Direxion has 70 U.S.-listed ETFs that follow inverse and leveraged strategies. The sponsor provides some of the most popularly traded ETFs on the market. For instance, the $1.4 billion Direxion Daily Financial Bull 3X Shares (NYSEArca: FAS), which takes the triple-long daily performance of the financial sector, has an average daily volume of about 4.7 million shares. The $804.9 million Direxion Daily Gold Miners Bull 3X Shares (NYSEArca: NUGT), which takes the 3x or 300% daily performance of a group of large gold miners, has an average volume of 3.4 million shares.
ProShares offers 121 inverse and leveraged U.S.-listed ETFs. The firm is home to the largest leveraged ETF, the ProShares UltraShort 20+ Year Treasury (NYSEArca: TBT), which has $2.7 billion in assets under management and has been a go-to method for many traders to hedge against falling Treasury bond prices or rising yields.
Fund providers that offer leveraged and inverse products fear that any SEC rules governing the use of derivatives will effectively require leveraged ETFs to increase the amount of safe assets to counteract derivatives exposure. The funds would essentially be forced to increase exposure to low-risk, low-return assets, like cash and equivalents, which would impede their ability to provide outsize returns for those who understand the the risks.
Leveraged and inverse products only make up about 2% of assets in U.S.-listed exchange traded products. Meanwhile, net inflows into the sector more than doubled to $4.9 billion for the year ended October, compared to 2014. Investors funneled $181.2 billion into U.S.-listed ETPs this year.
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Max Chen contributed to this article.