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Devon Jones Comment On Regulatory Notice 22-08

Devon Jones

Hello whoever is reading this, hope your day is going well. I am a young investor with a few years experience actively trading and learning about financial products. Even though you're looking at making changes to how a wide range of complex derivate products are regulated, but I would like to talk specifically on leveraged products as they are what I am most familiar with. I'll refer to them as LETPs (leveraged exchange traded products, including ETFs and ETNs). Currently, I can understand the concern that buying/selling these products is as easy as buying and selling an individual stock. In my own experience talking to other people interested in LETPs it is clear some do not fully understand the risks / implications of using LETPs. However, I do not think this is sufficient reason to limit access to these products. In my opinion, LETPs are to ETPs as penny stocks are to mega cap stocks. Individual stocks range from low volatility / dividend to high volatility / speculative. Similarly, LETPs are the more complex / volatile version of their established ETP counterparts. To me, limiting access to LETPs would be similar to restricting the trading of specific tickers based on their risk characteristics for fear that retail investors will not understand what they are getting into. The risk that people do not understand what they are buying is inherent to an open market where individual investors can have access to many of the same products fund managers do. At the moment, I believe the disclaimer shown about long term holding LETPs is a good deterrent to people unknowingly buying into a complex financial product. However, if additional limits are desired, I think requiring retail investors to apply for LETP trading would be a good solution (similar to how you need to apply for options or futures trading). As a young investor looking to smartly utilize leverage in my portfolio, I believe completely restricting LETPs would be a crude solution to concerns over their complexity.