February 20, 2020
The SEC's proposed rule is ill-advised and not fully considered. Consider an average investor who has a $100,000 investment in a non-leveraged, long-only SP 500 index fund. Plain vanilla. The investor's cost basis is $50,000. Global tensions begin to weigh on the market and the investor would like to decrease her market exposure. With a smaller dollar commitment, the investor could easily buy a leveraged, short-only SP 500 fund to affect that decrease in market exposure. If this average investor were excluded from purchasing the leveraged short fund (even for the protective, risk-reducing purpose illustrated) under the proposed rule, her only alternative would be to simply sell . . . and incur an income tax liability resulting from the realized gain. In this way, the proposed rule would absolutely harm instead of protect the average investor. The Commission should NOT adopted proposed rule.