4X is serious leverage for a publicly traded product. It's not hard to imagine the regulators feeling some discomfort with it. It will be interesting to see where the SEC comes out, both as to the potential for fraud and as to the public interest. 

One would expect to see all of the listing exchanges give themselves similar discretion, if they do not already have it. It is to be expected that the exchanges will start to take a much harder look at issuers whose assets are largely outside the United States and that do not have a significant prior trading history on a major non-U.S. exchange.  

The significance of these rule changes, assuming that they are all eventually approved, is that it brings back the "basis trade," netting securities risk against offsetting futures risk to reduce margin requirements. Of course, the ultimate level of margin is not yet known. In addition, the clearing houses may require customers to hold a minimum level of margin with them at all times, regardless of the level of risk. That will cause customers to narrow the number of firms through which they…

These enforcement actions raise practical, legal and policy questions.

Practical. Firms must consider whether they are vulnerable to the same type of enforcement action that was brought by the State of Texas. They must also consider whether it is worthwhile to provide execution services to small clients executing low-dollar transactions.

Legal. The enforcement actions treat a 5% commission as an effective cap. It is not obvious that this should be good law. After all…