Comments: As a retail investor that wants to take advantage of leverage without the use of options these instruments work to add exposure for a long or as a hedge on sector/market downturns.
I would say that most retail need to understand how they work in reality (rebalancing every day) and the risks associated during times of high volatility. In that case it's the same issues as having options.
The difference, therefore, is that because these ETPs are bought and sold like common shares they give a false sense of security to ignorant and novice traders. But again this is also true of the options market.
Restricting access would be the incorrect remedy as their danger is no different from the dangers of using options on Robinhood.
Further education on the effects of rebalancing due to leverage/volatility and the risks associated with ETN vs. ETF (for example) are the better course of action.
Dean Truong Comment On Regulatory Notice 22-08
Comments: As a retail investor that wants to take advantage of leverage without the use of options these instruments work to add exposure for a long or as a hedge on sector/market downturns.
I would say that most retail need to understand how they work in reality (rebalancing every day) and the risks associated during times of high volatility. In that case it's the same issues as having options.
The difference, therefore, is that because these ETPs are bought and sold like common shares they give a false sense of security to ignorant and novice traders. But again this is also true of the options market.
Restricting access would be the incorrect remedy as their danger is no different from the dangers of using options on Robinhood.
Further education on the effects of rebalancing due to leverage/volatility and the risks associated with ETN vs. ETF (for example) are the better course of action.