February 21, 2020
These proposed regulations are really going to cause a lot more overall harm than good for the average retail trader.
They are more grandstanding than beneficial to the trading community.
Most of the people engaged in trading leveraged products are day traders. The primary reason to use the leveraged products is because it helps day traders have more positions on with 4:1 leverage restrictions.
When used properly, these leveraged ETFs also make excellent long term investment strategies because of how they continuously lose money due to volatility erosion. When properly hedged by holding the appropriate ratio of securities long, it's one of the safest strategies that a trader could possibly engage in. It's market neutral and in fact, arguably safer than simply holding SPY long.
Most of my trading profits over the last 5 years have come from trading UVXY and TVIX. In addition, I also use SQQQ short for long market exposure and hedge with 3x QQQ.
Most brokerages have restrictions in place for trading many of the leveraged ETFs, such as UVXY and TVIX. Additional regulation is not necessary.
And since so many people know how profitable it is to hold these securities short with an appropriate hedge, many of them are hard to borrow anyway. Making trading them very difficult for long durations of time for most retail traders anyway.
The 1% who are the dumb dumbs that don't properly educate themselves about these products and cry wold shouldn't wreck it for the rest of us that have.
Just Google TVIX, UVXY or any of the triple leveraged ETFs. There are endless pages on Googles filled with cautionary tales of trading these instruments. These are tales from fellow traders, not government sponsored entitites.
Any SEC sponsored education about these products is going to, in blatant terms, suck compared to real stories from real traders about these products. And there are plenty of fellow traders warning about the dangers of these.