Short ETFs Under Microscope as SEC Pounces
Reuters (04/14/09) Spicer, Jonathan
The dramatic increase of ETFs that profit from falling stocks has drawn the attention of the Securities and Exchange Commission (SEC), which has suggested that these leveraged inverse ETFs could be included in new rules aimed at curbing short-selling. Leveraged inverse ETFs are considered "synthetic" since they use a formula of options and other derivatives to yield two or even three times the profit when the underlying assets fall, allowing some trading firms to profit even during the market crash. ETFs were largely exempt from the SEC's original short sale rule, called the uptick rule, which was revoked in 2007. At that time, leveraged inverse ETFs were new, but they have since grown to account for nearly 3 percent of all U.S. ETF exposure, representing $12 billion.
