a stop loss sell order. I understand leveraged ETFs risks which include: • Significant asset loss in volatile declining markets • Market volatility accentuating compounding, particularly when the ETF is held longer than one day. • The use of derivatives can expose the fund to losses in excess of funds initially invested • Daily compounding can Reduce the return from the target multiple • Additional tracking error due to the leverage and compounding • A potential for increased tax exposure. I have been successfully managing my portfolio since my retirement five years ago. I am disturbed at the notion that a brokerage firm should have the right to decide if I am capable of assessing risk that would disqualify me from trading leveraged ETFs or any publically offered investment. When I started trading leveraged ETFs Fidelity provided me with a prospectus, which I reviewed, and a Fidelity representative contacted me and reviewed the risks of leveraged ETFs risks before I was allowed to invest. If the proposed regulation is implemented my prior use of leveraged ETFs should automatically qualify me to continue trading leveraged and inverse funds under the proposed regulations. Frank G Nitsch PE, CIH, CSP, MBA Lt. COL USAF Retired