ETF provider ProShares has withdrawn its registration request for some highly leveraged exchange-traded funds after receiving a warning letter from the U.S. securities regulator that flagged risk exposures and paused the review of such plans. Such letters were sent on Tuesday to nine ETF providers, including ProShares, Direxion and GraniteShares, asking them to provide more clarity on the risks tied to funds that sought to track up to five times the performance of the underlying stock.
ProShares had sought approval from the Securities and Exchange Commission for ETFs, including products targeting to replicate three times the returns of Wall Street tech giants, including Meta Platforms and Broadcom. “We understand and appreciate the recently published view of the SEC staff regarding certain novel leveraged ETFs filed by several issuers, indicating that such funds do not comply with relevant legal requirements,” ProShares said on Wednesday.
The fund manager’s suite of registrations also included funds tracking specific sectors, countries and cryptocurrencies. Tidal Financial and Volatility Shares, two of the nine recipients of the SEC’s letter, declined to comment. Leveraged ETFs, often favoured by retail investors, have exploded in popularity due to sustained bullish market sentiment, the rise of speculative trading and a surge in product innovation, especially around single stocks and cryptocurrencies.
