New 3x Inverse & Leveraged Treasury ETFs Launch
Index

Universe Staff

Thursday April 16, 2009, 2:54 pm EDT

http://finance.yahoo.com/news/New-3x-Inverse-amp-Leveraged-indexuniverse-14999922.html?.v=3

With Treasuries still offering rather skimpy yields, Direxion on Thursday came out with two sets of new exchange-traded funds allowing investors to juice returns in government-backed long-term bond markets.

The four new DirexionShares 3x ETFs are leveraged bull and bear index-based portfolios that try to either provide 300% of the daily performance or 300% of the inverse of the daily performance of the NYSE Current 10- and 30-Year U.S. Treasury indexes.

In a statement, DirexionShares President Dan O'Neill said:"We believe that these four new ETFs further our efforts to meet investor demand for tactical tools designed for active portfolio management, now specific to the Treasury markets."

He added that many advisers and institutional investors are using Direxion 3x ETFs to magnify their daily market exposures, while others are using the firm's family of inverse and leveraged ETFs to implement short-term hedge positions in their portfolios.

According to Direxion, its family of 20 DirexionShares ETFs "represent the highest amount of leverage currently available in the ETF space."

The four new Direxion ETFs are:

*The Direxion Daily 10-Year Treasury Bull 3x Shares (NYSE Arca:TYD)

*The Direxion Daily 30-Year Treasury Bull 3x Shares (NYSE Arca:TMF)

*The Direxion Daily 10-Year Treasury Bear 3x Shares (NYSE Arca:TYO)

*The Direxion Daily 30-Year Treasury Bear 3x Shares (NYSE Arca:TMV)

The short funds compete with existing products from ProShares, which offers the ProShares UltraShort 7-10 Year Treasury ETF (NYSE Arca:PST) and the ProShares UltraShort 20+ Year Treasury ETF (NYSE Arca:TBT). Both of those funds provide -200% exposure to their respective benchmarks.

Both the ProShares and the new Direxion funds charge 0.95% in annual expenses.

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Short ETFs under the microscope as SEC mulls rules
Tue Apr 14, 2009 1:45pm EDT
By Jonathan Spicer - Analysis

NEW YORK (Reuters) - The explosion and demonization of exchange-traded funds that profit from falling stocks have caught the eye of U.S. regulators looking to curb short selling, but it's hard to blame ETFs for declines in equities.

The Securities and Exchange Commission has hinted that so-called leveraged inverse ETFs such as UltraShorts could be included in new rules aimed at curbing short selling. Erik Sirri, the SEC's director of trading and markets, said last week that "we could carve them out, or could loop them in" to restrictions on short sellers.

The sharp market drop has put immense political pressure on the SEC to do something to limit the shorting of individual stocks. Some critics are also leveling fire at ETFs, which trade like stocks but instead track an underlying index or basket of assets.

Leveraged inverse ETFs are considered "synthetic" because they use a formula of options and other derivatives to yield two or even three times the profit when the underlying assets fall. They have allowed some trading firms to thrive throughout the downward spiral in stocks.

This has raised the ire of some, especially when the assets are hard-hit shares of banks getting emergency government funding.

But it is unclear how much influence ETFs have on the underlying assets, to which they are only indirectly connected. Further, the SEC's initial recommendations target the selling of borrowed equities, whereas ETFs involve the buying of funds.

"Although big trading of ETFs can move indicies, they basically trade derivatives, so they're really not involved with the cash markets," said Jamie Selway, managing director of institutional broker White Cap Trading.

"I can see how they would create late-day volatility," said Selway, a board member at BATS Exchange, the No. 3 U.S. equities market. "But if the problem is levered bear funds that drive markets down, addressing the short selling isn't going to matter because here the manipulation happens through buying."

In less than three years, the U.S. leveraged inverse ETF market has swelled from nearly nothing to $12 billion, according to Barclays data. Despite the wrenching market contraction set off last year, the U.S. leveraged inverse market has grown 26 percent in the last 12 months.

The majority of these products "reset" daily, meaning investors must cash out regularly to get the proper return. This makes leveraged bear funds ideal for the growing ranks of high-frequency traders that place hundreds of orders per day, driving demand for the leveraged products and pushing them into the spotlight.

This month, outspoken CNBC commentator Jim Cramer said aggressive short sellers have used ProShares' UltraShort Financials product to "pound bank stocks down," suggesting they should be banned.

Cramer's on-air guest, NYSE Euronext (NYX.N: Quote, Profile, Research, Stock Buzz) Chief Executive Duncan Niederauer, responded that the products could be "re-evaluated, potentially repositioned, and maybe even reinvented" -- but he stopped short of agreeing that a ban was warranted.

The New York Stock Exchange, which like other exchanges has come to rely on ETFs to maintain growing trading volumes, later told Reuters it would ask the SEC to exempt ETFs from any new rules to curb short selling.

ANOTHER EXEMPTION?

Short selling is a trading strategy in which investors sell borrowed shares in the hope of buying them back later at a lower price.

ETFs were mostly exempt from the SEC's original short sale rule, called the uptick rule, which was revoked in 2007. But leveraged inverse ETFs were then very new; they have now grown to represent nearly 3 percent of all U.S. ETF exposure, according to Barclays.

The SEC, now back at the short sale drawing board, is seeking public comment on five proposed rules, which include circuit breakers and a modified uptick rule. One question in its 273-page document asked specifically whether ETFs should be exempt.

"We don't think it's necessarily a healthy thing to be putting those types of restrictions on market price discovery," said Andy O'Rourke, senior vice president at funds provider Direxion Shares, which in November was the first to offer triple-leveraged "bear" ETFs on financials and other sectors.

"We're expanding. We generally believe that we'll be able to operate as we have in the past," O'Rourke said in an interview. "They (the SEC) could put restrictions on the way our products operate, in which case we would be concerned."

Direxion, managed by Rafferty Asset Management, had about $3 billion in ETF assets under management at the end of the first quarter. O'Rourke said the SEC did not ask extraordinary questions when Direxion applied to register its latest funds.

Industry leader ProShares, which introduced leveraged inverse ETFs in 2006 and now provides the double-leveraged UltraShort products, as well as smaller rival Rydex, both declined to comment.

Some industry observers say the triple-leveraged inverse ETFs may run into problems as the SEC evaluates its options, but most of those interviewed said double-leveraged inverse funds should remain untouched.

Compounding the questions, the SEC hasn't defined the problem that needs solving, said John Standerfer, executive vice president of financial services at Austin, Texas-based consulting firm S3.

"The leveraged ETFs, in my opinion, are not driving the stock prices of the underlying stocks that make them up," Standerfer said, noting restrictions on the underlying securities will affect the ETFs anyway.


http://www.reuters.com/articlePrint?articleId=USTRE53D57320090414

fas nice drop the last few days

will be interesting to see which way fas/faz go next week

in FAS under $8 ~~~>

check out today's volume flag. yeee-ikes.

Direxion has some new ones.

http://seekingalpha.com/article/111432-direxion-ups-the-ante-with-3x-international-u-s-tech-etfs?source=email


http://seekingalpha.com/article/111556-six-international-3x-etfs-hit-the-market?source=email

Thanks, I sold those and went long the other day. Possibly even went short and then long again since then too. Days run together sometimes...

a little late but...good call, LoL!!!!

I loaded FAZ today. I don't think this 2 week rally can last. Kind of hope I'm wrong, for the sake of the country, but selfishly I'd like to see a pullback :)

ERX was a great 20% trade today! Wahoo!

Clearing Corp. Moves To Increase ETF Liquidity
Written by Eric Rosenbaum
Wednesday, 03 December 2008 09:39


The Depository Trust & Clearing Corporation (DTCC), the central clearing agency for the U.S. funds industry, is now accepting cash-only creations and redemptions for exchange-traded funds.

The move is one of several announced recently by the DTCC that are intended to increase liquidity and reduce risk and costs for ETF market participants.

Previously, creations and redemptions for ETFs using commodities, foreign equities, credit default swaps and exchange-traded notes were not eligible for processing at DTCC subsidiary National Securities Clearing Corporation (NSCC), which serves as a central counterparty guarantee for investors.

The variety of asset classes comprising U.S.-listed ETFs has grown rapidly beyond domestic equities to include global/international equities, fixed income, commodities and currencies. That trend has precipitated the DTCC/NSCC expansion.

NSCC is also cutting down on the settlement cycle for ETF participants, offering an optional shortened settlement cycle of one day (T+1) instead of three (T+3) for ETF transactions. That is a change that can enhance the liquidity of ETFs, and better mirrors markets where underlying securities of ETFs already have a shorter settlement cycle, such as the commodities market.

The change also allows the NSCC to capture and process ETF creations and redemptions for less frequently traded corporate and municipal bonds and unit investment trusts.

http://www.indexuniverse.com/sections/newsinfocus/5004-clearing-corp-moves-to-increase-etf-liquidity.html

SKF & BGZ rockin!!

volatile =) maybe some more of this little rally, but im taking gains when i get them

what direxion, I mean, direction do you all see for the rest of the week...?

SKF yes WOW! has that been moving or what??

SKF is my fav! But the premiums after expiration day are way too high!

ya i was just looking at that... it really hasn't taken too long for some of these ETF's to get some volume, hopefully in a month or so the options will start to tighten up.

BTW I love trading these!

The options have too big of spreads right now but I'm sure that will change as they become more popular...

oh didnt see the options! those look pretty good =)

I just bought some FAS $25 DEC calls...

ty, gobso... :) agreed on the increased volume with these direxionshares. if we like it now, imagine what the spread & liquidity may be like in january.

nice job with ERX!, these are all swinging like crazy! and now that the volume is starting to come in these are looking better and better

they're due to release some more 3x ETF's soon, that gold one would be nice, would compensate for some of the manipulation in that market, for one, the downgrades on the same day gold is strong....unbelievable.

i am bullish gold

ERX is working... now if only direxionshares would create a triple-leveraged gold fund. :)

with gold moving higher i think crude is going to get a bid. i grabbed some ERX at $28 today.

i agree. ERX looks very good here, and it will probably get cheaper, but at some point you just have to hold your nose and buy. lol

ERX getting CHEAP.... but of course so is EVERYTHING else

we may see some technical bounces from oversold territory, but there's no fundamental reason for a bottom yet. not in the financials or anything else imo. energy was holding up nicely as a "lesser evil" these last few weeks, but today it finally got clobbered.

Wow simply amazing. The sad thing is...do you see any bottom or signs of a bottom on that UYG chart? GEEEEEEEEEEEEEEEEEEEZ

check out UYG today:

and scroll down for a 10 day chart of FAS @ $14.65... hard to believe it was in the $40s around 4 days ago.



FAS getting hammered down hard.

yes, and BGZ has been killin it the last 2 days!!

Nevermind, found it: RUI.

Ahh, thanks. Forgot that. Assumed it would still be at least a pretty good approximation. Is there a ticker symbol you can use for the Russell 1000?

BGU/BGZ doesnt follow the DOW... follows the russell 1000 and other holdings... so slightly different

Now down 1.5% while Dow up 1%+

Dow up 2% and BGU up 2.2%. Damn it...

I'm already loving these babies(BGZ + BGU).....Today is the first time I played them and made a nice gain....plus I got an A on my last western humanities test, and the proffesor is gonna double the highest test grade, so realy I got 2 A's....so Today has been great for me!

financials seem like ground zero in this mess. once the bottom is in, energy and small caps will probably lead the way. if we're using these leveraged funds that means ERX and TNA.

but that could be a while. right now BGZ is the crown jewel of my portfolio. lol

and with expire friday..this could be nuts..i'll play small if the markets set up for something sweet..

yeah, especially on those options.. wow man..

Those BGZ options must have swung HUGE last thursday..

thanks for setting this up..

interesting times for these..big money to be made..or lost..

I agree. Looks like you have more pain there

I say tarp the TARP. lol

I thought the DOW would bounce off of 8200 and got head faked this morning. I bought the 34's but I'm holding them and stressed about it

UYG weekly ~~~~>

i check 2X leveraged UYG to get a sense of where FAS may trade going forward. the TARP is probably best spent picking up the pieces when we see a lot more bank failures. otherwise the taxpayers will just catch a falling knife imo. there's not much to backstop when you consider all these credit default swaps. that's a real can of worms and imo we haven't even seen the tip of the iceberg.

we could get a technical bounce off of S&P 790, but my gut tells me we'll see it bottom in the 5 to 600s several months from now. note the volume on UYG. it doesn't look like capitulation is very close.

TARP doesn't seem to be doing crap for most fins... does the FIN selling continue until the eoy?

FAS ~~ daily chart ~~>

maybe we'll see it bottom in the high single digits?

Loaded a ton of BGU at 30.01 in my IRA for a bit of a hold and a bunch more at 28.51 in my trading account for a bounce tomorrow.

FAS - where is the bottom?

on a % basis TNA was a much bigger gainer than BGU yesterday: