ProShares withdraws registration for highly leveraged ETFs due to SEC warning about risk exposures and review pause. Nine ETF providers, including ProShares, Direxion, and GraniteShares, asked to clarify risks of funds tracking up to five times the performance of underlying stock.

ProShares sought SEC approval for ETFs targeting three times the returns of tech giants like Meta Platforms and Broadcom. SEC staff view certain leveraged ETFs as non-compliant with legal requirements. ProShares also had registrations for funds tracking sectors, countries, and cryptocurrencies.

Tidal Financial and Volatility Shares, among recipients of SEC’s letter, declined to comment. Leveraged ETFs, popular with retail investors, have grown due to bullish market sentiment, speculative trading, and product innovation around single stocks and cryptocurrencies.

SEC raises concerns over leveraged ETFs not complying with Rule 18f-4, requiring value-at-risk to stay below 200% of a reference portfolio’s value. Regulator questions fund managers on measuring leverage risks and suggests revising strategies to comply or withdrawing filings.

CEO of Roundhill Investments states SEC’s scrutiny isn’t a broad clampdown but signals firmer boundaries on product complexity. Pressure mounts on leveraged ETF market attracting retail investors despite regulatory worries over complexity and risks.

ProShares UltraPro QQQ ETF, the world’s largest leveraged ETF by assets under management, aims for three times daily Nasdaq 100 index performance and has gained over 40% this year. However, higher returns come with increased risks.

Read more at Yahoo Finance: ProShares withdraws some highly leveraged ETF plans after SEC review halt