Even though the SEC has lifted their moratorium on new leveraged index ETF issuers, they maintain their concerns about the transparency of such funds and about the potential of such funds to exacerbate major market dislocations.  As a result, no new fund managers have sought exemptive relief to offer new products in the US market.

But a new construction for leveraged index products addresses both of the SEC’s concern and holds out promise that a new offering using this construction would be able to obtain exemptive relief and would also open up a new class of funds suitable for buy-and-hold investors.

This paper first provides a brief understanding of the SEC’s resistance to new offerors of such products. It then describes a solution that could serve to reopen this market to new offerors by fully addressing the SEC’s concerns.

Solution for Obtaining Exemptive Relief for Leveraged Index ETFs