Based on TheMarketPeriodical, the U.S. Securities and Exchange Commission (SEC) has halted applications for leveraged ETFs with more than 200% exposure to underlying assets. The regulator sent letters to ETF issuers including Tidal, Direxion, and Provixion, citing Rule 18f-4 of the Investment Company Act of 1940 to limit fund leverage risk. The move affects 30 3X high-leverage ETF applications from Direxion alone. Experts such as Bloomberg’s Eric Balchunas and Alpha Architect’s Wes Gray support the decision, stating it protects investors from excessive risk and frequent termination events. The SEC posted the letters publicly the same day they were sent, signaling a firm stance against risky leverage.
SEC Blocks 3X and 4X Leveraged ETFs to Limit Risk Exposure
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