From: Adolfo
Sent: June 8, 2016
Subject: Rule S7-24-15 "Use of Derivatives by Registered Investment Companies and Business Development Companies" comment

Use of Derivatives by Registered Investment Companies and Business Development Companies



Respectable Securities and Exchange Commission, following are my comments on this proposal:

I am a small retail investor, its is core of my investment strategy the use of X1, X2 and X3 regular and inverse ETFs. I can submit to you any required information to support this.


This rule do not consider nor benefit CURRENT INVESTORS

I am already troubled at the idea. SEC, directly or indirectly will force the liquidation on my positions which are at a loss, and with no option to recoup losses, since this type of instrument (X2, X3) will not longer exist.

Right now, I see my financial stability threatened by this rule.

Just like the last time regulators banned short selling, there have been a lot of papers in the FED’s website on how tampering with the market, brought terrible “unintended consequences”. It  did not accomplish the goal on “protecting” investors but the opposite.


There is nothing in this rule to protect current investors. To me, the rule seems to be incomplete.


Please be aware of “unintended consequences: PANIC”

Your proposed rule will effectively shut down most if not all, 2X and 3X ETFs.
Do you think this could not panic these specific markets? And because their underlying securities, this panic could not spread?
Just the news on forcing the shut down of these instruments are already causing stress.


Small investor know the risk, I know the features of these products.

SEC have done a lot of work on ensuing full disclosure and risk understanding on these products, of course more could be done, which I consider is the spirit this rule should have.
Before buying, my brokerage and the investment company made me fully aware of the features of compounding interest and daily rebalancing on these instruments, these features are why I considered them attractive. Even my broker, like all the rest now, asked me for approval and raised the margin requirements on these instruments in order to manage risks.



Thank you in advance for the consideration on my comments on this rule.