Boost also rebuts the notion that end-of-day activity related to leveraged ETFs can lead to crashes. “There is a huge amount of activity at the close and in the closing auctions on the various global exchanges. This is of course for a variety of investment and trading strategies. If anything, the close on an exchange is the point of the day when liquidity is highest and where leveraged ETF rebalancing is least likely to have an impact,” the firm said.
Boost noted that in 2011, Credit Suisse published a paper leveraged ETF rebalancing is “unlikely to be the most influential factor in driving intraday swings into the close.” Hector McNeil, co-CEO of Boost, went so far as to say the Fed paper is “a head-line grabber.”
Popular leveraged ETFs listed in the U.S. include the ProShares UltraShort Financials (NYSEArca: SKF) and the Direxion Daily 20+ Year Treasury Bear 3X Shares (NYSEArca: TMV).
ProShares UltraShort Financials
ETF Trends editorial team contributed to this post.