ProShares Withdraws Some High-Leverage ETF Plans After SEC Review Suspension

Deep News12-04 20:00

ETF provider ProShares has withdrawn registration applications for some of its high-leverage exchange-traded funds after receiving a warning letter from U.S. securities regulators. The letter highlighted exposure risks and suspended reviews of such plans.

On Tuesday, U.S. regulators sent similar warning letters to nine ETF providers, including ProShares, Direxion, and GraniteShares. The regulators requested these firms to further clarify risks associated with certain funds—products designed to track underlying stock performance with leverage ratios as high as 5x.

ProShares stated on Wednesday: "We understand and acknowledge the views recently expressed by SEC staff regarding certain novel leveraged ETFs filed by multiple issuers, which indicated these products do not meet legal requirements."

The SEC issued warnings due to concerns over risk exposure in funds attempting to track underlying stocks with up to 5x leverage. The regulator paused reviews of such ETF proposals and demanded clearer risk disclosures.

Besides ProShares, other recipients of the warning letters included Direxion, GraniteShares, Tidal Financial, and Volatility Shares. Four additional firms were not named in reports.

The withdrawn ProShares ETF proposals included two categories: - Products targeting 3x leveraged returns of Wall Street tech giants like Meta and Broadcom (AVGO); - Funds tracking specific sectors, countries, and cryptocurrency-related assets.

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