The SEC approved a proposed rule change by NYSE Arca, Inc. that will permit the listing and trading of the first exchange-traded funds ("ETFs") that are quadruple-leveraged ("4X ETFs"). ForceShares Daily 4X US Market Futures Long Fund seeks to provide daily returns that are four times the daily return of the S&P 500® Index futures, and ForceShares Daily 4X US Market Futures Short Fund seeks to provide four times the inverse exposure to the daily return of the S&P 500® Index futures (i.e., if S&P 500® Index futures gain (lose) 1%, the Short Fund would lose (gain) 4%).
Prior to this approval, the highest-leveraged ETFs offered three times leveraged (or inverse leveraged) exposure to their benchmarks.
The SEC determined that this proposed rule change is not in violation of the Exchange Act, examined Section 6(b)(5) and Section 11A(a)(1)(C)(iii) in particular, and noted that the rule change will not fail to protect investors or create information asymmetries. Prior to the commencement of trading, the SEC will disseminate an Information Bulletin to ETP holders that highlights the unique risks involved in trading these ETFs.
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