"In June, FINRA and the Massachusetts Attorney General warned that these securities were unsuitable for investors to hold for more than a day. FINRA's warning seems to have struck a chord as several firms have begun to ban or severely curtail the ability of investors to buy and sell these securities in their accounts. In the last few weeks, we have seen outright bans or severe restrictions put in place by firms such as Edward Jones, LPL Financial, Ameriprise Financial, and most recently UBS." http://bespokeinvest.typepad.com/bespoke/2009/07/leveraged-etf-ban-spreading-like-the-flu.html
Their days are not numbered. People are just finally learning that the futures-based ETFs are for trading, not for investing. The big boys knew this from the start and played them accordingly. Too many folks are looking for easy money, and you almost always have to earn money made in the markets. Party on.
So many are worried about the risk in the 3X etfs, no one is forcing anyone to trade them. Everyone thinks these are risky when in reality everything on wallstreet is risky to begin with. Look at all the fools who over leveraged themselves in the past decade or so losing everything from their job to their home. Where was the regulation in that area when it was so needed. Another thing I don't comprehend is why is everyone so against these 3x etfs, there is plenty more to worry about than some 3x etfs. Remember when people were financing 110% and had an income of 45k, or no income verification to get a $500,000 ARM at 6%. Come on, if you don't agree with the 3x etfs turn away and trade something less riskier like BSC, GM, maybe a little Enron or Citigroup, how about a company that has no earnings like most did in 1999 that were pumped up to triple digits....
I think you would still be able to buy a 2x fund using 50% margin and get the same result as a 3x fund. If you are crazy enough to do that....
The point is not the leverage, it's that they dont track their index 3x on a daily basis but on an intraday basis and a lot of unknowledgeable investors dont know that and are "losing money" and complaining to their brokers so the brokers are just going to stop.
In a sense people thought they were betting big on direction when in reality they were making a dual bet on direction and autocorrelation. Since the average person who bought this for the long haul doesn't know what the word "autocorrelation" means or even whether it is in English, I suppose marketing efforts were misleading. Someone should have warned them they were making a bet on path dependency.
If anything, we need 4x, 5x, or 6x funds. This will guarantee volatility for traders and reduce the need for options and leverage. I'll post my results with automated ETF trading probably next month.