A new study conducted by Direxion in collaboration with analysis firms Vanda Research and The Compound Insights shows that nearly 90% of leveraged single-stock ETF trades in the U.S. market can be traced back to individual investors. Data indicates that the rapid increase in these exchange-traded products, which allow investors to speculate on short-term price movements of individual stocks, has been almost entirely driven by their appeal to retail traders. The study also found that leveraged single-stock ETF trading volume accounted for 8% of all exchange trading volume in the United States last year.
The proliferation of new products highlights the growing reliance on speculative behavior, according to Brian Armour, an ETF analyst at Morningstar. Data from Morningstar Direct shows that there are currently 355 leveraged single-stock ETFs trading in the U.S. market, with 275 of those launched since January 2025.
Mo Sparks, Chief Product Officer at Direxion, noted that rising interest in trading market volatility has intensified competition as asset management firms seek to capitalize on retail traders' growing appetite for leveraged products. He added that regulatory changes regarding the use of leverage have made it easier to launch such products, even if this has led to some unintended consequences.
In recent months, U.S. asset management companies have repeatedly urged the Securities and Exchange Commission to allow them to offer single-stock leveraged products, giving holders the opportunity to gain three to five times the daily return of the underlying stock. However, the SEC has consistently rejected these proposals.
Last Friday, Direxion submitted another application seeking approval for a suite of 20 ETFs linked to individual stocks, ranging from Nvidia to Palantir. If approved, traders would gain triple the exposure to the daily price movement of the underlying stocks. Sparks stated that he could not comment on the pending application currently under review by the SEC.
The study reveals that since their introduction in the U.S. at the end of 2022, trading volume in leveraged ETFs has grown at an annual rate of 29%, outpacing the growth of stock or options trading.
During the 12-month period covered by the study, the largest market sell-off occurred around April 2, when former President Trump announced "Liberation Day" tariffs, presenting a "first major test" for retail traders under pressure. The study concluded that during this period, which ended with a series of sharp market rallies, retail trading in leveraged single-stock ETFs sometimes accounted for up to 40% of total trading activity in the U.S. market.
The report concluded that it will be interesting to observe how single-stock funds are utilized during future market downturns.
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