Key facts
- Defiance ETFs plans to launch 16 new leveraged exchange-traded funds.
- These funds aim to double the return of underlying stocks or ETFs within a single hour.
- Unlike traditional leveraged ETFs, these would reset their positions every hour.
- The products are intended for knowledgeable investors capable of constant portfolio monitoring.
- The SEC is currently reviewing leveraged ETF products, and these filings could face scrutiny.
Defiance ETFs is seeking regulatory approval for 16 new exchange-traded funds designed to offer investors leveraged exposure to individual stocks or ETFs on an hourly basis. These products would aim to double the daily return of their underlying assets, but with a crucial difference: their leveraged positions would reset at the end of every hour, rather than at the close of the trading day.
Sylvia Jablonski, CEO and chief investment officer at Defiance, explained that the funds treat each trading day as a single hour. This structure allows investors to bet on intraday movements with amplified returns. If market movements are favorable and gains are rolled into successive hours, investors could potentially achieve larger daily gains than with existing daily leveraged ETFs. However, Jablonski cautioned that the hourly reset also increases risk; if a stock reverses course or experiences choppy trading, investors could incur losses if they hold the positions beyond the hourly reset.
The filing with the U.S. Securities and Exchange Commission comes at a time when regulators are scrutinizing leveraged ETF products. The SEC has previously blocked proposals for funds offering 3x or 5x daily returns. Defiance stated in its filing that these new hourly leveraged products are suitable only for knowledgeable investors who understand the associated risks and can actively monitor their portfolios throughout the trading day. If regulators do not object, these funds could begin trading as early as November.
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