The war of words between the largest exchange traded fund manager, BlackRock, and the providers of leveraged ETFs heated up again Tuesday when BlackRock’s chief executive said the financial products need more disclosure.

“Our statements against leveraged ETFs are related to disclosure,” BlackRock CEO Larry Fink said during a CNBC interview Tuesday.

BlackRock has been critical of leveraged products and says the funds shouldn’t be labeled ETFs.

Meanwhile, firms that oversee leveraged and inverse ETFs counter that BlackRock’s classification proposal is unworkable and anti-competitive, and that clients understand how to use the products. BlackRock doesn’t offer any leveraged ETFs. [What’s in an ETF Name?]

“ETFs were designed to be very basic,” BlackRock’s Fink told CNBC on Tuesday. “They’re mostly mimicking indices and different sectors of the marketplace. And now we overlay, through the ingenuity of the Street, products that have leverage in them so can you get hyper returns, positive or negative. The question I have is do we want to have another incident of a problem because of structural leverage.”

These high-octane ETFs are designed to multiply the market’s performance, and allow investors to go long or short. ETFs are baskets of securities that trade on an exchange like an individual stock. Leverage and inverse ETFs may invest in derivatives.

Fink said the implosion of MF Global is another example of the dangers of leverage, and he’s concerned that leveraged instruments could have the same problem if not managed correctly.

He added he was surprised that leveraged ETFs were approved by regulators, when they have cracked down on leverage in other areas in the wake of the financial crisis.

“This is not just an institutional product,” Fink said. “This is an individual product. We’re the largest player in the ETF market. We want to make sure this market is as clean as possible and so what we’re suggesting is a higher level of disclosure and possibly some form of limitations of as to who can buy structural leveraged instruments.”

The ETF classification system proposed by BlackRock is “arbitrary, anti-competitive and unworkable,” said ProShares CEO Michael Sapir in a statement. “The recommendation may serve BlackRock’s competitive interests, but would not serve investors’ interests and likely result in confusion.” [ProShares Balks at Proposed ETF Classification System]

ProShares has seen net inflows of $7.1 billion year to date through October, according to data from the National Stock Exchange. Leveraged and inverse ETF rival Direxion has gathered $3.6 billion in 2011.

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