VolatilityShares filed for 27 new single-stock ETFs with leverage ranging from 3X to 5X, raising concerns about financial regulation. ETF issuers have been attempting to increase leverage for some time. The SEC Rule 18f-4 was established 5 years ago to regulate the use of swaps, options, and futures in mutual funds and ETFs.

The rule requires funds to be tested for leverage using Value-at-Risk calculations and not exceed 200%. Despite potential loopholes, the SEC will likely scrutinize the new filings once the shutdown ends. The popularity of leveraged products among retail traders persists, with the potential for significant risks including counterparty risks and hidden financing costs.

Perpetual futures, a feature of crypto markets, are a more efficient alternative to traditional leveraged ETFs. These futures settle daily or hourly and self-finance based on supply and demand, eliminating the need for high-fee middlemen. The CFTC is exploring the use of perpetuals, which could eventually replace traditional leveraged ETFs. Until then, caution is advised when trading these products.

Read more at Yahoo Finance: 5 Things to Know About 5X ETFs